If you are a small business owner, you may worry about the money it costs to acquire, maintain and enforce intellectual property when you have limited dollars and want to focus on growth. You wonder, maybe it’s not worth the bother. First, let’s learn what intellectual property is. And how does it benefit your business?

What Is Intellectual Property?

Intellectual property is a patent, trademark, trade secret, or copyright. For example, when you spend money developing a new product, software platform or brand, you want to protect your investment by getting it registered.

Patents give you the right to exclude others from making, using, selling or importing goods covered by a patent. If someone rips off your patented idea, you have a legitimate right to protect your market position and stop the infringer from including the patented feature, or in some cases the entire patented product. This allows you to differentiate your product and increase your profit margins.

Say you make significant investments to market your brand and you build up a reputation, gaining a loyal following. Trademark law provides that you can exclude others from using a brand that is the same or that is confusingly similar. It’s important to promptly file for registration because if your competition files before you, you could lose your rights and be excluded from using your own brand.

Copyrights help you prevent others from making unauthorized copies of your creative or artistic work. These can be art, music, performances, books and even software. Copyrights can be licensed generating royalty income for the creator for many years to come.

Tradesecrets can in many cases be the most valuable asset in your business. For example, the recipe for Coke® is a trade secret. It has been around for over a 100 years and is the most valuable asset on the Coca Cola’s balance sheet. In order to gain rights around tradesecrets, the thing must have commercial value and it must be maintained in secret. If Coca Cola disclosed the secret formula, anyone could make and sell the bubbly beverage.

Why Does It Matter?

Although you may be worried about the cost to protect your intellectual property rights, securing these rights create true value in your business and is worth it in the long run.

You create perceived value and increase your margins through product and brand differentiation. Patenting features in the product allow for this. If a competing business wants to sell a product that includes features covered by your patent, you are entitled to exclude them from the market, or you can extract a license reducing your competition’s profits. Businesses build a strong reputation by focusing on high product quality and branding. If a competitor tries to use your brand, you can maintain your exclusive position by bringing a claim of infringement to stop them and preserve your position. Without registering your brand your will have greater challenges preserving your brand.

Intellectual property can also increase the value of your business if you ever decide to sell. Much of the value of selling any business is in its goodwill. Often, intellectual property represent the largest portion of the total goodwill when you sell. Having broad protection of your key intellectual property assets will help maximize how much you take off the table with you when you sell.

Without filing for intellectual property rights to protect your company, you could end up spending far more defending your market position, product, or you could be forced to rebrand entirely.