Safeguarding
intellectual property
to enhance corporate
value

30 September 2020

Safeguarding intellectual property to enhance corporate value

Foreword
As the value of intellectual property continues to grow, organisations need to prioritise actions to protect
their IP portfolios
Intellectual property is often referred to as ‘the currencyof the knowledge economy’. In terms of currency, thevalue of IP has appreciated consistently in recent
years. Revenues earnt from leasing IP have increased
almost 700% between 2012 to 2018 with an
expectancy to continue its rise in the decade ahead.
Many of the world’s most valuable businesses havesizeable IP portfolios and many of the market
challengers or disruptors are trying to bring new ideas
to the market that require legal protection.
COVID-19 has amplified some of these trends, withbusinesses racing to open up digital presence and stilltrying to adjust to the full consequences of remote
working. One of the implications is that well tested
processes that are fit for purpose in a face to faceenvironment, are suddenly being used in a virtual
setting, exposing organisations’ IP to a plethora of new
risks.
According to some studies, only about half of corporate
leaders understand the value and importance of IP and
are actively involved in strategic planning related to IP.
This means that IP decisions are often delegated tolower level legal staff who understand IP but don’tnecessarily connect with broader strategic implications.
One of the consequences is that many businesses failto maximise the value of their IP portfolios.

IP risks pose a threat not only to intellectual capital
itself but also to the overall financial success of theorganisation. Interestingly, exposure to these risks canhappen at various steps in the IP lifecycle, including theearly stage of research and development (e.g.
disclosing a critical piece of information about yourinvention to a 3rd party before submitting a patentapplication), the process of safeguarding your trade
secrets (e.g. neglecting some aspects of cybersecurity), IP registration process (e.g. by registering apatent that is too narrow and allowing a competitor toinnovate around it), and monetisation (e.g. third parties
exploiting loopholes in licensing agreements).
Consequently, there will be a number of risk prevention/ mitigation actions that organisations can take to keep
their IP safe. This report provides a range of examples
on how ‘IP savvy’ organisations safeguard their IP
portfolios. Some of these risks can be managed
through a range of internal measures or by using
insurance through a captive solution. In some cases,
there are opportunities to use the help of the external
insurance market or alternative solutions provided byinvestors. As the sophistication of external IP insurance
solutions grows, the future IP safeguarding possibilities
are likely to increase.

2

Safeguarding intellectual property to enhance corporate value

Contents
04

Executive summary

10

The growing importance of intellectual property

17

Determining the value of your intellectual property

21

How to manage the value of intellectual property

28

How to mitigate the risk of things going wrong

37

Moving forwards

3

Executive
Summary4

Safeguarding intellectual property to enhance corporate value

The growing importance of intellectual property
Compound annual growthrate of global IPIntellectual property (IP) is a sub-set ofintangible assets distinguished by the fact
these are created by law. Typically, it is the
product of original thought and creativity
with recognition or financial benefit as aresult of it. There are multiple types of IP,
including copyrights, patents, trade marks,
industrial designs, geographicalindications, and trade secrets.
The importance of IP has been steadilyrising across the world for the past few
decades. The number of patentapplications has almost tripled in the last
20 years while the number of trademark
grants has increased five times. China has
been a major hotspot of intellectual
property growth – a trend that is also likely
to continue in the next decade.
Where IP has historically been seen as alegal device, it is now seen as invaluablestrategic tool that can help businesses
gain competitive advantage and provide astrong foothold in a market. Protection of
IP assets is, therefore, becoming more
important than ever before.

Source: World Intellectual Property Organization; Statista; KPMG analysis

Copyrights /Database rights
Creations of mind,
e.g. literary works,
films, music,
databases,
architecture, etc.

Patents

Trade marks

Global patentapplications(millions)

CAGR

+5%
1.21
1998

An exclusive right
granted for an
invention.

A word or a
combination ofwords, letters, andnumerals.

3.33

2018
CAGR

Global trademark grants(millions)

+8%

7.74

1.58
1998

2018
CAGR

Industrial
designs
The ornamental or
aesthetic aspect ofan article.

Geographicalindications
Having qualities ora reputation due togeographicalorigin.

Trade secrets

Global industrial
design grants(millions)

+7%
0.24
2000

IP rights on
confidential
information which
may be sold or
licensed.

