Turning an idea into a real product and protecting the associated intellectual property (IP) is not cheap, so how can you make your desired outcome into reality? Let’s look at some options.
When to seek funding
An important consideration when seeking funding is confidentiality. Any public, enabling disclosure of your invention before your IP rights are filed could prevent grant and/or invalidate your IP rights. If you must disclose your idea, use confidentiality or non-disclosure agreements (NDA). However, such agreements can be breached. Therefore, it is important to manage disclosure under NDAs carefully, prior to the filing of applications for IP rights. Some sources of funding are only available after the IP rights have been applied for.
Sources of funding
Savings: use your personal savings. No disclosure of the invention to any third party is required.
Friends and Family¹: a network of friends and/or family may be tapped for a small monetary amount. However, clarify the expectations from the start, preferably in writing. For instance, is the money a gift or a loan?
Note that the same confidentiality requirements apply. If you can, obtain an acknowledgement, at least orally, and more preferably in writing, that your friends or family understand that you are disclosing to them in confidence. An NDA would be even better (e.g. in case of a falling out later on) but getting friends/family to sign such a legal document can be tricky.
Traditional Bank Loan¹: a loan can be obtained from a bank, typically secured against a collateral asset such as real estate. Note that IP rights are property and some banks may accept IP rights as the collateral asset. If disclosure of the idea to the bank is in confidence, the loan can be used to apply for an IP right.
Intellectual Property Funding (IPF): similar to a bank loan in many ways, you get a lump sum upfront from a financial institution or company. Unlike a traditional bank loan, the financial institution buys your IP upfront and licenses it back to you for a set period of time. For more information, see www.albright-ip.co.uk/2018/06/ 4-ways-to-fund-your-business/
Business Angels¹: Dragons’ Den, anyone? The television show has done much to raise public awareness about business angels (at least in the UK). Business angels are typically wealthy individuals who have been successful commercially and who are interested in investing time and money into other business ventures, typically in return for a share of the new business. There are many ‘angel’ groups throughout the UK, such as SWAIN (South West Angel and Investor Network) or Cambridge Angels. Look for your closest angel group. Once again, if the funds are intended to finance the filing of an IP right, disclosure to the business angels needs to be in confidence. No disclosing your invention on television when pitching for funding if you don’t have the IP in place!
Venture Capital¹: venture capitalists are similar to business angels. However, the sums of money involved tend to be larger.
Stock Market Listings¹: floating your business on the stock market and issuing shares can be another way of raising funds, but generally does require you to be fairly established already.
SEIS and EIS: are UK government schemes which help qualifying companies raise funds by offering tax relief to investors, subject to terms and conditions. Talk to an accountant or tax adviser.
IP Audit Government Grant: whilst competitive, the UK Government offers grants of £2,500 to select companies, with the company paying a further £500, for an audit of the company’s (potential and existing) intellectual property. The audit needs to be carried out by a Chartered UK Patent or Trade Mark Attorney, such as those at Albright IP Limited. As it is in confidence, the IP audit can be carried out at any time.
Grants¹: search for any grants that you might be eligible to apply for (though often the application process can be lengthy without any guarantee of success). If you are a university lecturer, you may want to look into applying for grants issued by the funding bodies such as the Medical Research Council, BBSRC, EPSRC (see UKRI for the full list of Research Councils), the Wellcome Trust, and Technology Transfer Organisations. As the grant application process typically requires disclosure of the invention, best to apply for these after your application(s) for IP rights are filed.
Competitions¹: are there any competitions you can take part in that offer money as a prize, or the opportunity to pitch to investors? The Earthshot Prizes and the Young Entrepreneurs Scheme (YES) are two such examples. Again, best to look into these only after your IP is filed.
Crowdfunding: donation pages and peer-to-peer crowdfunding platforms exist, such as Kickstarter. These allow people to pledge an amount of money for an idea they like the look of. As clearly requiring a detailed disclosure of your invention, do not apply for this until after your IP is filed.
