Understanding and utilising Intellectual Property can be a key factor in the success of a business. A strong IP portfolio can provide many benefits, including a competitive edge, revenue generation, and protection from legal disputes. Taking steps to protect it early on helps create a foundation for turning IP rights into revenue-generating assets and building confidence with investors.

Intellectual Property, often shortened to IP, refers to creations of the mind, such as inventions, literary and artistic works, symbols, names, images, and designs. It is a legal concept that gives the creators of these intangible assets certain exclusive rights to use, sell, and profit from their creations.

But what Intellectual Property actually is, in layman’s terms?

INVESTMENT

Intellectual Property certainly is an investment. For a high-technology startup it might be a hefty one, especially in the early stages of the venture building when one turns every penny. However, taking adequate steps to protect your intangible assets early on will create a foundation for turning this investment into revenue-generating assets. You might decide, for instance, to licence or divest your patents. It has recently been reported that Huawei has earned more than $1.2 billion for patent royalties in the last 3 years.

INSURANCE

Just like house insurance, you might never have to use it (touch wood!) despite paying the annual instalments. Yet, should an accident occur you will be thankful to your younger self for sticking with the annual premium. A similar reasoning can be applied to spending money on building your IP portfolio. Depending on what kind of IP strategy you decide to pursue and what your competitors are doing, you might too end up with an IP portfolio that lives a stable life, left alone in a spreadsheet somewhere in your legal department. In all honesty, this is probably a more desirable scenario than having to shell out thousands of pounds defending your rights.

INCENTIVE

I spoke with dozens of investors and asked what they mostly look at when investing into an early stage business pre-revenue. The most frequently heard answer was in the lines of: “Team, their ability to deliver, their confidence level. I want to know that they know what they are doing”. Whilst getting a few trade marks or patents filed will unlikely be the sole deciding factor for getting your startup funded, it will certainly help in building confidence for your prospective investors, especially if you can explain the reasoning behind your IP actions.

STOP-SIGN

Intellectual Property also serves as a “stop-sign” for competitors, prohibiting them from using or copying your unique ideas and creations without permission. Your registered rights such as trade marks and patents  set the exact limits between what your business has the exclusiver rights to, approved by official authorities such as Intellectual Property Offices. While you can pursue copycats based on passing off (i.e. without registered rights) it is a much more difficult case to prove than simply pointing at the legal boundaries set by your public and registered rights.

STRATEGIC TOOL

In my opinion, the beauty of Intellectual Property lies in the fact that you can still use it strategically, even if you think you have very litle IP of your own. Did you know that you can speculate and file patents on your competitors potential technology improvements (assuming you are able to prepare a sufficient technical disclosure). Did you find a competitor’s patent that could block you and threaten your business continutity? Some would panic and close the shop, others choose to find ways to invalidate this patent by finding earlier disclosures of the same technology (i.e. prior art). There are many ways to use IP for your business’ advantage.

VALUE-DRIVER

Intellectual Property can play a role in driving the value of a company. Investors like to see registered trade marks and pending patents because they indicate the business is taking appropriate steps to secure their future Return on Investment. Studies show that companies that doubled the number of patents in their portfolio get 28% higher valuation than those who didn’t.

ASSET

Intellectual Property can also be considered a valuable asset for a company, similar to physical assets such as property or equipment. It can be licensed, sold, used to secure investments or even as a loan collateral. I have seen businesses on the brink of going under, able to secure bridge loans simply on the basis of their IP portfolio. Valuing Intellectual Property is still a black box, though. There are well established methods of performing IP valuation but at the end of the day, it is very much dependent on the currect economic climate, industry and potential acquirors willingness to pay a certain value.

SHIELD

Having a strong IP portfolio serves as a shield for a company, helping protect it from legal disputes and infringement claims. However, do remember that having your own IP rights does not mean that you are in the clear. Your IP portfolio allows you to stop others from using your IP rights  rather than giving a free licence to commercialise them. It will certainly be helpful to have your own patents when you are accused of infriringement as you might be able to build a cross-licensing case (now you see what Apple and Samsung have been doing for years).

DETERRENT

Having a strong IP portfolio can also act as a deterrent for others from attempting to infringe on your rights, as they may fear legal consequences. You might even decide to build a portfolio so big that the sheer effort required for other to analyse it and establish whether they infringe on any of your rights might be enough to deter them from entering your space.

STIMULUS

I was THAT person who was trying to make the argument against the patent system. I was preparing my master’s dissertation on “How do patents hinder innovation and how can we do better?” Catchy yet not true. I read tons of research papers, statistics, blogs, articles, opinions. Patents are a stimulus for innovation and creativity.  Creators and inventors are encouraged to develop new ideas and creations knowing the legal system is there to protect them. Imagine spending millions on Research & Development only to let your competitor rip off your technology and sell it at ridiculously low prices. They might well afford to do that, considering they did not bear any R&D costs. That’s why you need to have patents. On the other hand, the IP equivalent of “rules are there to be broken” would be “patents are there to be invented around”. That’s how innovation works, regardless if we like it or not. We are being forced to move forward, to innovate because we don’t like the way things are or are annoyed with the limits of the current system. Watch the “Playlist” TV series about the rise of Spotify, an absolute gem showing how innovation works.

