A recession can be described as a significant, pervasive and prolonged decline in economic activity. While there is no universally accepted definition of recession, most financial analysts refer to two consecutive quarters of decline in a country’s GDP as a clear sign of recession.
While it is expected that companies would reduce their economic activities during a recession, previous trends have shown that firms instead become more rigorous in protecting their intellectual property. This is mainly because IP assets provide steady and dependable revenue that helps to offset losses from other segments.
There are many examples of companies filing innovative patents during a recession. During the Great Economic Depression in 1937, a patent attorney in New York invented xerography, a dry photocopying technique, which was then commercialised by Xerox Corporation. Other notable recession-era inventions include the television, personal computers and nanotechnology.
The following article will explore how an organisation’s Intellectual Property becomes its formidable tool to overcome the tide of a recession.
What Is IP? What Is Its Importance for an Entity?
Intellectual Property (IP) is the term used to describe creations of the mind. Examples include inventions, literary and artistic works, symbols, names, designs and images used for trade and commerce. It can be a valuable asset for a business because it offers exclusive rights to the creator or IP owner and prohibits others from copying or using it without authorisation.
The benefits of intellectual property for a business are as follows:
● A proper IP strategy helps a business maximise its potential.
● IPs help businesses protect their innovations and maintain a competitive edge in the market.
● Investors get more attracted to businesses which have a strong intellectual property portfolio. It indicates that a business has assets that can be easily monetised in the future, thereby increasing its total worth.
● Licencing or selling IPs can help businesses generate more revenue. Profits can be generated by selling patented technology or licensing patents and trademarks to other companies.
Importance of IP during a Recession
Dr Francis Gurry, the former Director General of the World Intellectual Property Organisation (WIPO) has emphasised the importance of creating new IPs during a recession. He has stated that “companies and countries which continue to invest in new products and innovation during times of economic recession will be those that will be best positioned to take advantage of the recovery when it arrives”.
IPs can mitigate the negative impact of economic recession in the following ways:
● IPs serve as a stable asset
An Intellectual Property of an organisation serves as a stable asset during a recession when the economic situation is uncertain. It continues to serve the purpose of business growth even when the emotions of investors and consumers threaten to disrupt the stability of a venture.
● Serve the role of visionaries
Owners of an IP can act as visionaries during times of economic crisis and pave the way for innovative changes that can effectively address the reasons for an economic crisis. Innovations act as a strong incentive to usher in positive changes.
IPs facilitate adoption
Intellectual properties facilitate companies looking to make adjustments to changing economic scenarios. It offers the reason and the way through which businesses can make their way through a crisis. Famous corporations that were born during an economic recession include LexisNexis, Microsoft, HP, General Electric Company, MTV Networks, FedEx Corp and CNN.
Researchers have stated that most companies in the United States of America (USA) and Europe engage in identifying and pursuing IP collaborations or joint ventures during difficult economic conditions. Licencing or such collaboration arrangements are seen as alternatives to litigation, generally seen to be expensive and time-consuming.
In every economy, IP litigation is associated with costs and risk; two things which downturn planners seek to minimise. However, there is an important point which must be considered. The assertion of IP rights which have been properly obtained and are aligned with one’s goals can offer a business strategic advantage for successful trading in more competitive and tighter markets.
That is why most companies continue to protect their IP and file for new patents and trademarks during a recession. In fact, over 4 out of 5 (82%) companies will enforce their IP rights during a recession.
How Do Entities Use IPs during Recession?
A key aspect in an organisation’s strategies to remain afloat during trying times remains its ability to maximise the potential of its IPs. Some of the strategies include keeping an eye out for commercialisation opportunities, conducting IP audits and tightening enforcement measures. Some of the key strategies can be seen as under:
- Commercial opportunities
Businesses can monetise their IP assets to generate revenue in case they are faced with capital crunches. It can be achieved through royalty payments and licensing of trademarks. Recession is also a time when companies can acquire valuable IPs at lower prices. This is because many businesses may sell their IPs off to maintain or increase cash flow.
- IP audit
An audit of their IP portfolios helps businesses identify their core, non-core and obsolete technologies. An IP audit offers an indicator of the assets businesses can leverage to generate additional revenue through franchising, licensing, exploitation through sales and collaborative ventures.
Furthermore, it gets easier to identify obsolete IPs, which significantly reduces the administrative costs of monitoring the registrations.
- IP identification and mining
IP mining is the activity of searching and examining old documents within a company’s archives for viable IPs. An IP mining program involves searching for new applications of technology, extensions of technology, new markets for technology and infringement candidates.
Patent mining begins with the listing and organising of a company’s patents. It is particularly lucrative for older companies or those which have undergone mergers and acquisitions. It allows companies to discover their previously undiscovered IP assets. Businesses can also mine another company’s patent portfolios to gain a competitive edge.
- IP as a collateral
Businesses can use their IPs as collateral to access credit during a recession. Many international companies have leveraged the value of their brands as collateral to apply for credit. Walt Disney is the most famous example. It raised around $725 million from the Industrial Bank of Japan in 1988 by issuing bonds against the parks’ future earnings for the next 20 years.
The deal was carefully structured to make sure that Disney continued to receive its royalties without losing any money. It was the brand which investors were interested in.
- IP auctions
Businesses can auction their IPs during a recession to raise money. But it may not always be a good idea. Usually, in the case of patents, sellers fall into three categories; (1) institutions such as universities and big corporations; (2) individual inventors; and (3) patent-holding companies or speculators. Entities auction those patents which do not generate much value for the business.
What Measures Should Entities Take to Protect Their IPs Post-Recession?
It is essential for an organisation to not only protect itself against the onset of a recession, it also becomes necessary to ensure that sufficient care is taken post-recession as well to ensure smooth sailing. Some of the measures an entity can undertake to protect its IPs after a recession are as under:
● Conduct thorough research
Conducting thorough research regarding all relevant international patents, trademarks and all other forms of IPs business information, scientific journals and industry standards would help a business to come up with new ideas.
● Spot emerging trends and patterns
Entities should keep analysing technology landscapes. It will help them to identify emerging trends and newer patterns before their competitors get there.
● Monitor a company’s IP assets
After a recession, entities must make proper strategies to capture and monitor all their IP assets continuously.
● Track non-English patents
It’s important to gain access to non-English patents as it will ensure companies don’t end up making investments in areas protected by such patents. It may also open up new collaborative opportunities leading to innovative products.
● Identify IPs relevant to one’s business
Entities should use cutting-edge thematic mapping resources to analyse data and identify relevant concepts. It would help them to identify which intellectual properties are more relevant to their business.
Conclusion
It is essential for entities to regularly analyse the intellectual property owned by them. Entities involved in patenting their inventions must also track the patents cross-licenced to them. It helps businesses to identify newer research areas and develop their products further.
During a recession, many businesses tend to reduce expenses related to research and development and new inventions to cut costs. However, maximising the potential of existing employees and developing intellectual property assets are essential steps during such times. It lends stability to the lives of both the employer and employees and helps businesses sail through the economic crisis.