What can my business do to build its intellectual property (“IP”) capabilities? What are some of the advantages and disadvantages of licensing? Besides licensing, what other options does my business have in commercialising its IP?
If you are unsure about intellectual property law, you can read our articles detailing the different categories of intellectual property and their legal implications.
Below is an outline of the various government schemes that your business may qualify for, should it seek to develop its IP capabilities. Also, there are several suggestions on how your business may leverage its IP to achieve its commercial objectives.
Government schemes
- Innovation & Capability Voucher (“ICV”) administered by Enterprise Singapore (“ES”): Your business may apply for an ICV that can be redeemed for consultancy services in various areas, including “IP Business Diagnostic” and “IP Legal Diagnostic”. There is a limit of two ICVs, each of which is valued at S$5,000, that can be applied for in the area of IP. The granting of an ICV is subject to the following conditions being fulfilled: (1) your business is “[r]egistered and operating in Singapore”; (2) a minimum of 30% of the company’s shares are held by local persons; and (3) the group’s annual revenue is below S$100m or the group has a maximum of 200 employees under its purview.
- Capability Development Grant administered by ES: This grant can subsidise the costs of your business’s projects, which may fall under Development Areas such as “Intellectual Property & Franchising”, by up to 70 percent. This is subject to the same three conditions mentioned in the paragraph above being fulfilled. Also, ES will evaluate your business’s application according to your business’s needs, the ambit of the project, and the proficiency of the service provider in enhancing your business’s capabilities. This application process may be expedited if the grant applied for does not exceed S$30,000.
- Productivity and Innovation Credit Scheme administered by the Inland Revenue Authority of Singapore (“IRAS”): Under this scheme, your business may apply for tax deductions or cash payouts for activities that fall under the categories of “Acquisition and Licensing of Intellectual Property Rights” and the “Registration of Patents, Trademarks, Designs and Plant Varieties”. The registration costs arising from activities in the latter category comprise of official fees and professional fees. To qualify for cash payouts, your business should have at least three local employees and should operate in Singapore.
- Intellectual Property Financing Scheme administered by the Intellectual Property Office of Singapore (“IPOS”): This scheme can allow your business to use its IP assets (more specifically, patents, registered trademarks, and copyright-related rights) as collateral for the raising of capital from certain financial institutions. There are three stages in the application process: (1) requesting a Participating Financial Institution (“PFI”) to conduct a preliminary assessment; (2) selecting an IP valuer from the Panel of Valuers to ascertain the value of the IP assets in question; and (3) submitting a formal application to the PFI referred to in stage (1). Should your business’s application be successful, the government will partially underwrite the loan issued by the PFI to your business.
- Global Company Partnership programme administered by ES: Through this programme, your business may leverage ES’s expertise and resources in building its capabilities. This can be done by collaborating with ES in developing tailored solutions that can help your business to expand into new geographical markets. In addition, your business stands to obtain up to 70 percent of funding support from ES for supportable activities, among which include “Intellectual Property (IP Management)” and “Franchising and Licensing”.
Ways to commercialise IP
- Licensing: When your business licenses its IP to other parties, it essentially grants other parties permission to use the IP in a certain area for a particular period of time. Such use is subject to certain constraints delineated in the licensing agreement, g. a prohibition against sublicensing of the IP in question. Through licensing, your business may (a) leverage the manufacturing and distribution capabilities as well as expertise of other businesses to launch your products in more markets and/or at lower costs; (b) receive a relatively steady stream of licensing revenue, while retaining legal interest in the IP; and (3) accrue greater brand equity due to the public’s increased awareness of your brands. In addition, your business may enter into franchising arrangements and/or cross-licensing arrangements with other parties to diversify its sources of revenue and to increase its pool of resources respectively. That said, your business will have to regularly monitor licencees’ use of the IP to ensure that such use conforms with the terms of the licensing agreement. Also, your business is obliged to sue third parties that allegedly have infringed your business’s IP, and to defend against any claims of IP infringement by third parties.
- Assignment: When your business assigns its IP to another party, it essentially transfers all rights and interests in the IP to that party. Therefore, there is no need to monitor the use of the IP after the IP has been assigned. Also, there is no obligation to sue third parties that subsequently infringe the IP, or to defend against any subsequent claims of IP infringement by third parties. Finally, your business may receive a significant lump sum as a result of the assignment instead of a stream of smaller payments as in the case of licensing. This lump sum can provide your business with an immediate injection of capital that can be channeled to other uses. However, the relinquishing of legal interest in IP concerned means that your business no longer has any opportunity to commercialise that IP. Also, the net present value of the lump sum may pale in comparison to that of the stream of payments that could otherwise have been earned had the IP been licensed instead.
- Joint Ventures (“JVs”): Your business can enter into a JV with other parties by jointly creating a new legal entity, apportioning its ownership among the JV partners, and then contributing resources (including IP assets) via assignments or licences to the said entity. Through the pooling of resources and expertise in the JV, your business can be better positioned to tap on new opportunities and actualise initiatives that might not have been possible otherwise. Also, entering into a JV allows your business to share costs with other parties, thereby potentially achieving economies of scale while diversifying risks. Just recently, a few Singapore firms signed memorandums of understanding with foreign partners to launch initiatives that would expand the formers’ global footprint (The Straits Times, 2016).
- Using IP as collateral: As aforementioned, your business may use its IP as collateral under the IP Financing Scheme to raise capital. This could be a particularly crucial avenue for businesses that lack tangible assets which are of value to corporate lenders. Meanwhile, even businesses that have significant tangible assets stand to benefit from using IP as collateral, in that they can take on more loans to finance their growth further. That said, the implementation of such a scheme is still in its nascent stages, and the extent to which it would be successful depends on several factors, including the quality of businesses’ IP assets and the receptiveness that corporate lenders have towards IP as collateral.
With the increasing availability of not just information, but also opportunities concerning the commercialisation of IP, it is only a matter of time before businesses jump on the bandwagon or risk being left behind. You may consider getting in touch for quotations from our Intellectual Property lawyers.