Are there any other words you would use to describe Intellectual Property? IP is such a multi-faceted asset, one that can really help your business thrive once you learn how to use it to your advantage. Fancy knowing how? I offer a limited number of FREE IP Strategy Calls every month, simply book yours here. I would love to hear from you.

Apart from being an Intellectual Property expert, I am also a self-diagnosed skincare addict. My passion for skincare got to a whole new level once I discovered that you can DIY cosmetics. After many failed attempts at preserving clay masks during lockdown (give it a try, I dare you) I finally found Formula Botanica. I graduated with my Organic Skincare Formulation diploma in April 2022 and really upped my skincare game. 

Starting my formulation journey I learnt so much about different legal requirements which I had no idea about before. It made me realise that this is how most formulators must feel when the world of patents comes knocking at their door and that there is so much I wish I could share with this lovely community. 

I sat down with Dr Philip Lenden, a UK & European Patent Attorney and founder of Simplify IP, who specialises in chemistry to learn more about the intricacies of patents in the field of skincare. Here are the seven key takeaways you should be aware of, straight from the experts:

IF YOU INVENT A NEW FORMULA, YOU CAN PATENT IT

Patents are a form of intellectual property (IP) protection that gives inventors the exclusive right to make, use, and sell their invention for a certain period of time. This means that if you develop a new and unique ingredient or formulation, you can apply for a patent to protect it from being used by others. However, you will have to disclose the details about your formulation to allow others to understand it enough to replicate it (so that they know when they might be infringing on your patent!)

Whether to patent a skincare formulation or keep it confidential is a decision that everyone must make based on their specific circumstances and goals. One advantage of patenting a skincare formulation is that it provides legal protection against other people/parties infringing on your patent. Once a patent is granted, the patent holder has the exclusive right to make, use, and sell the invention for a certain time (in general, 20 years). On the other hand, keeping a skincare formulation confidential can prevent competitors from learning about the specific ingredients and proportions used in the formulation. This can give a formulator a competitive edge, especially if the formulation is difficult or expensive to replicate.

BE STRATEGIC ABOUT DISCLOSING YOUR FORMULA DETAILS

In some cases, a hybrid strategy of patents combined with trade secrets may be the best option. For example, a formulator could file for a patent on a new active ingredient or delivery system, while keeping the specific formulation and usage instructions confidential. Ultimately, the decision of whether to patent a skincare formulation or keep it confidential will depend on the formulator’s business goals, resources, and the specific circumstances surrounding their invention.

PATENTS CAN BE INSPIRATION FOR YOUR OWN PRODUCTS

Most compositions are easy to reverse-engineer. As soon as you look at a product’s full ingredients list you can decipher its contents. Formulators are legally required to list their ingredients from the highest % used to the lowest, with the caveat that once you get to the 1% ingredients and below, you can arrange them in a random manner. Some ingredients (e.g. Phenoxyethanol) are usually used at 1% therefore you will know that all ingredients that follow are used at less than 1% of the overall formula. However, the ingredients research will only get you as far as figuring out the ratios, without the knowledge of the formulating process. Getting a hang of searching in patent databases opens up a whole new dimension for your work as a skincare formulator. 

I was so impressed by the MONO Skincare products, I could not wait to try to formulate similar products for one of my DIY projects. If you have not heard of MONO, you must check them out. They invented an entirely water-free, sustainable range of products delivered in an organic skincare tablet which you can simply disperse in tap water at home. How amazing is that!? I was glad to see they have actually applied for a patent for their formula (you can view it here). I read it top to bottom, to try to replicate their tablet with my own ingredients. Whilst my experiment in pressing inulin, sugar and maltodextrin together into a neat tablet ended up a disaster in my kitchen, I remain a massive fan of the brand. It also gave me further ideas for my own products! Searching in patent databases might feel overwhelming but I promise you, it’s worth it.

INGREDIENT AVAILABLE ≠ INGREDIENT LEGALLY FREE  TO USE

I spent 3 years perfecting two formulas I am now personally using on a daily basis and which I cannot live without. I tested hundreds of ingredients and dozens of suppliers. I finally realised that there is one particular ingredient that really makes that formula. I purchase it from one of the well-known suppliers of natural skincare ingredients. To my surprise, I found an active patent covering a pretty broad application of this ingredient. Thankfully, the company let it lapse in the UK so I can use it in products I sell locally without worrying about that particular patent but I have to be careful elsewhere. 

This comes back to the basic point of doing your research before you release a product. It’s not easy, it’s not cheap but it has to be done, similarly, as you must test your products for stability and get them safety assessed.

PATENTS ARE NOT LIKE DIAMONDS, THEY ARE NOT FOREVER

Patents have a limited lifespan, typically lasting 20 years from the date of filing. After the patent expires, the invention becomes part of the public domain and can be freely used by anyone. Skincare formulators should be aware of when their patents will expire and plan accordingly. 

