What is the purpose of an IP Holding Company?
Intellectual property holding companies (IPHCo’s) are registered with the purpose of managing and holding a business or group’s intellectual property assets such as patents, trade marks, designs, copyright, trade secrets and other proprietary know-how. IPHCo’s are commonly overlooked as a method to strategising a new business or company structure. In simple terms, the IPHCo will be registered as a separate legal entity, whether as a subsidiary of the group parent company/shareholder or as the parent company of the business group.
A business group may significantly reduce administrative costs and reap considerable tax minimization benefits by, for example, establishing an IPHCo in a jurisdiction with a lower corporate tax rate.
However, considering the nature of intellectual property, IPHCo’s can play a vital role where companies specialise in technology innovation and product development. The major benefit of an IPHCo is that it separates intellectual property from the operations of the other affiliated companies in order to have the company’s intellectual property portfolio registered and managed independently. This is one of the best ways to protect and shield your valuable intellectual property assets in the event of litigation, financial difficulty or insolvency of the operating company(ies) in the business group, as the intellectual property assets in the IPHCo will not be able to be attached or sold in order to pay creditors.
An IPHCo will generally handle the registration, enforcement, assignments, marketing and licensing of the group’s intellectual property assets. Typically, all of the intellectual property rights will be assigned to the IPHCo and consequently, all of the exclusive rights granted by the various forms of intellectual property assets will vest in the IPHCo. The IPHCo would then license the intellectual property to the other companies in the business group as well as to third parties.
By creating a separate entity for the purpose of owning and exploiting the intellectual property assets, you will be able to use these intellectual property assets as security and ultimately sell or license these assets independently.
An IPHCo is just one of the ways in which you can structure your companies to protect your valuable intellectual property assets. For more advice on company structures and intellectual property protection, contact KISCH IP.