As the 2024 fiscal year approaches, finance departments are hard at work forecasting and planning how to efficiently spend the company's resources. Budgeting for intellectual property (IP) is a crucial part of this process in today's tech economy. As a new fiscal year approaches, organizations should think carefully about how they allocate resources for harvesting, protecting, managing, and leveraging their intellectual assets. Below are five important considerations when budgeting for the new year.
Forecasting IP Protection Costs - Protecting a company's IP is a crucial step in safeguarding the company's competitive advantage. The company should budget for filing new patents on inventions produced from research and development and filing trademarks on brands the company uses in commerce. Don't forget to include the costs for filing for protection in foreign countries if appropriate. The company should also forecast costs to maintain and further develop existing patents. These costs include filing continuation applications before patents grant and paying maintenance fees for existing patents. Companies should also work with their IP counsel to forecast costs for the coming year. The patent and trademark filing systems are fairly predictable and an experienced attorney can help the company come to a reasonably close cost estimate.
Factoring in Research and Development (R&D) Spend - To estimate costs for the upcoming fiscal year, the R&D budget can be a good indicator, especially how it compares to previous years' spend. Consider allocating a small portion of your R&D budget to protecting new IP assets. Innovation is key to staying competitive, and competitors can easily create identical features once they see your products in the marketplace. Without patent protection, there is nothing to stop them from copying your hard-earned innovations. After all, protecting the innovations coming out of a company's R&D spend is the purpose of filing for patent protection.
Estimate Costs for Monitoring IP - Companies often pretend that their competitors are not filing for IP protection. It seems less scary and real that way. However, the costs to monitor competitors' patent and trademark activities are not as high as most would expect. We often set up patent and trademark monitoring services for clients to provide a low-cost way to stay up-to-date on IP filings that relate to the client's business. It is amazing how impactful it is on an IP strategy just to be aware of what your competitors are doing.
Embrace IP Commercialization - To fully realize the potential of your intellectual property, include a budget for IP commercialization. IP commercialization often looks different to each company but can include monetizing IP through licensing agreements, partnerships, or joint ventures; obtaining exclusive access to new innovations and brands through inbound IP licensing agreements; and optimizing tax strategy by creating arm's length IP licensing agreements between affiliates. IP commercialization also includes allocating resources for marketing and promotion efforts to increase the visibility and value of your branding and innovation.
Budget for IP Enforcement - While not a significant expense for a growing business, it is important to take action to protect a company's IP from infringement. A well-timed cease and desist letter can efficiently warn competitors from copying your inventions or misusing your brands. Further, while most companies try to avoid litigation, you should still forecast the cost to offensively protect your IP as well as defend against allegations of infringement of competitor IP. Often when these events come up, they are unavoidable and the company can be blindsided by the costs if not properly prepared.
In conclusion, a company must budget for intellectual property in the next fiscal year to enable the business to protect its innovations and maintain a competitive edge. By forecasting and planning for future IP costs now, organizations will be prepared to spend resources wisely to ensure their intellectual assets are protected and leveraged to their fullest extent. An effective IP budget not only safeguards your creations but also positions your business for sustained success in an increasingly knowledge-driven economy.