Take as an example the absolute groundbreaking Skinceuticals Vit. C + Ferulic Acid serum. Vitamin C is notoriously difficult to stabilise and Skinceuticals have devised a novel way of stabilising it with ferulic acid. This was such a groundbreaking technology that decided to patent it (rightly so!), you can view the entire patent text here. With their patent being filed in 2005 they are looking at only 2 more years of exclusivity of this formula. This means we will see some new products launching around that time which will likely have a lower price point than £150 for 30ml of product. Having a monopoly over the formula for 20 years allowed Skinceuticals to set their price point high enough to recuperate the costs of Research & Development related to inventing this formula.

PATENTS COST A LOT BUT INFRINGEMENT COSTS A LOT MORE

Applying for a patent can be a costly and time-consuming process. The whole process can take several years and cost tens of thousands of pounds, and you need to repeat it in every country where you wish to gain exclusivity for your invention.  

If you were to be found guilty of infringing on someone else’s patent, you can be required to pay damages. Based on data from Lex Machina the average damages in a patent infringement lawsuit are between a few million dollars to even $300 million. To prosecute such a case would cost anywhere between $2.5 million to well over $10 million. These numbers vary by industry but this a pretty good indication that spending money on research before you launch a product will be less pricey than the courts doing that research for you after the fact.

Now, a special note for DIY skincare formulators. Would using someone’s patent to replicate a formula be considered an infringement? No, as long as you do it in the privacy of your home. This is how innovation works. How about if you filmed it and published it? That’s a topic for an entirely new post!

PATENTS ARE JUST ONE PIECE OF A PUZZLE IN THE IP GAME

There are several different types of Intellectual Property Rights that skincare formulators should be aware of, to best protect their product. Patents protect the functional aspects of an invention such as formulation, manufacturing process etc. Registered designs can be used to protect the ornamental design of your packaging. 

However, one of the most important Intellectual Property rights are trade marks. Customers are buying into your brand and your product’s quality. It’s your reputation and trade marks are legal rights that can protect it. Getting your trade mark registered is not enough though. You also need to perform searches to make sure there are no identical or similar brands already trading in the same space which toes you would be treading on (that’s my gentle way of saying: “get sued by”). 

In conclusion, patents play an important role in the skincare industry. They can provide a valuable tool to safeguard ideas and inventions as well as prevent others from profiting from your hard work without permission. Navigating their complexities can be a challenge so please reach out and book a free IP Strategy call to discuss any questions you may have.

Intellectual Property (IP) is an important aspect of any business, but it can be costly and time-consuming to establish and maintain, especially when you are still at the early stage of your venture. There are multiple priorities to balance and, unfortunately, IP is usually on the lower end of the scale. However, there are several steps that startup founders can take to strengthen their IP position without incurring any additional costs. 

Here are 5 easy steps to strengthen your IP position that will cost you nothing:

1. Pick a name after a thorough trademark search: Before you start using a new name, logo, or slogan, conduct a thorough trademark search to ensure that it’s available for use. This can prevent you from infringing on someone else’s trademark and help you avoid costly legal disputes down the line. Search both in trade mark registries (TMview is a good, free resource to start) as well as by simply looking for your brand online, in Google, AppStores, Companies House. Finding another business under the same name is not the end of the world, as long as they are not in the same line of business but it’s highly recommend that you consult an IP specialist when in doubt.
2. Document your IP: Keep detailed records of your IP including the date of creation and any modifications made to it. Logos, websites, decks, reports, absolutely anything that you created. This can help you establish your ownership and prove it in case of any disputes. 
3. Use Non-Disclosure Agreements (NDAs): Have your employees, contractors, and business partners sign NDAs to legally bind them from sharing your confidential information. This can help you protect your trade secrets and confidential information, which can be a valuable asset for your business.
4. Implement Cybersecurity measures: Implement strong cybersecurity measures, such as encryption and secure login protocols, to protect against cyber attacks and unauthorized access to your digital IP. If there are any elements of your business that you consider trade secrets, make it very clear. You will not only need increased cybersecurity measures for protecting them but also contractual and organisational measures that differentiate handling of trade secrets from other standard, even if confidential, information used in your business.
5. Educate your employees: Regularly educate your employees about IP protection and monitor their activities to ensure compliance with company policies. This will not only help you in protecting your IP but also create a culture of ownership. Make sure your team understands what IP is (so that they report it as soon as they create anything worth considering for registered protection) and what IP you currently own (so that they can red flag any potential misuse by competitors).

By taking these 5 easy steps, startup founders can strengthen their IP position without incurring any additional costs. It’s important to remember that protecting your IP is an ongoing process that requires constant vigilance and regular updates to security measures as technology and threats evolve. Your business will evolve too and your take on Intellectual Property and IP Strategy might need updating every now and then. If IP is not a regular point of your management agenda, make an effort to include it at least every quarter to proactively manage any risks and opportunities.