14 May 2020 | Mary Turonek, WRAYS
IP Australia has recently published the results of its first longitudinal research project on the impact of IP rights on Australian business profitability as part of its annual 8th edition of the Australian Intellectual Property Report 2020. Access Report. It is no surprise to Wrays that the study finds that ownership of patents, trade marks and designs is strongly and positively associated with profitability.
Until now, the economic impact of holding patent, trade mark and design rights on Australian firms and industries has been limited by a lack of available information about how these rights were used. The study provides several insights into the types of Australian firms that utilise the IP system, the industry sectors in which IP rights are most concentrated, and the impact on business profitability, measured in terms of profit per invested capital and profit per employee.
The longitudinal study was commissioned by the Office of the Chief Economist (OCE) at IP Australia in collaboration with the Australian Bureau of Statistics (ABS). The dataset on which the study is based extends over a 15 year period from the beginning of FY01/02 to FY15/16 and is the result of an integration of IP Australia’s Intellectual Property Longitudinal Research Data (IPLORD) with the Business Longitudinal Analysis Data Environment (BLADE). BLADE is a comprehensive database sourced from the Australian Taxation Office (ATO), the ABS and other government agencies, integrating administrative, tax and IP records at the individual firm level.
While we tend to think of start-up companies as being the engine of innovation in Australia, the study finds that, on average, it is older, more established businesses with larger numbers of employees who are more likely to actively engage with Australia’s IP system and obtain IP rights. The highest percentage of businesses holding IP rights are in the Wholesale Trade, Manufacturing and Information Media and Telecommunications industries.
According to the study, simply holding one type of IP right is no guarantee for increasing business profitability. The study shows that there is no marked effect on business profitability if the business only owns a registered trade mark. In a world where brands are often the most valuable asset of a company (think NIKE, Uber and Coca Cola), this finding seemed counterintuitive and surprised me the most.
Interestingly, however, firms that only own registered designs appear to have the highest profit ratio over invested capital on average, at 10.2%. Looks obviously count! The fashion industry has certainly been taking advantage of the registered design system – Australian-based fashion house Zimmerman Wear and Magi Enterprises (better known to fashionistas as KOOKAÏ Australia) were ranked first and second amongst Australian design applicants in 2019, in good company with Louis Vuitton and Cartier who were amongst the top five foreign design applicants.
Generally, in comparison with businesses who do not own any IP rights, business profitability is markedly higher for businesses who own a combination of IP rights, such as patents and designs, or patents and trade marks, and especially a combination of patents, trade marks and designs. Unfortunately, the report does not name these successful businesses. But based on these findings, the ownership of a range of IP rights as a marker for a profitable business is obviously a desirable attribute for any Australian company, when looking to attract investment and partnerships.
In most cases, the positive link between business profitability and ownership of a combination of IP rights would seem to suggest that these businesses have a commercialisation plan that marries protection of technological innovations (patents) with marketing (trade marks) and product aesthetics (design).
The positive link between profitability and ownership of a range of IP rights reinforces our long held view that IP rights are an essential commercial tool to enable businesses to optimise the value of their technological innovation. Wrays IP professionals, including patent and trade mark attorneys, IP lawyers and corporate advisory specialists are well-placed to deliver end-to-end solutions for our Australian, New Zealand and international clients at any point along their innovation cycle.
Author: Mary Turonek