How to Invest in Intellectual property

Intellectual property is a vital segment of the economy. It has a major impact on the growth of an economy. For example,

  • It creates millions of jobs across the world. In the United States alone, these jobs pay around 40% more than jobs not related to intellectual property. 
  • It makes up the majority of export commodities. In the United States alone, exports in intellectual pro[perty are worth around $770 billion. 
  • It will boost a nation’s GDP through jobs created and exports. 
intellectual property

What is intellectual property?

This is an intangible asset you create with your intellect and gain revenue or a share of revenue from their turnover. Examples include ideas, franchise, trademark, patents, trade secrets, and copyrights.

The current global economy is knowledge-based which creates room for inventions and innovations which are part of intellectual property. Furthermore, this makes intellectual products highly profitable. A company will protect its intellectual assets using legal means and economies have laws that protect intellectual assets as well as tangible property. 

Most intellectual property is not represented in a company’s balance sheet. However, the price of stock will represent the value of the stock. Intellectual property cuts across various industries such as scientific, technology, entertainment, medicine, hardware, software and more. 

International perspective of intellectual property 

Intellectual property has created a whole industry on the rise with the main focus on its protection. Sales and protection of intellectual property has created a rapid development in international relations. Countries have formed strong relationships in an effort to fight intellectual property theft. 

For example, China and the United States teamed up to try and recover revenue losses. Companies like Microsoft and Apple miss out on millions because of violation of rights. There are countries that go to greater lengths to enforce intellectual assets than others, 

3 Investment opportunities for intellectual property. 

As an investor, you have multiple options when you want to invest in intellectual property. They include:

1. Brand investments

Brand investments entail investing in a brand with attractive and profitable qualities. A brand is a unique set of products or services. You can invest in brands that have already established themselves, for example, Coca-Cola or you could invest in a start-up with similar brand potential. 

2. Venture Capital investment

Venture capital investments are investment management funds that collect investments to invest in private equity of startups with promising growth potential. An investor in the venture capitalist pool should ask questions like:

  • Is there an effective management in place to deal handle the intellectual property?
  • Does the share price reflect the intellectual property’s value? 

3. Venture Debt investment

Debt investment is similar to venture capital investments. However, debt investments provide the capital in the form of a loan. Venture capital investment is the purchase of equity in the business.

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Types of Intellectual property

1. Copyright

Copyrights protect how your ideas are expressed and not the ideas themselves. If you own a copyright or you will control aspects like performance, reproduction, adaptations, new versions, distribution and public performance of your work. You will need to present the work you own as you register for the copyrights. Registration is not necessary but it has major advantages like infringers will pay your attorney fees. 

intellectual property

2. Trade secrets

A trade secret is business information the owner or business executives hide from the public. The information could include business plans, business contacts, business procedures, recipes and more. You cannot register a trade secret with any government organization. However, you can protect it legally using a non-disclosure agreement.

Trade secrets should protect this business information on the short term as you may get exposed to independent redevelopment or reverse engineering. They give you a competitive edge and help you develop your company. You should advance to patents to protect secrets like a formula in the long run. 

3. Patents

Patents are documents that give you credit and exclusive authorization to develop a certain product, conduct a particular process or service.  A patent has two major sources of revenue:

  • Revenue through sales of the products or services
  • Licensing fees from other organizations to use your processes and develop your products. 

Investors can purchase a share or the whole patent to earn the revenue benefits. They can also sell their share of the patent for a profitable income. 

4. Trademark

Your trademark is a symbol that identifies your business as the source or certain products or services. For example, the Mercedes cars have a trademark symbol at the front and back of the car. Registering a trademark is a great way to boost your business leads, increase your customers and revenue. You can register your trademark with the government for protection. 

Risks Facing Intellectual property

Any investment comes with risks. Examples of risks you will face as you invest in intellectual property:

Compliance risk

Compliance risks revolve around legal issues of copyrights. You need to be aware of the legal perspective of your intellectual property. 

Availability risk

Your company needs to make some information available. For example, the ingredients of a recipe to ensure the food product is safe. Such information puts your recipe at risk of being reverse engineered. 

Brand risk

Your brand holds a lot of sway over the reputation of your business. Poor brand performance can lead to low revenue returns.

Business Value

Intellectual property has influence over the general value of your business. When intellectual properties value depreciates, your business value could depreciate as well. 

Access risk

Access risks relate to general business information especially trade secrets. They may get out when outside parties are granted access. 

intellectual property

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Intellectual property offers a competitive advantage for your business and the general growth of the economy. Examples include trade secrets, patents, copyrights, and trademarks. Each protects a certain type of intellectual property, for example, copyrights protect artistic works such as journalism, music or paintings. 

You can choose to invest in this asset either directly or through venture capitalists. Your investment options are brand investments, venture debts, and venture capital investment. However, like any other investment, you will be facing some risks. They include Compliance, availability, brand risk, business value risk, and access risk. 

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