0.81

2018
CAGR

+1%
OECD R&D
spend(% of GDP)

2.28

2.37

2010

2017

5

Safeguarding intellectual property to enhance corporate value

Managing the value of intellectual property

There are two types of IP risk – internaland external; both can result in asignificant damage to the competitive
position of the business and a sizeablemonetary loss.
The internal IP risks typically arise frominsufficient intellectual property protection
due to lack of awareness of similar
inventions in existence or from making
mistakes in the protection process.
Meanwhile, the external IP risks typicallyarise from a 3rd party attempting toinvalidate someone’s IP or claiming
infringement of their IP.
Both types of risk are very common and alarge number of risk managers and riskowners across industries are unaware of
the full exposure to these risks and how
their actions (or inaction) could lead to newrisks. For example, a 2015 survey by the
UK Intellectual Property Office showedthat 79% of businesses are not aware thattelling people about an invention before
applying for a patent could undermine apatent application.

Source: UK Intellectual Property Office; KPMG analysis

Internal
IP risks
Lack ofexclusivity /loss ofrevenue

External
IP risks
Infringementof 3rd party
intellectual
propertyrights / costfor defenceor licensing

Example of Insufficient
freedom-to-operate analysis• Lack of proper intellectual property
rights protection of core products resulting
in increased counterfeiting• Missed deadlines (renewal, payments,
oppositions)• Insufficient freedom-to-operate analysis• Early disclosure of inventions by
employees• Flaws in drafting or application limiting
enforceability of intellectual property rights• Becoming a defendant in IP litigation• Forced licensing under unfavourable
conditions• Liability for IP risks and problems ofcontractual partners, such as suppliers• Invalidation attempts of intellectual
property rights by competitors or nonpracticing entities (NPEs) such as “patenttrolls”• Own invalidation attempts against 3rdparty intellectual property rights• A motor company wanted to launch a
motorcycle with a new engine, for which it
had several patents.
• The company did not conduct a freedom-tooperate study considering that the more
limited ‘positive patentability’ study was
sufficient to proceed with the launch.
• It was later sued by a competitor as one ofits patents made a broad claim which was
found to infringe an essential component of
the competitor's engine. The court instructed
the company to halt its launch and motorcycle
manufacturing, resulting in significant losses.

Example of forced licensing• A patent troll acquired several patents
essential to the 802.11 Wi-Fi standard, andthen claimed that every business (orindividual) with a router containing a Wi-Fi
chip was infringing its intellectual property.
• It followed this by sending thousands of letterstargeting hotels and cafes that provide Wi-Fi
for customers, demanding them to pay alicense fee of $2,500 per location.
• A major router manufacturer then stepped in
to defend its customers and whilst it
ultimately settled with the patent troll for
only 3.2 cents a unit, this still meant apayment of $2.7m plus $13m in legal fees.

6Safeguarding intellectual property to enhance corporate value

How to mitigate the risk of things going wrong

IP risks pose a threat not only tointellectual capital but also to the overall
financial success of the organisation. It is
more important than ever to have aneffective risk mitigation strategy thatcovers the whole life lifecycle of IP.
Effective IP management, from thecreation and development stage, throughto the protection and monetisation stage,
will help ensure that all IP related internalrisks are adequately covered. This will alsomean that any unexpected external risks
would cause less disruption.
Each step in the IP lifecycle will bring a
new set of risks that will have to be
mitigated. Depending on whether anorganisation decides to register its IP or
keep it as trade secrets, there will bedifferent internal and external events that
could cause financial damage.
Consequently, there will be a number ofrisk prevention / mitigation actions thatorganisations can take to keep their IP
safe.

Source: KPMG analysis

Create anddevelop

Keep itsecretRegisterMonetise

There are multiple ways themost ‘IP savvy’ organisations
protect themselves during thiscritical stage of IP lifecycle.
The best practice includes
being disciplined aroundsigning NDAs with employees
and business partners, clearly
articulating ownership rights
to the background andforeground IP, safeguarding
access to information(including cyber and physicalsecurity), and carrying out athorough search of existingideas.

Before IP has been legally
protected and is still kept in
the form of a trade secret, it issubject to a range of key risks
that can cause majorcommercial implications. The
most ‘IP savvy’ organisations
will make sure they follow theguidance of the domestic
legislation in each IP
jurisdiction (the trade secretrules tend to differ), take goodcare of cyber and physicalsecurity of their IP portfolio,
and provide regular training totheir staff in handlingconfidential information.

