It is no secret that intellectual property (IP) rights are a central consideration for investors looking to invest in a technology company. Historically, IP rights would often be relied on as an indicator of underlying innovation within a company. However, while IP rights - and in particular patents - are still a good indicator of innovation, IP now represents significant value for a company.
In fact, over the last quarter century, intangible assets have grown to be the leading asset class for a company. In 1975, it was estimated that 17% of the S&P500's market value was in intangible assets (e.g. patents, trade marks and copyright). In 2020, intangible assets are estimated to make up 90% of the S&P500 market value.
According to a Bloomberg report, global investment in the low-carbon energy transition totalled $755 billion in 2021 - up 27% from 2020. This is encouraging news for technology companies and investors operating in this sector. The increased activity comes with increased scrutiny and it is increasingly important - for technology companies and investors alike - to make sure that IP rights such as patents and trade marks are not only in place, but are also fit for purpose and being managed effectively.
It is often not enough for technology companies to simply demonstrate that they have IP in place - their IP must be robust and fit for purpose in a rapidly changing and evolving sector. IP can secure a company's position by acting as both a sword and shield against third parties, however it can only do so if it has been drafted and implemented effectively.
One key consequence of the energy transition is that opportunities are being created in new sectors as society looks towards new energy sources and infrastructure. Technology companies that are able to pivot to implement their expertise and know-how in these new commercial environments will be able to take advantage of these opportunities. IP rights can enable this through licensing and incentivizing new partnerships, but to do so the IP must be suitable to not only protect a company's existing position, but also to support the penetration of a new market. Ineffective IP might make the difference between being able to secure a contract in a new market and losing out to a third party.
This applies to both side of the investing equation. While it is important for technology companies to secure robust IP rights, it is equally important for investors to be able to reliably identify and evaluate a potential investment target's IP. IP due-diligence is an investor's best friend, however - as for technology companies - it is critical to get the right advice at the right time. The difference between a high-quality IP portfolio built with knowledge of the sector's demands and opportunities, and an IP portfolio put together without such knowledge, is vast. It can mean the difference between penetrating a new market and losing out, gaining and losing market share, and attracting commercial partners and not. IP advice based on IP expertise combined with an intimate knowledge of the energy market can not only assist on evaluating the true value of a company's IP portfolio, but can also help to guide IP strategy moving forward to maximize opportunities in the market.
It is therefore important, that in the rapidly evolving energy landscape, technology companies and investors partner with IP professionals who know both the legal and energy sector landscape. Only with this combination of knowledge can technology companies and investors alike benefit maximize the value of their IP.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
