Genius at work
Article Date: Oct 23 2008
IP is an invaluable asset
For companies operating on the frontiers of science and technology, intellectual property (IP) is everything.
‘IP is the mortar among the bricks of our business,’ comments Bruce Girvan, director of IP at fuel cell provider Ceres Power.
Exclusive research conducted by Business XL, in association with patent mapping specialist Cambridge IP, reinforces how vital this area is for companies that survive on sustained brilliance. Looking at concerns listed on the Alternative Investment Market (AIM), our research shows that 2,331 patents have been filed by the top ten most patent-rich companies.
While it many of these blue-sky ventures won’t be cash-rich, some do have a heavy IP portfolio and money in the bank. GW Pharmaceuticals, which specialises in controlled drugs for prescription purposes, is a case in point. With a total of 283 patents, it has £18.4 million in the bank and a market cap of £44.6 million. Super conductor specialist ClearSpeed has 147 patents, £19.6 million on the balance sheet and a market cap of £10.3 million.
Valuable ideas
All of these companies regard IP as a vital commercial asset. At fuel cell specialist Ceres Power, originally a spin-out from Imperial College, there are three core elements to its IP strategy: protection, exploitation and defence.
Girvan explains that the company files patents, trademarks and designs regularly. However, he notes that if a competitor can’t break a product down and see how it’s been made, a patent won’t be filed.
‘With our patenting process, we use it to protect our crown jewels – our core technology – when it can be reverse engineered. If a competitor can’t see how we’ve done it, we generally do not patent that technology. That’s a trade secret.’
This approach is taken by another cleantech company, Energetix. CEO Adrian Hutchings refers to laying an IP ‘minefield’ around a product, noting that to do this effectively you need to patent a system as opposed to a basic component. ‘A system patent includes various components and that prevents someone from replicating the system,’ he notes.
None of this is cheap. Girvan says that Ceres budgets £60,000 for the first five years of a patent’s life. This will include the price of registering in other countries, legal fees and additional costs, such as translating documents. Nevertheless, the investment can be worthwhile as a solid set of IP assets will significantly strengthen your business and could even make you an attractive proposition to an acquirer.
US-based fuel cell specialist IdaTech is looking to operate in Europe, South Africa and India. Chief engineer William Pledger says: ‘We look at where our competitors are and we may try to get patent protection outside the US. You try to get as much patent protection as you can – whether it’s simply for protection or as a potential bargaining chip.’
China isn’t on IdaTech’s list of countries to enter. ‘Even if you have patent protection in places like China, it doesn’t really help you. Or it’s extraordinarily expensive to try and get protection,’ observes Pledger.
Ben Goodger, global head of commercialisation at IP law firm Rouse, observes that IP can be defended in countries which belong to the World Trade Organisation, even developing economies such as China. However, he adds that it’s easier if you choose one of the main cities, such as Beijing.
‘If you go to the right courts in China, IP will be recognized, although it’s fair to say it’s not widely understood. So you need to go to the major commercial centres and then you can get a
very fair result.’
On the attack
IP shouldn’t be seen as a purely defensive tool. Goodger observes that licensing or even selling IP is an area companies should look into. ‘Licensing is fantastic as you may hang on to the asset. Especially in the current market, companies need to make an active effort to maximise the revenue opportunities from their IP portfolio as much as any other set of assets that they own.
‘There are brokers out there who can purchase patents you don’t want. A lot of companies now need to focus on selling patents, rather than letting them lapse.’
The biggest danger for a company that has no legal defence is its employees. Girvan says: ‘People are our biggest strength and biggest weakness and any business that doesn’t realise this is foolish.’
Measures can be taken to protect a company, continues Girvan, and this includes healthy remuneration and confidentiality clauses in a contract should an employee move on. But it doesn’t end there.
‘We’ve split our organisation into compartments, so no one person has the entire picture,’ he says. ‘We control where information is stored on our databases, so people can’t download and take away information. There are only two or three computers in this company where you can download information on to a memory stick or CD.’
In addition to this, controls are in place to avoid employees sending out commercially sensitive emails. It’s another tool in the effort to guard what’s vital for the longevity of the company, and IP figures as an intrinsic component of that strategy. Goodger says: ‘Patents are incredibly powerful – if you get it right with patents, you have something very strong. It gives an absolute monopoly to you over anyone doing something similar. That can’t be underestimated.’
Business XL and Cambridge IP have compiled an extensive array of information about IP-rich AIM companies. To order your copy of the report, contact Calvin Green on 0207 250 7056, email us, or click here for more details.
