Increase the value of your service business with an IP portfolio

By Lisa Liu, Senior Partner at The Mitzel Group, startup Founder, Corporate Lawyer, Board Member, Venture Capitalist.

Intellectual property protections add value to all types of businesses. Although securing trademarks and other types of intellectual property protection (e.g., patents, service marks, copyrights, and trade secret agreements) is a common tactic for widget makers and technology companies, professional services often overlook opportunities to create value with a thoughtful IP portfolio strategy. In fact, if you ever hope to sell your business or seek financing, creating value around your intangible assets should be a central goal. Especially for service businesses where the entity's brand relies on the reputation of key practitioners - founders and partners - develop a strategy to position the business as something bigger than the personal reputation of one (or a few) individual can increase the commercial value.

Prepare an exit strategy

Traditionally, service businesses (professional services, lawyers, architects, consultants, medical professionals and others) are often named after their owners and partners. Think "John Smith's Law Firm" or "John Smith, Chiropractor." These business owners can spend decades growing their customer base and developing a reputation that encourages widespread referrals from their highly satisfied customers. After a long and successful career, the professional decides it's time to retire. Rather than just taking off their shingles and sliding off into the sunset, what if the person decides to sell their practice? This can be done through careful succession planning. They use a partner or junior partner who builds their practice under the watchful eye of the original partner, slowly taking over the founder's responsibilities and client relationships.

This model still works. But what if there isn't a junior partner already on the sidelines? A customer list is definitely a nice asset that a buyer might want to buy. But a client list does not guarantee that the trust associated with the former owner's personal brand will carry over to the new owner. This is when a well-managed IP portfolio can bring additional value to the business and a higher price for the professional seller.

An IP-rich company

Without a brand that transcends the name of the business owner, businesses are leaving potential value on the table. For example, a consultant's company could be their name followed by their area of ​​expertise or, better for longevity, it could be a brand name easily identifiable in the market and linking several future owners. If the business has a good reputation, this goodwill can be passed on to the future owner of the business. Beyond business entity names, however, there are many processes, products, and services that may also be trademarked and protected by intellectual property law. In this way, the company builds a portfolio of IP assets, thereby creating additional value.

Examples of these customizable elements are only limited by the imagination. A physical therapist may trademark the name of a detailed injury rehabilitation program or a nutritionist may trademark and copyright the content of a series of courses offered to clients via on-demand video downloads. A property planner can put together an application checklist for guest intake or an event planner can score a set of specialty wedding packages. By protecting the intellectual property of these processes, relationships, and service lines, you develop an intellectual property portfolio that includes trusted, repeatable customer experiences that become a real asset to future owners.

Principles of trademark protection

Trademark law is generally designed as consumer protection law to ensure that consumers buy what they want to buy and are not confused by products and services with similar names. Trademark laws help guard against counterfeiting and fraud. Likewise, service marks identify the source of the services, in the same way.

A common misconception is that a trademark owner owns that word or mark in all uses and categories. Indeed, the rights to use a name are linked to a particular category of goods or services (industry) and within the same geographic market. You may have seen the