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Business and Corporate Law, Intellectual Property

Wanting to increase the sale price of your business?

The benefit of maximising the value of your IP

Over many years I have acted for business owners wanting to sell their businesses. Always they are looking to maximise the same price and as my business broker friend tells me they are, as Darryl in the Castle movie puts it so eloquently: “they are dreaming”.

Apart from the usual issues where owners think that because  the business is worth a certain amount and the problems of “cash” from the business, not many have thought how they can maximise the price by, for example adding value through their ownership or licensing of IP.

Just like when the real estate agent tells you can improve your price by preparing well for the sale, the same applies to IP.

Often owners don’t even know what IP is and how it can be part of the sale. Sometimes I even find that it is at the eleventh hour that we find there are valuable IP assets that have only just been identified.

So, what is IP?

It is certainly not just the business name or a domain name or email address … these can form part of an overarching IP, but they are licensed to owners not owned by them.

IP is the rights in certain property that you have in the productive expression of ideas and includes but is not limited to:

  • Copyright
  • Trade Marks
  • Patents
  • Designs
  • Plant breeder’s rights
  • And trade secrets (including confidential information).

Do you have to register IP?

Leaving aside plant breeder’s rights for a minute, no, but it helps to do so for certain IP if you want proper and adequate protection. In Australia, for example, you would be well served by registering trademarks, designs and patents whereas you do not have to register copyright.

Most often owners have a variety of IP that may or need to be registered and another IP which you don’t have to register, or which has been licensed to the owner. All of it is valuable though.

What are the PBL 5 key points that you need to be aware of to make my IP more valuable?

There are really 5 key points that need to be addressed here:

  1. Conduct an IP audit

It is crucial that a full audit be conducted to work out what you have.

You would put on your list any registered trademarks, patents and designs and then if there are any of these that are unregistered, think about registering them now.

If in doubt consult a lawyer with experience in these matters such as PBL

You would include all relevant electronic IP including the website and any client database etc.

  1. Make sure you own it and keep it confidential

Often owners are surprised (or get a surprise) when asked whether they own the IP, particularly when it comes to the website.

I have had cases where the owner has had to approach the website designer to get an assignment only to find the designer wants money paid to do so.

There is other IP that is merely licensed, and you need to check if the licence can be assigned.

Also, it is very important that details of the IP are not released to the buyer or probably anyone outside the business until the right time as you may lose out significantly if this happens.

  1. Get it valued

It may pay you to have your IP valued to see what it is worth. Some accountants can help here but I would suggest a specialist valuer might be in order if you can afford it.

  1. Make sure the IP is capable of being assigned

In Australia, if you want to assign copyright then it needs to be in writing preferably by way of a deed of assignment (see section 196 of the copyright act).

Also, with registered IP there is a need to complete certain forms with IP Australia to enable an assignment.

  1. Make sure that when the sale agreement is prepared you make it clear that either all or part only of the IP is being sold with the business.

If you are going to retain any IP right, you need to have the lawyer who drafts the contract make it absolutely clear so there can be no uncertainty.

There may be other relevant matters that apply here but these are certainly very important

If this article interests you, or you want further advices about its content then please contact me at PBL on 1300 965 689 or by email david.prior@prioritylawyers.com.au

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