Managing Intellectual Property Risk and Reward

16 August 2016

Company value is steadily shifting to intangible assets like intellectual property (IP). Some sources put the value as high as 80%, eclipsing the value of “bricks and mortar” assets. The value of the Coca-Cola brand has been put at more than USD $80 billion.

However, given the intangible nature of IP, it can be difficult for companies to grasp the full extent of their IP assets. As a result, these assets are often overlooked and undocumented, and consequently at risk of being lost.

Robust risk management and compliance is essential to maximise the value of your company’s IP. This generally includes five steps:


You cannot design an effective IP management program unless you know the IP your company is creating and using. This includes the obvious – the global sportswear brand, the innovative pharmaceuticals that your R&D department is working on, the blend of secret herbs and spices. However, IP assets that sit in the background can be just as valuable. The custom-designed software for your widget manufacturing business or the operations manual for a franchise may represent many, many hours of human intellectual effort. You would not want to see your rights to use these assets compromised, or see these assets exploited by a competitor.

It can be extremely useful to conduct an IP audit, going through your business division by division and speaking with managers to determine what IP assets you are creating and using. Registered assets such as trade marks, patents and designs are important but represent just one element of a comprehensive audit. The scope of your audit should be broad enough to uncover IP assets that may not be registered or registrable. Specialist IP lawyers can be helpful here as they are trained to recognise when the hard work of your company translates to a protectable asset.
It is also important to identify third party IP that is business critical. If your flagship product contains licensed technology, you need to know the breadth of that licence and the nature of any restrictions.


The next step is to set up a central IP Register that brings together the pertinent details about each asset. At a minimum, the IP Register should include:

  • A schedule of all your registrable IP, such as patents, trade marks, designs, plant breeders rights, and quasi-IP rights such as domain names and business names. The schedule should include the registered owner and status of each item and all relevant examination, renewal and maintenance deadlines. These details should be verified by conducting searches of the relevant government registers.  The schedule should also identify the person responsible for managing your registrable IP. For many businesses this will be an outside law firm or patent and trade mark attorney firm, which takes instructions from one or more people within the company;
  • Details of all material IP that is not necessarily registrable. This may include copyright material such as drawings, plans, software, photographs, lyrics and music, and confidential information such as customer lists and other valuable data;
  • Details of all material IP that the company has not yet registered, or has chosen not to register. Brands that have built up a reputation in the marketplace can still constitute valuable IP even if they are not registered.  Your company may also have chosen to treat technology innovations as trade secrets rather than filing for patent protection; and
  • Details of all contracts that relate to IP, such as:
    • IP licenses – whether your company is the licensee or the licensor;
    • Research and development agreements;
    • Co-existence agreements;
    • Non-disclosure agreements;
    • Employment agreements;
    • Contractor agreements; and
    • Manufacturing and distribution agreements.

The Register should include a signed copy of the final agreement or indicate where it can be found.


Now you should have a fairly comprehensive idea of the IP created and used by your business. However, not all IP is created equal. Before going further, it is important to understand which assets are most valuable to your business, and which potentially represent the most risk if managed incorrectly. Consider:

  • How much have you invested to develop or register the asset? International trade mark and patent portfolios can represent a significant investment over many years;
  • However, past investment is only one factor to consider, particularly if the bulk of your portfolio consists of trade marks you no longer use or patents that are about to expire;
  • The time and cost to replace the asset. For example, if you could no longer use your custom software, could you easily transition to an off-the-shelf product? What would be the impact to your business if a third party claimed your product infringed their patent?;
  • The income attributable to the asset. Is it your secret recipe or superior technology that keeps customers coming back? What would happen if a competitor were able to exploit that asset?; and
  • Have you licensed the asset and are you collecting royalties? What opportunities may exist to commercialise this asset in the future?

The value of the asset to your business will influence how much time, energy and money you are willing to invest to properly manage and protect it.


Once you have determined the IP that is of most value to your business, the next exercise is to locate any risks or holes in your protection. Some issues may not be capable of resolution but foreknowledge will allow you to put steps in place to manage the risk.

A major issue that should be addressed in any IP audit is verifying ownership. Often, ownership issues are not uncovered until a company starts the due diligence process prior to a business sale, which can cause delays, embarrassment and expense. Consider these scenarios:

  • Your company purchased a business many years ago along with a substantial international trade mark portfolio. An infringer crops up in a particular country causing significant disruption to your sales. You speak with lawyers in that country to enforce your trade mark registration and find it is still registered in the name of the previous owner. Further, in that country you need original notarised assignment documents to record the change in ownership but the previous owner has now been wound up;
  • Your business depends on unique software developed by a contractor. You thought you owned the copyright in the software but it turns out you only have a licence and the licence is not transferrable to a purchaser of your business; and
  • The domain name required for the launch of your product next week is actually registered to your former IT manager, who was fired several months ago and refuses to cooperate.

It may be possible to deal with all of these issues with enough advanced warning, but the last thing you want is to be blindsided with a completion deadline looming.


The final step is to put procedures in place to identify and protect the company’s valuable IP assets into the future. Key to this is a comprehensive IP Policy, which addresses things like:

  • Clearance: When a department develops a new IP asset such as a brand, marketing campaign or manufacturing innovation, it is important to clear that asset for use. You will rarely have an ironclad guarantee that a new asset is free for you to use, and the lengths you go to clear an asset will depend on the potential consequences to your business if you are accused of infringement. Depending on the nature of the asset, clearance may take different forms, such as running the campaign past your IP lawyers, trade mark availability searches, obtaining freedom to operate opinions or obtaining relevant licences;
  • Protection: A conscious decision should be made as to how new IP assets are to be protected. This protection could take many forms, from seeking registration, to keeping the assets confidential, to contractual restrictions on how it is to be used;
  • Third Parties: It can be very useful to develop guidelines for business units as to how to deal with IP when they are contracting with a third party. This includes any of your IP that a third party may need to use and access, any third party IP that you are licensing, and any new IP developed. You should review IP clauses in resulting agreements to ensure your existing IP is protected and any IP developed is owned by you or licensed to you on appropriate terms.  Some businesses may find it useful to develop a set of standard IP clauses;
  • Security: In this age of hacking and data theft, what technological and physical security is in place to protect your IP? What protocols must be adhered to?
  • Maintenance: Managing a company’s IP assets and risk is not “set and forget”. It is important that the IP Register is kept up to date. Provision should also be made for regular reviews to identify new areas of innovation within the company, underperforming assets, new sources of risk and opportunities for commercialisation.

Of course, a policy is only as good as the procedures that back it up. IP needs to be front of mind for managers as well as the executive team. Training is helpful and knowing who to contact with a query or a problem is invaluable.

HWL Ebsworth has considerable experience in all aspects of IP risk management and compliance. Whether you need a comprehensive IP audit, assistance in drafting an IP Policy or simply to talk through issues you have uncovered in your own audit, we would be very happy to assist.

This article was written by Nicholas Pullen, Partner and Gina Tresidder, Special Counsel.

Subscribe to HWL Ebsworth Publications and Events

HWL Ebsworth regularly publishes articles and newsletters to keep our clients up to date on the latest legal developments and what this means for your business.

To receive these updates via email, please complete the subscription form and indicate which areas of law you would like to receive information on.

Contact us