Intellectual property (IP) is a legal tool and a core business asset. Whether scaling a tech company, running a manufacturing operation, or building a consumer brand, your decisions around IP can directly affect market position, revenue, and long-term growth.
This article explains what IP means in business, how different types of IP affect commercial activities, and how companies use it to generate income, strengthen branding, and reduce risk. Real-world examples and linked sources are included for further reading.
What Is Intellectual Property in Business?
Intellectual property is legally protected intangible assets created from human knowledge and innovation in a business setting. These include:
- Patents – for inventions and technical solutions
- Trademarks – for brand names, logos, and slogans
- Copyrights – for creative and original works like software, reports, or marketing materials
- Trade secrets – for confidential business information such as formulas, algorithms, and processes
These protections help businesses secure a temporary monopoly over their creations, giving them legal tools to prevent unauthorized use. A temporary monopoly means that for a certain period, usually 20 years for patents, the creator has the exclusive right to use, sell, or license their creation, thereby preventing others from exploiting it without permission.
How IP Contributes to Business Value
1. Financial Asset
According to Ocean Tomo, intangible assets represent 90% of the market value of S&P 500 companies. This means that most of a company’s value is not in buildings or equipment but in its ideas, data, and protected knowledge.
Example: In 2022, Qualcomm reported over $6 billion in licensing revenue. This income comes from allowing others to use its patented technologies in smartphones and devices without manufacturing the products themselves.
2. Generates Licensing and Partnership Opportunities
Businesses that manage IP portfolios well can license their technology to other companies or enter into partnerships. This creates additional income streams and extends market reach.
Example: ARM designs chips but doesn’t manufacture them. Instead, it licenses its processor architecture to companies like Apple and Samsung.
3. Supports Fundraising and Valuation
For early-stage businesses, IP can strengthen investor confidence and boost company valuation. A robust patent portfolio signals that the company has protected its technical edge and can defend its position in the market.
4. Reinforces Market Positioning
A business with strong brand recognition and exclusive technologies can charge more, retain customers, and fend off imitators.
Example: Nike protects its “Swoosh” logo and slogan with trademarks. This allows it to prevent counterfeit products, while its strong branding supports its pricing power across global markets.
Key Types of IP and Their Business Applications
|
IP Type
|
Use in Business
|
|---|---|
|
Patent
|
Protect technical inventions
|
|
Trademark
|
Protect brand identity
|
|
Copyright
|
Protect original content, code, designs
|
|
Trade Secret
|
Protect confidential know-how
|
Risks of Not Managing IP
Poor IP management can lead to legal disputes, lost revenue, and missed opportunities. Common issues include:
Failing to register trademarks in new markets
Overlooking trade secret protection with contractors
Skipping patent checks before launching new products
Losing control of jointly developed technology
How Companies Use IP Strategically
Strategic Use #1: Protecting Core Technology
IBM files more than 8,000 patents a year. Its legal and R&D teams work together to identify innovations worth protecting. This not only defends its technical leadership but also creates leverage in negotiations and joint ventures. Source
Strategic Use #2: Opening Access to Gain Influence
Tesla made parts of its patent portfolio available to competitors to accelerate EV adoption—while still retaining key trade secrets and manufacturing advantages. Read Tesla’s statement
Strategic Use #3: Enhancing Deal Value in M&A
In the 2022 Broadcom–VMware acquisition, VMware’s software IP was a major component of the $61 billion valuation. Buyers and investors routinely conduct IP due diligence to understand what they are acquiring.
Summary: Why IP Matters in Business
|
Business Goal
|
Role of IP
|
|---|---|
|
Increase valuation
|
Signals innovation and exclusivity
|
|
Generate income
|
Licensing and royalties
|
|
Protect brand
|
Trademarks and copyrights
|
|
Reduce legal risk
|
Prevent infringement
|
|
Strengthen position
|
Barrier to entry for competitors
|
Final Considerations
Managing IP is not only a legal requirement—it's a business imperative. For companies building technology, content, or brands, it can unlock new revenue, attract investment, and reduce exposure to litigation.
Regular audits, proper registrations, employee awareness, and cross-functional strategy ensure it works as a business asset, not a liability.
