Understanding the Value of Intellectual Property for Your Business

Intangible Assets, it is stated, now make up 80% of the value of a business and as such, it is important for any business to know what its Intangible Assets are, and how to protect them from misuse by a third party.

Intangible Assets include know-how, confidential information and other forms of Intellectual Property such as Trade Marks, Patents, Registered Designs, Domain Names and Copyright.

When entering into an Agreement for Sale and Purchase of Business, a Purchaser wishes to pay the highest amount possible for the Tangible Assets (so that it can get a tax advantage through depreciation of the same) and the lowest amount possible for the Intangible Assets. The Vendor on the other hand wishes the opposite.

If the Vendor has adequately protected its Intellectual Property and can show this to the Purchaser, then the Vendor is more likely to get the Purchaser to agree to the full amount of the Intangible Assets.

There are various ways of protecting different forms of Intellectual Property, and some of these are as follows:

• Registration with the Intellectual Property Office of New Zealand (for Trade Marks, Patents and Registered Designs);
• Affixing various forms of notices to unregistered Trade Marks and original works;
• The use of Confidentiality Agreements;
• The use of Deeds of Acknowledgement of Ownership of Intellectual Property;
• The use of restraints of trade; and
• Specific clauses in employment and independent contractor agreements which deal with the creation of various forms of Intellectual Property and ownership in the same.

If you are uncertain as to what Intellectual Property your business consists of, or if you need help in protecting it, please contact us (Scott Goodwin and Ruth O’Brien) to undertake our “Intellectual Property Audit”.

In addition, if the Intellectual Property of your business is held by your trading company, then you also need to come speak with us regarding setting up a new structure to minimise risk to the Intellectual Property (should the trading company ever be attacked).

We strongly advise all businesses to get a greater understanding of their Intellectual Property and to ensure that it is protected, especially given that it will benefit you on the sale of your business.