What to do when you own an idea

As business people and economists alike increasingly recognise the value of intellectual property, the size of claims being made for violations is also on the rise. But how can companies manage and protect something that is intangible?

It is not products but ideas that increasingly drive company value today as western economies continue to shift from manufacturing to services.

“Companies are becoming more aware of how important intellectual property (IP) is to the success of their business. And it’s becoming more relevant – certainly in the tech space, where you get a lot of people setting up businesses with one eye on how they are going to exit,” explains Tom Dixon, Head of Technology at Hiscox, adding that his firm is now regularly seeing quite expensive claims for breaches of IP.

Beware the pitfalls

While the average person is likely to be aware that there are protections in place to stop one company from passing off another’s products or services as their own, for example, they may not always know IP when they see it.

As well as including distribution rights and patents, the IP law covering copyright protects the expression of an idea rather than the idea itself. It can be hard to untangle the language and as everyday life is increasingly digitised, what is covered by copyright is changing. Certain types of data and databases, for example, are now given protection by copyright law, as well as computer programs.

Then there is the IP exposure that comes from unknowingly breaching contractual conditions. “People will happily sign up to contractual conditions without having an expert cast their eye over them, and if they don’t understand the implications then they might fall foul of the contract,” explains Tom, drawing on the example of geographic area. “Quite often where people fall down is not getting the right licences in place for different locations, for instance. So they might have a UK licence, but not a European or US licence.” This is where IP cover comes in to play.

So what else should clients and brokers look for in IP cover? “The definition of IP covers lots of different specifics. Some insurance policies will take out certain aspects of IP, for example patents or trade secrets might be excluded. So from a broking perspective you’ve got to be aware of what is excluded versus what is included.”

Know your worth

But there are two sides to this coin. Just as people infringing IP often don’t realise when they’re doing so, the creators of IP can be remiss at exploiting its full value. “One of the things we’ve developed as part of our proposition to tech companies is an IP health check,” says Tom. “It brings to life how much value IP has in your business and how you could use it to expand revenue streams and exploit it to the greatest advantage. It also asks whether the client is protecting its IP properly.”

In practice, this means a consultation with a specialist lawyer, who gets under the skin of the client’s business to find out what IP they create, where is it and how it is managed, protected and exploited. A report is then drafted and sent on to the broker and client. Armed with this knowledge, companies are better able to protect their intellectual assets.

How to manage intellectual property when you’re...

Developing: Distinguishing the idea from its expression in software development can be hard. Make sure you carefully document the development process and if you are entering a new field check you are not copying an existing player’s products.

Recruiting: If you’re making lateral hires, make sure those hires haven’t brought anything from their old employer with them and make sure they develop your new product in a white room environment.

Acquiring: Check the party you are paying owns the rights to what you are buying and be cautious when someone is offering something (for example the rights to use their software) for free – it often isn’t theirs to give away, or the conditions of use may be restricting, leading to a potentially costly breach of rights.

Using: When using someone else’s IP, make sure you have the right licence(s) in place and adhere to its terms – for example geography, duration, extent of use, making sure you credit the copyright owner (if relevant).