Why is it so hard to generate value from IP?

Matter
6 min readSep 28, 2022

Why does it feel so hard for tech SMEs to generate real value from their IP? This blog post answers that question and tells you how to fix it.

Investopedia defines a cost centre as “a department or function within an organization that does not directly add to profit but still costs the organization money to operate.” It goes on to give a few examples — HR and IT being two.

So, is IP a cost centre?

Strictly speaking, in most tech businesses, it probably is. IP doesn’t often directly add to profit — one exception being IP licensing that directly generates revenue.

So let’s maybe ask a different question: does your IP generate tangible value in your business?

If you’re a tech business leader and the answer to that is ‘no’ or ‘I don’t know’ then you’re doing it wrong. That’s not your fault — you’re fighting an IP system that isn’t designed to get SME tech businesses the commercial outcomes they want.

Here’s what’s going on.

The problem

The reason you think IP does not add any value to your business has its roots in two things:

  • a complex IP system that you struggle to understand; and
  • IP attorneys who cannot be relied upon to get the result you want — value generation.

If you’re leading a tech businesses then you’ll have some sense that IP is important — at least that’s what you keep getting told. You know it’s something that investors will want to see, and will want to see managed well. You might also have the vague fear that lots of the value you’re generating with your R&D is not being protected.

The trouble is that you don’t really understand IP or what managing it well looks like, and you don’t know how to use IP to drive real commercial outcomes. If we’re really honest, you probably don’t even have a full grasp of what IP is and how much of it your business owns.

And that’s not a criticism. After all, why would you know everything about IP and how it should be managed? And why should you? That’s what you pay IP experts to know, isn’t it?

But IP experts like patent attorneys and trademark attorneys can’t help — at least most can’t. They can’t explain IP in words that make sense to non-experts, and they often can’t be relied upon to deliver the value generation that you want.

And that’s not their fault either — well, not entirely.

As a tech SME, the IP services sector is not built for you. It’s built for big tech companies. Big tech companies that have internal IP expertise. And the professionals working in the IP services sector are trained to deliver support to those big tech companies and the IP experts that sit within them.

Consider the diagram below.

The client in this case is a large tech business with a Head of IP. That person faces the business to determine what they want and need from their IP to achieve their commercial aims. The Head of IP can interact smoothly with IP solicitors, patent attorneys and trademark attorneys because they talk the IP jargon that they all understand, and they hire those professionals to get the IP rights that the business needs. They can also convert the jargon into business language that the senior leaders of the business can understand, act upon and generate value from.

This is the scenario that the IP services sector is set up for. The external IP attorneys are not value generators — they’re outsourcing options. The Head of IP is the person that pulls all the strings and generates value for the business.

Now consider the diagram below where the client is a tech SME.

The Head of IP is missing because these businesses struggle to justify employing one. So the business leadership is directly exposed to the IP solicitors, patent attorneys and trademark attorneys. They are missing the part that understands what the business needs and converts the outsourced actions of the IP attorneys into value for the business. The entire process is flooded with IP jargon. The leaders of the business either feel like their heads are exploding or they’re drinking from a firehose when trying to get up to speed and, in the end, no value is generated.

If you don’t have IP expertise in your business it’ll be very difficult to interact with external IP advisors. What they do will seem impenetrably complicated and filled with jargon. You’ll be asked to make decisions that you don’t feel qualified to make, and you’ll be asked to make those decisions all the time. You’ll get big bills without understanding the value you’re getting and will feel that you’ve bought a huge white elephant.

Sound familiar?

External IP attorneys are not trained to be an interface with companies who are IP novices and the services offered by the firms they work for are not intended for consumption by IP novices.

The solution

A complicated legal framework is not unique to the IP sector.

I run a business and I know that accounting and bookkeeping are really important. Do I understand accounting? No. I find it really confusing and complicated. In fact, it always amazes me that the world has managed to make adding up and taking away so complicated! Do I know what it looks like when it’s well managed? Not really. I just want to stay out of jail and manage my affairs so I’m not overpaying tax.

A few accountants have tried to explain aspects of accountancy to me a few times but it’s pretty complicated and, if I’m totally honest, I’m not really that interested in it so my eyes kind of glaze over.

The analogy with patent attorney work is a good one here and patent attorneys ought to take note. IP is complicated and they should understand that you, their client, most likely don’t want to be educated on it. Beyond getting the outcome you’re looking for, you probably aren’t that interested.

So the situation is that I don’t understand accountancy and my accountant is not able to explain it to me in words I can (or want) to understand. But the crucial difference here is that I can trust them to manage things for me and get me that outcome I’m looking for. The service they offer finds out what I need, gets it and then delivers the value.

When it comes to IP, tech SMEs do not generally get the same outcomes driven service. There is nobody to pull it all together, just a collection of IP attorney outsourcing options. You can get patents and trademarks, but you must work out whether that’s a valuable exercise or not. If it is valuable, how do you realise that value within your business? You’re often just left with huge bills and a patent or trademark that you have no idea what to do with. Then you discover that it’s pretty much worthless when you do finally need it.

You don’t get the outcome you’re looking for.

Another analogy that I think works well is a medical one. Talking directly to an external IP attorney is like having a pain in your chest and going straight to a heart surgeon to ask for a triple bypass. It’ll be expensive and painful and, hey, it might be exactly what you need. But it might not.

The solution is to talk to a GP first — you need a Head of IP. Get IP expertise into your business so that the role of the Head of IP is taken care of. If you’re spending £100k or more a year on this stuff then think about hiring someone full-time. If it’s less then talk to a business like Matter IP that can help you get the IP expertise you need at a level to match your budget.

Originally published at https://matter-ip.com on September 28, 2022.

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Matter

Matter helps tech businesses leverage their Intellectual Property to improve their exit valuation