The IP checklist – Ten key considerations for aerospace and defence SMEs

Intellectual property (IP) is one of the most valuable assets for aerospace and defence SMEs, yet it’s often an area that gets easily overlooked. Understanding what you own, how to protect it, and how to leverage it strategically can make a significant difference to your competitiveness and long-term success.

This checklist highlights ten key considerations to help you navigate IP opportunities, as well as potential challenges, and ensure your business is well-positioned to protect its technology and maximise its potential.

1. What IP do we actually have?

An IP audit can be a good place to start. It will identify what you have actually protected and where the gaps might be. The UK-IPO in conjunction with Innovate UK offers a part-funded IP audit service, where they pay the majority (about £2,250) of the cost, with your company paying the balance (£750). More info on IP audits can be found here.

2. Should I patent or can I rely on trade secrets?

Trade secrets certainly have their place (think Coca-Cola’s secret recipe) but one important question to consider is: is it reverse-engineerable? If the answer is “yes”, keeping it a trade secret is unlikely to cut the mustard. Patents (or perhaps registered designs) are more likely to keep out the competition. E.g. if you’re an SME suppler to a prime, patents can make it harder for the prime to change suppliers.

Even for non-reverse-engineerable information, trade secrets are still more vulnerable to cyber-attacks or release by ex-employees.

3. How can I collaborate with other companies while keeping some control of my technology?

There are a few main aspects to consider: licensing, patents and collaboration agreements. Suppose, for example, another company (“Company A”) wants to use your manufacturing processes and wants its suppliers to be able to use your processes too, this is how it might work: 

• A know-how licence is an option, but it may not be enough. If, for instance, there is a leak of confidential information, you may only be able to enforce against Company A, not against its suppliers or other third parties.
• Patents give you greater control. Can be enforced against any party that infringes. Gives you the confidence that you can more openly share know how with other parties while being covered if things go south.

When making collaboration agreements – at the project outset and before any IP has been generated – ensure they are clear about who owns jointly-generated (“foreground”) IP and what the terms of use of the technology are, and ensure that they give you the level of control of your technology that you want.

4. We haven’t filed patents for a while. How do we go about it?

You could start by undertaking an “invention harvesting” session which is the process of reviewing and documenting those developments which may be patentable, often with the help of your IP adviser. This will help you to understand what you might be able to protect, and helps avoid patentable inventions being overlooked.

A good way to start “invention harvesting” is to ask if your development provides a technical solution to a technical problem. This helps pinpoint whether it relates to potentially patentable subject matter, rather than an excluded area like business methods.

At what point should you start the patenting process? It’s a balancing act. Start the process too early and the idea won’t be fully fledged – so you can’t provide enough detail for a patent application. Start too late and competitors could have got there first, plus there is more chance of accidental disclosure from your company invalidating your own patent. As a rule of thumb, the prototyping stage is a good place to start the process. Keep it secret till then.

5. Can’t I just rely on copyright to protect software?

You can rely on copyright to protect software but the protection it gives is very limited. Copyright protects the actual code (it is considered a literary work) rather than the underlying function of the software. Therefore, if someone wrote different code, but which produced the same function, they would not infringe your copyright. In contrast, patents can protect the effect the software has when run. Therefore, different code producing the same function would be caught by a patent.

It is also a myth that software can’t be patented. Some software is patentable – it just depends on what it does. Is the software technical or does it relate to e.g. administrative methods? Does it control an industrial process or measure data? If so, likely to be technical (and potentially patentable).

6. What about dual-use technology?

If your tech is applicable to more than one sector (e.g. civilian and defence), IP protection (particularly patents) gives you the option to licence to a manufacturer in one of those sectors so you can concentrate on supplying into the other sector.

7. I’ve heard of Patent Box – what is it?

Patent Box gives you a reduction in corporation tax payable for patented products. It requires a granted patent and product sales, so tends to come later in the product lifecycle, but can be worth significant sums. For example, recently, we came across a company that used to make most of its money from product sales but now makes over 50% of its income from Patent Box.

8. Patents can be expensive. Is there a way of reducing the costs?

In terms of reducing the costs of patenting, the European Patent Office offers fee reductions for SMEs. Picking your territories wisely, and the inventions you look to protect can reduce wasted costs. Planning ahead in terms of where you want protection means you don’t need to pay extra to keep your territorial options open.

Remember – having IP has a number of benefits which should be weighed against monetary costs. For example, this study found that owning patents and trade marks increased the chances of investment for startups by 10 times on average. Revenue per employee was also found to be on average about 36% higher for patent-owning companies, with 460% more employees.

It may be tempting to think that “we don’t have the money to enforce a patent so why get one in the first place?” But your competitors don’t necessarily know that; you might have IP insurance to fund litigation, or you might licence it to a company that does have funds to enforce it. Very few patents of the tens of thousands of patents granted each year actually end up being enforced. Most serve other purposes e.g. providing barriers to entry, helping gain investment, increasing company valuations, Patent Box revenue, licencing revenue, marking you out as an innovative company, and so on.

9. Be aware of any defence-specific rules if operating in that field (particularly important if working with US companies)

Check compliance with ITAR and EAR rules if you are operating in the US and/or with a US company.

Defcon 705 - typically gives you ownership of foreground IP, but UK government has broad permissions to use or sub-licence it in defence field. But if your technology is dual use, can you then exploit in the civilian field with less fear of competing use?

10. Ensure you put in place strong internal processes to manage IP

Confidential information should be marked as such, and access restricted to it, if appropriate. This helps reduce further damage if there is a leak.

When it comes to new inventions or products, put in place a process for checking every time whether protection with trade marks (to protect branding and logos), patents or designs is appropriate. Consider making a standard “invention disclosure” form to describe the invention for more efficient working with your IP adviser.

You could arrange some IP training for your employees so that they are aware when an invention or product might need protection and/or whether there may be any potential IP issues.

If you have any IP questions or would like to discuss your IP strategy in more detail, I would be happy to offer a free, no obligation, consultation. Please get in touch with me via doconnor@marks-clerk.com.