Introduction

It is often said that Intellectual Property (IP) is the most important asset class for modern businesses today. As discussed in our article on ‘The Rise and Rise of IP – How to Protect and Leverage Intangible Assets’, today IP accounts for almost 90% of a company’s or corporate group’s total asset value.

Whether a company is building a start-up, scaling an established business, or preparing for an exit, strategically managing and commercialising IP can be the key to maximising enterprise value.

In this article, we explore the different kinds of IP recognised under Australian law, common examples of business IP with commercial value, the main ways business IP can be commercialised, and how companies can mitigate common risks to unlock the full value of their intangible assets.

What is IP?

IP or intangible assets are sometimes called ‘creations of the mind’ and can include inventions, literary and artistic works, designs and symbols and names and images used in commerce. Intangible assets may generally divided into four basic categories:

1. Patents: If the business has a unique invention or method, registered patents provide a commercial monopoly over the invention/method.
2. Trade marks: A trade mark is a unique mark the registered ownership of which provides an exclusive right to commercialise goods or services within certain registered classes.
3.  Copyright: Copyright provides unregistered rights of over artistic and creative works, such as designs, videos and written material, that enables the owner to stop others copying the work without permission.
4. Trade Secrets: A trade secret is a form of unregistered rights that keep formulas, commercial methods and other forms of knowledge confidential.

Examples of Business IP with Commercial Value

IP that has commercial value in business presents itself in many forms across different industries. Common examples include:

• A software company develops a software application. The code, user interface design, and accompanying documentation can be protected by copyright if the requisite criteria are met.
• A supplier develops a list of its most valuable customers and their buying habits. This list can be protected as confidential information if the requisite criteria are met.
• A tech company develops a wearable device that monitors heart rate. This invention can be registered as a patent if the requisite criteria are met;
• A company operates under a brand name and logo. The brand name and logo can be registered as trade marks if the requisite criteria are met.
• A fashion house designs handbags. The visual appearance of the handbag can be registered as a registered design if the requisite criteria are met.

The above examples typically have commercial value in business, because these IP rights can be used for revenue-generating purposes, either via direct sale or license, or to support revenue-generating purposes.

How fit is your IP?

Main Ways to Commercialise Business IP

The main ways business IP can be commercialised are as follows:

1. Assignment: An agreement to transfer ownership of IP from one party to another party. IP can be assigned in part; for example, an author of a work may assign publishing rights to one entity and may keep or assign to another entity the right to adapt the work.
2. Licence: A right granted by the IP owner (Licensor) to an entity (Licensee) that enables the Licensee to use IP they do not own. This enables the Licensor to commercialise their IP while retaining ownership. Typically, specific terms will apply to the scope of a licence, including terms relating to exclusivity, duration and territory. E.g. in a franchise agreement, the franchisor gives the franchisee the right to use trade marks, business systems and processes to provide goods or services to agreed specifications in return for royalties or other fees.
3. Sales of Products or Services based on IP: Directly exploiting the IP by using it to create and sell goods or services based on IP. g. a swim fin manufacturer uses a patented design in a swim fin which it sells to the wholesale and retail market.
4. Securitisation or Collateralisation: The IP is used as collateral for loans or securitised to raise funds. E.g. in 1997 David Bowie famously raised $55 million from Prudential Financial, an insurance company, through asset-backed bonds for future royalties for over 20 albums. This enabled Bowie to get immediate access to cash without selling his catalogue, while investors received a relatively high return (7.9%) compared to other investments at the time.
5. Sale of Business: The IP is sold in an exit transaction as part of the sale of all of the shares or assets of the business.

Common Risks — and How to Address Them

While IP offers significant value, it can also create vulnerabilities if not properly protected or managed. Below are common risks businesses face and practical strategies to mitigate them:

1. Not registering a trade mark: Ownership of an unregistered trade mark (a “common law” trade mark) can be difficult to prove. Conduct trade mark searches before branding decisions, and apply to register the trade mark early to secure rights.
2. Public disclosure of an invention or design. Public disclosure can make patents or designs ineligible for registration. Maintain confidentiality until protection is secured, and use NDAs where disclosure is necessary.
3. Contractor IP not assigned. IP automatically vests in the creator of the work unless assigned, or there is an employment relationship. Entering into contractor agreements which contain an IP assignment clause.
4. Poor IP ownership structures. Lack of clear IP ownership within a corporate group can expose businesses to risk. Use dedicated IP-holding entities and implement formal IP licences between the companies within the group.
5. Poorly drafted IP clauses in contracts. Since IP clauses are highly nuanced, it is important they are well drafted to protect the client’s interests. Ensure IP clauses are properly drafted, clearly defining scope, duration, territory, fees and exclusivity of IP commercialisation arrangements.
6. Assigning copyright with no contract. Copyright assignments must be in writing under section 196 of the Copyright Act. Put in place written assignments with valid consideration.

Concluding Remarks

Successfully commercialising IP is about more than simply having innovative ideas or strong brand assets; it requires a proactive legal and commercial strategy.

At Edwards + Co Legal, we work closely with clients to identify, protect and commercialise their intangible assets, ensuring they are properly structured to support both operational goals and long-term enterprise value. The below schematic provides an overview of our process to identify and protect business IP.

If you would like to discuss your business’ IP strategy, whether it relates to brand protection, licensing, raising capital, or preparing for an exit, please contact us below.