A Legal Guide to Intellectual Property for SMEs

Intellectual Property (IP) protects more than just an idea or a concept - it protects your business assets. A recent IPO report shows that approximately 70% of a company’s worth lies in intangible assets, and this percentage is steadily increasing.

IP is present across every facet of your business, from the way in which your customers view you to the technical innovations underpinning your goods and services. Protecting IP is crucial for most small businesses, as it fortifies a competitive advantage that may be the difference between success and failure. However, IP law encompasses an array of legal issues, from copyright to trade secrets, which can make it difficult for small business owners to navigate.

To ensure you have the best protection for your business, you may consider contacting a lawyer for tailored advice. In the meantime, this handy guide can teach you everything you need to know about the types of IP, the benefits for small businesses, and the challenges you may face when building a portfolio:

What are the most common types of IP?

There are four main types of intellectual property. Securing the right kind of protection for your property is important and will depend on the nature of your business, which is why it's advisable to consult an expert lawyer before spending time and money on applications.

1. Trademarks

Trademarks, which can be applied to company names, slogans, logos, sounds, smells, or colours, form the basis of your brand image and help customers to distinguish your unique product or service from rival firms.

Trademark protection is a complex issue, and it’s essential to seek expert legal advice as early as possible. This not only establishes if you have the right to register your marks, but also helps you register correctly and in the appropriate territories. Trademarks initially last for ten years, but can be renewed indefinitely. Considering the permanent and exclusive nature of this protection, registering for trademarks is highly worthwhile.

2. Patents

Patents provide inventors with a monopoly over their inventions for a limited period (20 years in most countries, including the UK). Patents may be applied to physical objects, software, chemical processes, drugs, data processing, artificial intelligence, and machine learning. In order to qualify, the invention must be new, include an original step, and be capable of industrial application.

With a patent granted, entrepreneurs can prevent others from producing and selling copies of their invention without permission. This protects your investment in research and development by preventing your rivals from freely exploiting your work. For a small business owner, particularly those with limited revenue streams, a patent is key to turning a profit.

3. Registered designs

Registered design rights protect the physical appearance of a design, such as its texture, contours, shape, materials, and decoration, for up to 25 years. They can apply to packaging, graphics, logos, and products, if the product’s appearance is considered one-of-a-kind.

Unregistered design rights offer some protection, but only for three-dimensional designs. It's also not enough to show a high level of similarity between your design and another party's work; designers must prove that their work has been knowingly copied. With registered design rights, no such evidence is required. As fees are fairly inexpensive, business owners looking to secure absolute rights over a design, rather than its functionality, are likely to benefit from registering.

4. Copyright

Copyright is the legal right granted to a creator to prevent other people from copying their original work. This type of IP applies to a wide range of creations, such as photographs, paintings, music, films, scripts, books, and reports. Under copyright law, you retain full control over how and when your work can be utilized by third parties to prevent misuse or exploitation.

In the UK, copyright protection is automatically granted at the point of creation; there is no need to apply or pay fees. Adding the © symbol, your name, and the year of creation can indicate to others that the content is protected, but it’s not a necessity.

5. Trade Secrets

One final type of IP rights are trade secrets. This refers to commercially valuable, private information that's important to a business because it offers a competitive advantage. Trade secrets can be applied to confidential information that's of economic benefit to the creator, such as recipes for food items or drinks, but they can also apply to business practices and procedures.

Trade secrets are not publicly registered. Instead, the business must implement internal measures to prevent this information from spreading outside the company, like requiring employees to sign confidentiality agreements and comply with data security rules.

When is the right time to start protecting your business?

The point at which you should consider seeking protection for your business’ ideas, designs, or products will depend on the type of IP that's valuable to you.