Licensing your IP Rights: patents, designs and Trade Marks are property rights. Similar to renting out real estate, you can license out your IP in return for royalties. This does require that you have IP rights. Otherwise, there is nothing to license out. Remember, your licence may need to be recorded against the IP right at the relevant IP Office. Albright IP can help with this as well, directing you to a good specialist lawyer to draw up the licence agreement. Defending or bringing legal action approach potential established players in the relevant sector directly to see if they might be interested in taking a licence (but beware of unintentionally signing any rights away when you do so). Alternatively, patents can be listed on marketplaces or platforms as being available for licensing. One such marketplace is the ‘Patents 4 Partnerships’, organised by the United States Patent and Trade Mark Office (USPTO).
Sales of the Product: fairly straightforward, selling your product for more than it costs to make earns you a profit. As sales of a product typically count as a public disclosure, apply for the IP rights first, then start selling.
Sales of IP Rights: as mentioned above, IP is property. You can sell your IP right, e.g. for a lump sum.
Claiming money back through tax relief
R&D Tax Credits: if your invention creates an advance in a technological or scientific field, involves some scientific or technological uncertainty, subject to conditions and eligibility, you may be able to claim back money in the form of Research and Development (R&D) tax credits. Ask an accountant or tax adviser about these.
Patent Box Tax Relief: for companies that pay corporation tax in the UK, owning or being an exclusive licensee of a granted British patent can open up an effective corporation tax rate of 10% for qualifying earnings, subject to conditions. Ask your accountant or tax adviser for more details about Patent Box tax relief.
Defending or bringing legal action
IP Insurance: is a thing. IP insurance can provide peace of mind. If you are involved in an IP dispute with another party, IP insurance can also encourage a settlement as it is essentially a war chest that signals that you are in a financial position where you can pursue litigation if necessary. Albright IP can introduce you to an IP insurance broker if IP insurance is wanted.
CrowdJustice: CrowdJustice is a platform that allows you to crowdfund for the cost of bringing or defending legal proceedings for a cause that might have wider public appeal. Whilst the causes are typically social causes, intellectual property is one of the categories, and might typically include copyright or Trade Mark disputes such as the MONSTA PIZZA vs MONSTER ENERGY DRINKS case. See the CrowdJustice website for more details.
You hopefully now have a better overview of the sources of funding that are available. It is worth noting that you can use a combination of the above sources of funding, depending on whether you have filed IP rights, and your commercial goals.
Funding is just one of the steps to turn your invention into reality. Actually applying for the IP is another such step. Here, at Albright IP, we can assist you with drafting and filing patent, design and Trade Mark applications, and help you throughout the process in each case.
Citations: ¹Enterprise for Life Scientists: Developing Innovation and Entrepreneurship in the Biosciences (Paperback), Chapter 8-“Funding your Ideas”; David Adams and John Sparrow (eds), Publisher: Scion Publishing Ltd, Bloxham, UK, 2008; ISBN: 9781904842361 www.wipo.int/wipo_ magazine/en/2008/05/ article_0001.html www.innovateukedge.ukri.org/Build-your-capacity-innovation-to-grow-and-scale/harness-intellectual-property www.albright-ip.co.uk/2018/06/4-ways-to-fund-your-business/ www.cambridgeangels.com/ www.bvca.co.uk/ www.gov.uk/guidance/venture-capital-schemes-applyto-use-the-seed-enterpriseinvestment-scheme www.gov.uk/guidance/venture-capital-schemesapply-for-the-enterpriseinvestment-scheme www.ukri.org/councils/mrc/ www.ukri.org/councils/bbsrc/ www.ukri.org/councils/epsrc/guidance-for-applicants/types-of-funding-we-offer/ www.wellcome.org/grant-funding www.earthshotprize.org/ www.yescompetitions.co.uk/ www.kickstarter.com/ https://developer.uspto.gov/ipmarketplace/search/platform www.gov.uk/guidance/corporation-tax-researchand-development-rd-relief www.gov.uk/guidance/corporation-tax-the-patent-box www.crowdjustice.com/case/save-the-monsta/ www.crowdjustice.com/cases/?tag=Intellectual%20property www.crowdjustice.com/how-it-works/ www.natwestgroup.com/news-and-insights/newsroom/press-releases/enterprise/2024/jan/ natwestlaunches-intellectual-propertybased-lending-to-fuel-hig.htm
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