With the current threats of tariffs looming between Canada and the US and more globally between many other countries, certain innovators may be tempted to question the pertinence of securing IP rights and of maintaining them over time in foreign countries.
Securing and maintaining IP rights require resources, which may be scarcer during a trade war where the bottom line is directly affected and financial prudence becomes crucial.
The following arguments elucidate why securing and maintaining IP rights, even in jurisdictions where a company may face considerable headwinds, are still paramount in the context of a trade war and why it should not be overlooked.
Obtaining a strategic advantage despite a trade war
Securing IP rights provides a strategic advantage to the company. It is a legal advantage. In the case of a patent, it is a right to exclude the public from importing, manufacturing and using the invention claimed. While the tariffs may render the sale of a given product comprising the invention in a target market not worthwhile and exclude the company de facto from the market, the patent will exclude any other player from entering that target market and appropriate its share. The unfair advantage given to domestic players by the tariffs could, in a way, be offset by the legal rights afforded to the owner of the patent.
A long-term investment for a better time
Protecting IP rights takes time and the corresponding protection is afforded for many years. For instance, in the case of patents, the monopoly is granted for 20 years. While a trade war may rage for a certain time and turbulences be felt, over the long term, the situation may change drastically as a global trade agreement is reached for instance. Failure to protect the IP rights may have dire consequences for the future. In many cases, if IP rights are not timely, secured the opportunity to secure them is lost forever. It is therefore pertinent to have a long-term vision and not get carried away with short-term considerations.
Creating other opportunities for navigating a trade war
While a company may now lose access directly to certain markets due to heavy tariffs, the same company may find local partners not subject to the tariffs and license them the IP rights. The IP rights may therefore be commercialized instead of the products of the company. The company can then obtain licensing revenues. Licensing deals may be made with local business partners.
Alternatively, the company may use the IP rights for creating a joint venture with a local partner, for instance.
The secured IP rights can therefore provide new ways to navigate a trade war.
Attracting investments/increasing valuation of the company
In a time where financial resources may become scarce due to the consequences of heavy tariffs, IP assets can still be very valuable for securing investments and/or increasing the valuation of the company.
For instance they can be used for IP-backed loans. In such case the IP assets are used as collateral to secure loans.
In another case, the IP assets can be used to perform an IP sale-leaseback. In such case, the company sells its IP assets to an investor and then leases it back. The advantage is that the company can still use the IP while gaining immediate capital.
In another case, an IP royalty securitization can be performed. In such case, the company bundles future royalty payments from their IP and sells them to investors. The advantage for the company is that it provides upfront cash.
In another case, the IP assets can be used for equity financing. They enhance the valuation of the company and, as a consequence be useful for raising equity capital.
In conclusion, securing and maintaining IP rights are still key and pertinent even during a trade war. As the business strategy of the company evolves to adapt to new trade parameters, it is crucial to ensure that the IP strategy of the company stays congruent with the business strategy. The IP rights are central to the IP strategy.