• Trademark applications can be filed at any time, but it's good practice to file applications before, or shortly after, starting to market the brand.
• Patent applications must be filed before the subject of the application is made publicly available, i.e., before the sale of a product or publication of a report.
• Design applications generally need to be filed within 12 months of the subject becoming publicly available.
• Copyright arises automatically upon creation.
• Trade secrets should be identified and ring-fenced as soon as they are created.

3. Registered designs

Registered design rights protect the physical appearance of a design, such as its texture, contours, shape, materials, and decoration, for up to 25 years. They can apply to packaging, graphics, logos, and products, if the product’s appearance is considered one-of-a-kind.

Unregistered design rights offer some protection, but only for three-dimensional designs. It's also not enough to show a high level of similarity between your design and another party's work; designers must prove that their work has been knowingly copied. With registered design rights, no such evidence is required. As fees are fairly inexpensive, business owners looking to secure absolute rights over a design, rather than its functionality, are likely to benefit from registering.

4. Copyright

Copyright is the legal right granted to a creator to prevent other people from copying their original work. This type of IP applies to a wide range of creations, such as photographs, paintings, music, films, scripts, books, and reports. Under copyright law, you retain full control over how and when your work can be utilized by third parties to prevent misuse or exploitation.

In the UK, copyright protection is automatically granted at the point of creation; there is no need to apply or pay fees. Adding the © symbol, your name, and the year of creation can indicate to others that the content is protected, but it’s not a necessity.

5. Trade Secrets

One final type of IP rights are trade secrets. This refers to commercially valuable, private information that's important to a business because it offers a competitive advantage. Trade secrets can be applied to confidential information that's of economic benefit to the creator, such as recipes for food items or drinks, but they can also apply to business practices and procedures.

Trade secrets are not publicly registered. Instead, the business must implement internal measures to prevent this information from spreading outside the company, like requiring employees to sign confidentiality agreements and comply with data security rules.

The benefits of IP protection

Having invested your efforts into building your brand, from selecting a logo to improving your product offering, protecting IP is key to maintaining your market position and customer base. In doing so, your business is guaranteed to be the sole beneficiary of your efforts. The advantages of IP protection include:

• You receive the exclusive right over your output, allowing you to provide unique products, services, and content that may enhance your reputation among consumers. Without protection, it can be very difficult to stop others from using your IP.
• If your business has a well-defined IP strategy and robust IP portfolio, you may benefit from higher valuations from investors.
• You may be able to apply a reduced rate of corporation tax to any income earned from a patented invention via the Patent Box regime.
• You could generate additional revenue by licensing your IP rights to third parties. This activity can increase your market share and profitability.
• IP can be used as collateral for debt financing when you're looking to secure a loan for your business. IP rights can also be used as leverage when applying for government funding, such as a grant.

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Key challenges to building an IP portfolio

Whilst having the right protection for your IP is hugely important to your growth and profitability, there are a few hurdles that business owners face when registering for and trading under IP rights. Most of these, however, can be easily tackled with help from a business lawyer. Typical challenges include:

• A significant investment may be required to build and maintain a robust, international IP portfolio. Depending on the type of IP, the registration and renewal fees could mean you have to set aside a large sum of money to cover these recurring costs.
• IP rights are territorial, so you will have to file trademark, patent, and design applications in each country where protection is needed. If you trade in multiple countries, this can add to the complexity and cost of your IP portfolio.
• IP applications have strict deadlines that must be adhered to, and you must keep an eye on expiration dates. Hiring an expert to manage your portfolio can help you keep your IP rights legally enforceable at all times.
• Some types of inventions can be tricky to patent, including software applications and business methods.
• Having IP rights does not mean that you will not infringe on someone else’s rights. Other IP owners can still challenge your trademark, patent, and design applications.

About the Author

Kevin Hanson is a lawyer at LawBite, the UK’s top digital law platform offering expert, affordable commercial law for small businesses at 50% of the usual cost. He has 10 years experience of working in the legal profession, specialising in patent & trademark registration, enforcement and monetization, and general intellectual property law.

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