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Investing in the intangible


8th Oct 2014

The UK Intellectual Property Office (UK IPO) has just published an updated report which attempts to estimate the UK’s investment in intangible assets and intellectual property rights (IPR).

Of particular interest: the report attempts to answer the question “What proportion of UK knowledge investment is protected by formal IPRs?”

Apparently, approximately 48% is protected by formal IPRs (patents, design registrations, trade marks, unregistered design rights and copyright). Of that 48% only 10% of the assets were protected by patents. On the face of it, not particularly encouraging figures. However, drilling down into the report, we find that 38% of R&D is protected by patents, which is far more encouraging. Going even further, and taking for example the manufacturing sector, we find that while only 31% of those companies use patents to protect their IP, those 31% of firms account for 94% of the R&D spend. It is very encouraging that the almost all of the firms who engage in meaningful R&D use patents to protect that investment.

Further, we find that the UK’s investment in intangible assets grew from around 74% of the investment in tangible assets in 1990 to around 144% of the investment in tangible assets in 2011, again, encouraging. Along with that growth came an increase in the investment in patents and other registered rights.

The report also analyses a number of studies into how companies in the UK prefer to protect their innovation. In one study, companies were asked to rank the relative importance of these eight protection mechanisms:

  1. Design Registration
  2. Trademarks
  3. Patents
  4. Copyright
  5. Confidentiality Agreements
  6. Secrecy
  7. Complexity of Design
  8. Lead time advantage over competitors

Looking in particular at the companies investing heavily in R&D, and based on further analysis, the authors note that the most important protection mechanisms are 1) Patents; 2) Complexity; 3) Copyright; 4) Secrecy; and 5) Design Registration.

Clearly, companies with significant R&D efforts are finding patents to be the most appropriate way to protect their intangible assets. However, there appears to be significant reliance on complexity and secrecy, which can be dangerous. Employees moving to competitors, salesman saying too much to clients, and, perhaps to a lesser extent, reverse engineering, can all very quickly undermine the use of complexity and secrecy as protection mechanisms. In addition, unlike patents, they do not provide a monopoly, and so do not protect against a competitor independently developing the same or a similar solution.

Conclusion? Well, it seems that the UK is investing more and more in intangible assets, and where appropriate is using patents, and other registered rights to protect that investment. This can only be seen as a good thing. The ability of UK companies to use their IPRs to export those intangibles assets to the wider world can only be improved by the ever increasing use of registered rights.

On a final note, these statistics are based on information from 2011, before the UK Patent Box came into effect in April 2013. I wonder whether the Patent Box will have an effect on the proportion of investment in intangibles protected by patents. Given that a company may conceivably expect a positive ROI when investing in patents for use in the Patent Box, one can only expect so.

If you or your company are interested in learning more about how the patent system in general, or the Patent Box in particular, can help increase your profits, get in touch.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.

Author
Paul Loustalan
Partner
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Would you like to know more? You can talk to Paul Loustalan who will be able to help. Call +44 (0)20 7242 0901

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