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Putting the IP in your IPO


AA03-Mar-Apr-2004-fineprint_largeIn the rollercoaster ride of potentially lucrative, but often disappointing, technology IPOs and private equity investments, a well-managed intellectual property portfolio could be your ticket to success, writes Rob McInnes.

For any innovative company looking to take advantage of an IPO window in the next few years, or indeed for any high-technology enterprise looking to grow and attract investment, proper management of key assets is a prerequisite for financial success.

Regardless of whether you run an established biotechnology company looking to float, or a small IT spin-off, in all likelihood your company has one major asset – its intellectual property.

Few Australian technology companies, even those already listed, will directly supply worldwide retail markets. Most Australian biotechs, for example, will license to larger overseas biotechs or to multinationals in the life science, healthcare or agricultural sectors, and will seek new opportunities through partnering with these larger organisations.

IP is the key currency of these relationships. Without a comprehensive, integrated IP portfolio, a technology company may simply have nothing to sell to collaborators – however strong its underlying science may be.

With recent adverse comments on the biotechnology sector in the financial press, it is doubly important for any high technology company to demonstrate the effective capture of their intellectual capital, and the strength of their competitive advantage, with a sound patent portfolio.

The starting point for the management of any IP portfolio is an accurate assessment of existing IP assets, policies and procedures. But a thorough knowledge of your existing IP is only half the story.

Building company value through the successful commercialisation of IP depends on knowing every contour of the IP landscape, which is defined not just by the rights of competitors, but also by the gaps in the IP portfolios of potential collaborators and licensees.

A clear understanding of the IP landscape gives you a means of knowing whether a proposed R&D path leads to a strategic opportunity or a litigation minefield.

Once you have a picture of what IP assets you have, it is absolutely vital to make sure you have clear legal ownership of them.

Especially for a new company spinning out of a larger research organisation, the legal terms of access to any IP should be clarified. Not having clearly established ownership runs the risk of an investor’s due diligence procedures uncovering defects.

While having clear access to a comprehensive IP portfolio is a foundation for a successful high-technology business, the path to continuing growth is by planning and executing future R&D in a customer-focussed way.

There is the need to make sure that all research planning maintains a commercial focus, looking not just to research results but to the IP rights that will result from the R&D.

And finally, early stage technology businesses need to communicate the strength of their IP portfolios and IP management strategies to investment markets as well as to potential licensees and collaborators.

To float in today’s investment market, you have to make sure your IP is water-tight!

Three keys to a sound IP portfolio:

  • Be aware of the IP landscape – not only your competitors’ IP rights, but also those of potential collaborators and licensees.
  • Have a firm legal foundation to ensure you have access to all the IP used by your business.
  • Maintain a commercial focus in all your R&D plans and activities; plan for the creation of relevant IP, don’t just focus on research outcomes.

Rob McInnes is a principal with Spruson&Ferguson and leads the commercialisation practice of their associated law firm Spruson&Ferguson Lawyers. For more information, visit the website www.sprusons.com.au or call (02) 9207 0888.