Using Your Intellectual Property Assets to Combat the Recession

A positive outlook and adaptability is key

In times such as these, companies need to do more with less and, therefore, it is essential for them to capitalise on all of their assets.

I am a firm believer that one of any company's biggest assets is Intellectual Property (IP) - an asset that is often not very well utilised by companies, particularly small and medium-sized enterprises (SMEs).

Intellectual Property encompasses property and assets resulting from original creative thought such as patents, copyright material, designs and trade marks. Today, IP represents a staggering 90% of the total value of the world's top 2000 companies. Be this as it may, less than 5% of innovations created in the United States are under licensing agreements, leaving billions of dollars worth of IP assets underutilised.

Globalisation and the growth of a knowledge economy have highlighted the importance of intellectual property rights, thereby putting the demand for effective IP management at the heart of all businesses.

Big multinationals regard IP as a strategic asset rather than merely a legal tool, and it follows that the most successful SMEs are also now seeing the need to manage, exploit and capitalise on their IP assets. This involves not merely protecting and administering the IP assets themselves, but also integrating IP into innovation, growth strategies and business models alike by using both the legal and economic functions of intellectual property.

IP management can be divided up into three task areas - innovation support, portfolio management and IP exploitation. Obviously, the exploitation of IP and related tasks has tax implications which must be addressed and optimised.

Tax implications

SMEs can use the same strategies that have already been employed for many years by multinational companies, which consist of localising their value-generating IP assets - such as brands, customer lists and patents - in low-tax jurisdictions.

If properly managed, locating or relocating assets offshore is a relatively simple process and can provide significant benefits.

Steps to take

When clients contact me regarding how best to adapt to the current economic climate, I look for ways for their companies to extract the maximum possible value from the business's existing IP assets by leveraging those assets across their business models. We also work to identify opportunities for them to extract value from IP from outside their respective industry and support their efforts to find potential customers for their IP in unrelated business sectors.

The importance of protecting and registering trademarks, patents, designs and copyrights cannot be emphasised enough. Whether it be a trade mark registered with the Trade Marks and Designs Registration Office of the European Union (OHIM), with the Organisation Africaine de la Propriété Intellectuelle (OAPI) or with the US Department of Commerce, Patents and Trademark Office (USPTO), the protection and subsequent licensing of IP assets is key to any modern company's survival and development.

I would encourage all of our clients and readers to analyse their own business to see if there are any undervalued existing IP assets that they could protect, sell and/or license from a tax-friendly jurisdiction. Jurisdictions such as Cyprus offer good solutions for precisely that purpose. No tax is withheld on royalties payable to a non-resident company when the right is granted to a Cyprus entity for use outside the Republic. Another solution would be to set up an appropriate Mauritius company.

Intellectual property rights play a crucial role in giving companies a lead in a market, and IP is definitely the business asset of the future.

Will companies be able to rise to challenge of turning knowledge into wealth? COBUS GROUP is here to ensure that you can!

I wish you all the best for a successful 2009.

PS: We shouldn't forget that the hugely successful Microsoft was born during the recession of 1974; we saw the founding of Hewlett Packard during the Great Depression, and the genesis of the technology boom of the past decades began during the recession of the early 1980s - which just goes to show that every cloud has a silver lining and that business model restructuring during hard times really does pay off.

Source : Ezine