Selling your business? Gain control of your intellectual property first

small business intellectual property

A recent Ernst & Young report reveals that nearly half of all Australian companies believe they are in a well-structured financial position and could make the preparations to acquire another business within 30 days if necessary.

The message seems clear: businesses small or large must either be prepared to grow or be prepared to receive an offer. For businesses heavily reliant on IP, whether an offer is received and ultimately accepted can depend on whether a company can establish clear IP rights in its key technology and chain of title to that IP. So what can businesses do to get their IP in order?

Are your IP registrations up to date?

A common misconception is that the registration of a business, company or domain name confers exclusive rights in that name. This is not true.

Business and company name registrations are no more than legal requirements and registration does not give the owner any exclusive right as such to use the name. Similarly, registration of a domain name does not give exclusive rights to that name. To have a proprietary form of IP that grants exclusive ownership rights in a name, you must have a registered trade mark.

Trade mark protection is the most effective way to protect the names, brands and ‘get up’ of businesses, and ensures that money and time invested in a business is well preserved. Registered trade marks are protected country by country, so if you trade or sell products overseas, you should have registered trade marks in those overseas countries too.

Businesses should ensure that all of their important logos, brands, designs and technology relevant to its business operations are identified and subject to the appropriate trade mark, patent and design applications or registrations in the jurisdictions in which they are used (both in Australia and internationally), and cover all the necessary goods and services relevant to those jurisdictions.

Businesses must also ensure that the owner’s details on each application and registration are kept up to date on the relevant central register.

Are you trapping and protecting new IP?

Just as it is important to keep existing registrations up to date, businesses should also be diligent in identifying and recording new IP assets as they are created or acquired. Regular IP audits should be performed to determine whether or not these new IP rights are being trapped, evaluated and registered, whether rights are being used effectively, who owns the rights, whether the rights are being challenged by others and even if third parties are infringing those rights.

Such audits can prove invaluable in helping businesses to identify and rectify any IP issues which will inevitably be uncovered during a future sales negotiation. A comprehensive and up to date register of all the IP assets owned and used by a company is an essential and in many cases invaluable component of any business management system.

Look before you leap

Not conducting IP use and availability searches (often called ‘freedom to operate’ searches) before launching a new product or service can result in a business being forced to change or cease using a product or their name and branding. Without proper searches, you may find your new product, name or logo infringes the IP rights of a third party and you could be forced to rebrand, redesign or even withdraw the product from sale.

Establish the chain of title to IP

You must also ensure that your business has the ability to sell your IP rights to a potential buyer. Many businesses believe they own various important IP rights when in fact they do not.