Harvard Business Review Contribution.

Small businesses must set-up a real culture of intellectual property just like large companies.

Today, intellectual property is one of the most discussed topics in the business world but it remains one of the less understood ones. Immaterial assets have become main assets of many businesses and one of the prerequisites for any valuation. These represented 84% of the total value of the S&P 500 stock market index in 2018 (The S&P 500 representing 80% of the US stock market in capitalization). However, if we recognize intangible economic value, they are still too often neglected, underestimated and underreported. Only 9% of European SMEs register intellectual property rights, compared to 40% of large companies.

Unfortunately, it is when companies face attacks such as piracy, counterfeiting and “theft” of intellectual property and trade secrets (cost estimated at 500 billion per year), or when looking for investors, that 'they become aware of the vital nature and the extent of their intangible heritage. Today, all businesses, from VSEs / SMEs to large groups, have intangible assets which, if they are protected, allow them to gain credibility, perpetuate activity, acquire market power or even create collaboration opportunities if they are protected.

Assessing intangible assets

Intellectual property includes industrial, literary and artistic properties. Industrial property more specifically aims at the protection of inventions and industrial or commercial creations. As for literary and artistic property, it concerns the creation of original works such as advertising videos, websites, commercial documents or software. It is in the interest of companies to identify the intellectual assets to be protected and convert them into intellectual property in order to make them an effective strategic tool. The way to remedy this lack of knowledge is an intellectual property audit in order to:

-identify and document all the valuable intangible assets that a business may possess, into four categories: brand, inventions, literary, artistic or computer creations, trade secrets, and then use the appropriate protection tools

-choose the appropriate protection: in fact, copyright covers intellectual works as soon as they present an original character without formalities being imposed, the same for trade secrets, if the company guarantees their confidentiality. Other intellectual property rights require the implementation of procedures to be able to benefit from it, this is the case of trademark registration, patents, aesthetic innovations

-examine the intellectual property of competitors with the aim of obtaining a great deal of information on its developments, projects, products, and to be alerted in the event of infringement of patents or other rights.

In France, Protect your brand with the INPI

The brand represents the company, its products or its services with its customers and makes it possible to distinguish itself from its competitors. It can be a name, logo, distinctive packaging or specific advertising slogans. A major asset, the brand is most often the first good to protect as it increases the value of a business and contributes to building a solid reputation with its customers. Being a major asset, the brand is most often the first thing to protect as it increases the value of a business and contributes to building a solid reputation with its customers. It also makes it possible to create and reinforce a "corporate identity" among employees and job applicants. By way of illustration, Apple has built its sales and marketing strategy around its brand, which today is worth $205 billion (value based on the financial performance of products, the role of the brand in purchasing decisions and its ability to build loyalty).

By protecting its brand, the company will be able to enjoy the monopoly of exploitation on it in the countries where it is registered and to make it grow, while protecting itself from third parties, and defending itself in the event of counterfeiting. In France, protection procedures are carried out with the INPI (French National Institute of Intellectual Property), and the investment remains minimal (from 200 euros for protection for ten years, renewable endlessly).

Developing trust through patents

Faced with the high rate of appearance of new products, new technologies and new forms of competition, innovation is at the heart of business economic growth today. If the businesses design original inventions that can be manufactured or used, such as machines, tools, instruments, methods, systems, processes, compounds, formulations or medicines, they must be protected. In order to increase the cost of research and development, and to face a globalized competitive environment, it is vital for companies to protect their inventions. In addition, patents make innovation more credible and give investors confidence.

Finally, they are growth accelerators; they give a competitive advantage and they can also be the subject of license contracts, be sold, or be put on standby for possible future uses while preventing competitors from using them, when used directly by the company, even if this tactic is time-limited. In France, a patent confers on its holder a right of exclusivity on the national territory, valid for a maximum duration of twenty years. Before filing, the company must be vigilant in the drafting of employment contracts or services to ensure that the inventions of whether employees, trainees or freelancers belong to them.

Using trade secrets

Even if a company does not have a formula like Coca-Cola kept in a safe under high surveillance and known only to a few people, it needs to keep certain information essential to its activity beyond the knowledge of its competitors. These can include early-stage innovation, customer and/or supplier lists, financial data, product formulas, manufacturing processes, marketing strategies, computer source codes and information on prices. For a business secret to exist, the information must be confidential, have commercial value, and be subject to reasonable provisions designed to keep it secret (for example, through non-disclosure agreements). In these circumstances, the unlawful appropriation of this information by a competitor or by a third party will be considered as a violation of the business secrets of this company and maybe penalized by obtaining injunctions and the payment of damages, even if this can be complicated in practice.

Exploiting copyright

Copyright protects everything that is formatted in literary or artistic terms. It can be a source of income for the company, be sold or granted through a license agreement. It covers the creative expression of literary, musical, dramatic, pictorial, graphic, sculptural, cinematographic and architectural works written or otherwise fixed on a medium. In the enterprise, copyright includes elements as diverse as emails, letters, legal documents, articles, computer programs, spreadsheets, scientific models, drawings, plans of architects, photographs or software. The Berne Convention for the Protection of Literary and Artistic Works (176 signatory countries) lays down the principle that an intellectual creation is protected by the mere fact of its existence. The right is granted to the author of an original work automatically and free of charge. On the other hand, this protection is limited in the event of a dispute because the author will then have to prove his prior art. In the case of unpublished works, for example, it will be necessary during a dispute to establish proof of creation using a Soleau envelope, by depositing them with a ministerial officer (notary or bailiff) or using a society of authors. Easy to use, almost free, copyright should be part of any intellectual property strategy. Again, the company must ensure through adequate contracts that copyright is transmitted to it by its employees or any external service provider behind the creation.

Intellectual property is now the main engine of wealth creation and economic growth worldwide. Profitability of investments in research, obstacle to competition, defense against copying, key element in attracting investors, intellectual property assets increase the value and the competitive advantage of companies. However, as pointed out by Christophe Roquilly, professor of law at the Edhec Business School, director of the legalEdhec center and dean of the faculty and research,

“in order to make the preservation of the intangible heritage of the company an economic and strategic first-rate, each company will have to establish a true culture of intellectual property. This involves raising awareness and training its leaders and proactive management of its intellectual property, which will no longer be seen as an expense but as an investment.”

Today, no company can take the risk of not protecting its intangible assets. Combining creation, innovation and protection is the sine qua non for guaranteeing sustainable growth for the company.

This article is an English translation of a French article published In the Harvard Business Review " La propriété intellectuelle, un enjeu crucial pour les entreprises".