Knowledge & News

Deriving value from IP

22 June 2017

Many modern businesses are well aware of IP as a valuable, if not the most valuable, corporate asset. A 2015 Forbes article indicated that up to 80 per cent of public companies’ market value now lies in their IP and intangible assets. Forbes’ long-running analysis of the world’s most valuable brands, show Apple, Google, and Microsoft topping the 2016 list with valuations ranging from US$87 billion to US$170 billion. Even with current real estate prices, the days of corporate value being driven by the bricks and mortar are gone.

As patent filings, trade mark filings, design filings, etc increase by double-digits around the world, innovative companies are discovering non-traditional strategies to derive value from their IP. Some of these strategies have caught on in multiple countries, while others are very location-specific. However, all modern business people, financiers, attorneys, should be aware of the variety of non-traditional methods so as to better derive value from their IP.

Tax benefits

In an increasing number of locations around the world, Governments are providing tax benefits to innovative companies which locate R&D and corporate entities within their boundaries. This move by local and national governments typically recognises the spill-over effect of local R&D – increased jobs/lower unemployment, higher-skilled jobs, higher paying jobs and more. This in turn leads to a virtuous cycle of increasing population, better education, higher real estate and corporate rents and increased income tax revenue. Two good examples are the UK’s Patent Box and China’s High- and New-Tech Enterprise program which reduces corporate tax by up to half.

Some countries tax royalty income at a lower tax rate than other forms of income. What is more, as royalty income goes directly to the bottom line, £1 million in royalties is equivalent to £10 million in sales if your profit margin is 10 per cent.

Marketing benefits

Marketers have used IP, especially trade marks and trade dress, as key tools for protecting their work for decades, and many US companies place utility patent markings on their products and/or webpages as it provides specific benefits under US law. However, the rise of additional strategies has also gained popularity as well. For example, the marking of design patents and utility models on packaging in China often provides a sales boost, as consumers may believe that such products contain an improved technology. Admittedly, in some cases this is based upon consumers not understanding the difference between a patent, a design, and a utility model.

Stock/Valuation Benefits

Across the world, companies with active and large IP portfolios are seen by some as advanced and innovative compared to their IP-less peers, potentially-leading to increased stock valuation, PE ratios. Many discerning investors will look for a robust IP portfolio before investing.

Political benefits

In certain countries different regions, municipalities and universities are ranked against each according to their IP filings to ostensibly track and encourage innovation and research investment. In certain universities, patent filings also count as publication credits for tenure.

Areas such as Silicon Valley, Boston, London, Tel Aviv and Seattle, have often included in their marketing materials statistics about IP filings as indicators of innovation and entrepreneurialism to encourage startups and entrepreneurs to relocate.

Moving Forward

As the world economy becomes more and more interconnected, it is becoming essential that business owners and entrepreneurs understand the variety of options available to them to build long-term value for their organisations and institutions. Exploiting their IP as widely as possible is becoming more and more important.


Michael Lin

Michael Lin Partner Hong Kong (China) Beijing (China) Ohio Attorney, US Patent Attorney

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