UK: IP Healthcheck: Unlocking Your Asset Potential

Last Updated: 4 September 2007
Article by Isabel Davies, Tom Scourfield and Louise Wallace

Building competitive edge in the hotels industry requires innovation, development, investment and planning. A key aspect of any successful business in the sector will be the maintenance of the intangible assets in the intellectual property portfolio. A healthy portfolio will differentiate between operators and act as a vehicle for commercial goodwill, as well as providing a strategic and defensive base from which to operate.

Every business should conduct an Intellectual Property audit and revisit it periodically. The importance of the role played by IP in the modern hotels sector is indisputable. Understanding the strengths and weaknesses of your portfolio, and the value of the assets both internally and externally, is a fundamental part of business planning. This is an approach that should be followed in the boardroom, as well as at the "coalface", so the IP is used for maximum effect in the market. Perhaps the IP portfolio is registered, renewed and up to date, but is this reflected in the latest management agreement, brand manual or franchise agreement?

In the past, IP audits have been seen as defensive measures to identify assets risks in current procedures and practices. However, a good IP audit tailored to your business may also discover hidden treasures – intellectual assets that are ripe for protection or commercialisation to add value to the company. Waiting until a problem arises with your IP before any positive action is taken is waiting too long and your competitors may not make the same mistake. This may mean confronting tensions and difficult issues up front, such as the allocation of goodwill between owners and operators, rather than waiting until it becomes an issue.

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Building competitive edge in the hotels industry requires innovation, development, investment and planning. A key aspect of any successful business in the sector will be the maintenance of the intangible assets in the intellectual property portfolio. A healthy portfolio will differentiate between operators and act as a vehicle for commercial goodwill, as well as providing a strategic and defensive base from which to operate.

Every business should conduct an Intellectual Property audit and revisit it periodically. The importance of the role played by IP in the modern hotels sector is indisputable. Understanding the strengths and weaknesses of your portfolio, and the value of the assets both internally and externally, is a fundamental part of business planning. This is an approach that should be followed in the boardroom, as well as at the "coalface", so the IP is used for maximum effect in the market. Perhaps the IP portfolio is registered, renewed and up to date, but is this reflected in the latest management agreement, brand manual or franchise agreement?

In the past, IP audits have been seen as defensive measures to identify assets risks in current procedures and practices. However, a good IP audit tailored to your business may also discover hidden treasures – intellectual assets that are ripe for protection or commercialisation to add value to the company. Waiting until a problem arises with your IP before any positive action is taken is waiting too long and your competitors may not make the same mistake. This may mean confronting tensions and difficult issues up front, such as the allocation of goodwill between owners and operators, rather than waiting until it becomes an issue.

The IP Audit

The practicalities of working with businesses on an audit of their IP portfolio requires a specialised approach, and the relative importance that IP rights such as patents, trade secrets, trade marks, domain names, copyrights, designs, get-up and trade dress play can vary enormously between industries.

For service industries such as hotels, understanding the importance not only of the IP, but the competitive environment in which it operates, is paramount. Our team has a proven track record in the sector, and is able to draw on substantial experience in industry issues, from commercial agreements to commercial disputes. As operators move away from bricks and mortar towards a franchise and management agreement model, the IP rights must act as bridge between the bricks and the brand. Brand leverage from established players in other sectors is also an important development for the industry, with a number of luxury and lifestyle brands seeking to enter this space to take advantage of the perceptions of their products and services generated elsewhere.

Identifying issues, and opportunities

The IP audit is about much more than looking for areas of weakness or disputes. It is structured to go beyond the obvious and to look at the commercial reality of the assets and their scheme of protection (or lack of). The benefit is unearthing assets that can realise value – either in building the business for the future or, where they are not core, as saleable assets that can raise revenue to be used to invest in the core business of the organisation. As such, the process has the dual benefit of reducing risk, as well as a means to obtain competitive advantage.

Taking the complexity out of your IP helps it to tie in to the business plan to promote, protect and add value. Many companies waste money when the proper protection of intellectual assets is actually a business investment – and one that can be a springboard to business success. Every penny spent on IP protection and enforcement must work hard to justify itself. If there is no business case for the maintenance of an individual asset in its current role, it should be deployed elsewhere, sold, or abandoned.

Some Common Questions

Each audit varies greatly according to the composition of the business (and whether it has grown organically or been acquisitive), its geographical focus, and its business model (owner, operator, franchisee etc.). However, common issues on the review will include:

  • IP registration: A critical review of the IP registration policy for core business, and the stage at which registration is considered. Never too early, but often too late?
  • Portfolio Management: Consideration of the structure for licensing of core assets and arrangements for dealing with renewals and maintenance. A review of record keeping and investigation of compliance by licensees. The Madrid system in particular is a good cost saving tool.
  • Ownership and subsistence: A review of contractual entitlement and other arrangements for the ownership of IP, particularly in relation to third party contractors, and a critique of the evidence of creation and subsistence. Waiting until you have a dispute is rarely a good time to start looking.
  • Infringement and Disputes: Considering the key drivers in enforcement policy, the most efficient method of protecting assets, as well as identifying perceived areas of weakness.
  • Licensing and commercialisation: The final stage of the audit, assisting the business to identify opportunity and utilise the IP for strategic and financial gain. Healthy IP can reduce borrowing risk, increase market value, and help attract investment.
A worthwhile investment

A well-timed strategic review of the business can provide a cost effective solution to undetected problems, as well as a competitive advantage in the battle for business. The earlier a company focuses on getting its processes and policies properly organised, the better. This saves valuable management time and heads off the risk of costly disputes later. Once a good audit has been conducted it will be cost effective to revisit this periodically and can not only save significant sums but also generate revenue both in the short and long term. Wise organisations value such investment.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 31/08/2007.

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