Author Matt Sammon
Many businesses may be wondering how their Intellectual Property can be used to guard against the current recession? Understanding the role of Intellectual Property during a recession can help you adapt your commercial strategy and effectively plan for the unfamiliar path ahead. And let’s be honest, 2020 feels anything but familiar!
Official figures released from the government on 12 August 2020 confirmed that GDP had fallen two quarters in a row and the UK had entered a recession for the first time in 11 years. With the market shrinking it’s timely for IP specialists (like us at Sonder IP) to highlight how IP can be of benefit to brands in surviving a recession. In this article we also share examples of how you can make your intellectual property work even harder for you in difficult times.
The different roles of IP during a recession
- Brand Loyalty
As you would expect, during difficult times, consumers often have less disposable income or are more reticent about making purchases, reducing purchase frequency. As a natural result of this the consumer may become more discerning which brings brand loyalty to the fore. Having a brand that is recognised and trusted by existing consumers is key to retaining a client base and making sure that the reduced buying frequency is focused on those brands.
Keep your brand distinctive
To gain the biggest benefit from this its important to maintain your brand and ensure that it remains distinctive in the marketplace. Monitoring the activity of your competitors and new entrants to the market can identify potential infringements at an early stage to make sure they can be dealt with quickly and in the most cost-effective way. This in turn ensures that your brand retains its distinctive character and stops the erosion of brand loyalty.
There are a wide variety of monitoring tools available for brands to reduce the workload in protecting your IP and a recession is a good time to give serious consideration to your defensive IP strategy.
2. Raising Capital
Intellectual Property rights are property rights, as the name suggests, and like other property Intellectual property rights can be bought, sold and mortgaged. It is relatively common for IP rights to be used as security for financing so if you have a strong IP portfolio and require a capital injection then it is well worth discussing this possibility with your financial advisors.
In order to use your IP to raise capital it is important that the ownership of the portfolio is up to date and you have a clear picture on what IP you own and is available to be used for security. A simple IP audit can help ensure that everything is in order and help you benefit from the role of IP during a recession.
In addition, a strong IP portfolio can be the sign of a well-run business and make a clear and attractive proposition for investors. Even if you don’t require investment right now getting your IP portfolio in top shape is always a good idea from a financial perspective.
3. IP Licensing
If you have built a good reputation and a distinctive brand it is worth considering how you can use this to diversify and generate additional income. One option is to seek to licence your brand or other intellectual property rights. By doing so you can exploit an opportunity to derive income from your IP without the risk and cost associated with diversifying and entering new markets.
Licence agreements can be exclusive or non-exclusive, they can cover different ranges of goods and services and can designate different geographical areas.
Expand your business with a third-party licence
Alternatively, you may wish to seek opportunities to take a licence from a third party brand owner in order to make the most of your manufacturing, sales and marketing capabilities. Opportunities to work with well known brands that have instant appeal to the consumer can also help open doors for your existing product ranges.
There are a number of licensing groups and events that help put licensees and licensors together, such as: Festival of Licensing and Brand Licensing Europe. If you’re curious please browse their databases and don’t hesitate to contact our IP specialists to discuss the practicality of your ideas.
4. Mergers and Acquisitions
It is common to see the businesses buying and selling IP portfolios and brands in particular, during a recession. As businesses begin to struggle, they become vulnerable to takeover or may enter administration which creates opportunities to acquire the assets, including the IP.
Acquisitions in the retail sector
We are already seeing examples of this. Retail has been hit by the recession and the impact is instant, giving us insight as to what might lie in wait for other business sectors. Fashion giant BooHoo has acquired high street fashion outlets Oasis and Warehouse. BooHoo have a history of acquiring other struggling retail brands, such as Coast and Karen Millen and a recession presents a good opportunity for them to continue this strategy. SportsDirect, are another retail giant with a history of acquiring troubled brands and they have already acquired Jack Wills. We anticipate more retail mergers are yet to come.
Not every business is sufficiently cash rich to make such eye catching acquisitions, but opportunities to both buy and sell IP to diversify or raise funds become more prevalent in a recession and its worth considering whether your business can benefit from such a strategy.
The alternatives to selling IP
Selling businesses and IP need not be a final resort once the administrators come in. Developing a business strategy around streamlining and focusing on key markets can make good business sense and may necessitate divesting businesses and their associated IP.
Tesco recently announced plans to sell off some of its international businesses, such as those in Thailand and Malaysia. Then Tesco Chief Executive, Dave Lewis stated that the sale ‘releases material value and allows us to further simplify and focus the business.’ Focussing your business in your areas of strength and increasing brand equity is another tried and tested strategy for surviving a recession.
Meticulous IP due diligence is essential
When buying or selling IP it is important to do your due diligence to get a good understanding of what the acquisition involves and the value of any IP portfolio you are looking to acquire/divest. Due diligence is the process that parties will go through to assess the viability and value of a merger or acquisition.
A well-maintained IP portfolio can make an attractive proposition for a buyer, reduce due diligence costs and make sure that any prospective deal goes smoothly.
5. Diversify or Pivot?
We are in a perhaps unique situation where a global event, the Covid-19 pandemic, is directly responsible for the current recession. In addition to plunging the economy into recession the pandemic has altered the way we interact with one another, shop and do business.
We talked previously about how the pandemic has speeded up digital transformation by changing the way we behave and how businesses have adapted. It important that consumer needs and behaviours stay to the fore when business strategies for dealing with a recession are considered.
Align your IP strategy to your business strategy
If you decide your business does need to diversify or pivot then you need to ensure that your IP portfolio is fit for purpose. For example, if you enter new markets and new domains, such as digital, then make sure your IP is protected to both allow you to move into these new areas and to ensure that you can maximise the benefit of your successes. Whatever, strategy you decide to adopt in these challenging times, you need to make sure that your IP strategy moves with it.
We create real IP value
From the everyday to the IP emergency, our accomplished Chartered Trade Mark Attorneys and IP Solicitors are driven to get the very best outcome for every brief for every client, every time! Sonder & Clay are a full service IP law firm with proven expertise and results in IP protection, strategy, disputes, and exploitation. Learn more about our IP services or get in touch with us for a complimentary IP audit today.