Some of the obvious
protection activities will
include selecting the righttype of IP and deciding how
broad or narrow theregistration should be, as wellas thinking through thegeographical scope of the IP
rights and smart orchestrationof the registration process(e.g. patent delay strategies).
Before registering your trade
mark or patents in newmarkets, it is wise to conduct
searches to determine
whether by expanding into
those markets you will
infringe a 3rd party’s IP.

There are multiple ways
organisations can try to protect
themselves during
monetisation, including forming
their own ‘rainy day’ funds,
creating patent thickets, andcarefully monitoring licensing
agreements, including
conducting compliance audits.
Having a clear market
reputation as someone that
protects its IP will also help
deter potential infringers.
Furthermore, performancemonitoring of your IP portfolio
will help you allocate yourresources to protecting theassets that matter the most.

7

Safeguarding intellectual property to enhance corporate value

Future insurance opportunities

Despite these products, there is significant scope
for the insurance industry to do more to support
organisations in protecting their IP portfolios. In the
short term (horizon 1), insurers need to think about
ways of simplifying policy wordings and bringing IP
to the forefront of insurance conversations toimprove awareness.

Finally, in horizon 3, there could be opportunities
for insurers to expand product coverage and offer
IP related risk prevention and response services.

Source: KPMG analysis

1

3

Bringing IP tothe forefront of
conversations

2

Current policy wordings are often too complex(e.g. IP risk owners are unsure if they are protected
through their media policies).

3

Market / position IP insurance as a means of giving
leverage to businesses to enforce their legal
rights (and, therefore, protect competitive position).

4

Insurance incumbents and InsurTechs have an
opportunity to introduce Next Gen IP risk
modelling tools to assist underwriting.

5

Many organisations find the existing IP infringement
cover too expensive, forcing them to seek
alternatives and avoiding purchase of broader cover.

6

Launch IP risk management services to support
organisations in preventing internal and external IP
risks from happening and responding if they do.

7

Insurers can enhance coverage to include theresidual value of IP (e.g. by sharing the potential
upside of infringement cases to manage pricing).

8

Develop stronger IP claims management function(in-house or through external IP agencies) tomaximise the residual IP value.

6
Launch IP
Safeguard
solution

Improve risk
modelling2

1

IP is a highly valuable business asset (not just‘legal rights’) and should be adequately captured inclient and insurer / broker conversations.

Revisepositioning

4

Product development

In horizon 2, insurers need to make a step change
in IP risk modelling and pricing and start rethinking
the positioning of IP insurance. The recognition that
IP is a strategic business asset (and not just “legal
rights”) and that insurance can provide a true
leverage in the case of infringement could play amajor role in increasing the use of IP insurance.

Positioning / Marketing

One way organisations can protect themselves is
IP insurance. Insurance solutions can offer extra
protection in case of an unexpected turn of events
related to internal intellectual property
management. There is a range of offensive anddefensive insurance products that already exist,
particularly when it comes to supporting
businesses with legal costs.

There are multiple attractive opportunities for insurers to drive better awareness of the power of the existing IP insurance
products, while working diligently to continue enhancing risk modelling and pricing, offering better risk coverage andbroader preventative insurance solutions. This would provide tremendous value for risk owners beyond their traditionalrisk management strategies.

8
Simplicity ofwordings

Transform IP
claims function

5
Improve
pricing

Horizon 1

Horizon 2

7
Enhance IP
insurancecoverage

Horizon 3

8

Safeguarding intellectual property to enhance corporate value

Moving forward – four actions risk owners could take

There are four actions risk owners cantake to minimise the risk to their IP
portfolios.
Depending on the size of yourorganisation, you will also want to think
about how IP risk management fits into
your broader insurance strategy. Some ofthese risks can be managed through arange of preventative measures or byusing internal insurance through a captive
solution. In some cases, there areopportunities to use the help of theexternal insurance market or alternative
solutions provided by investors.
Your risk management function can (andshould) play a major role in safeguarding
your IP assets. It is important that your risk
managers are represented at board level
discussions about the value generationfrom your IP portfolio and other intangible
assets.
The sophistication of the IP insurance
coverage available is likely to increase in
the coming years, so don’t forget to raise
this topic with your insurance broker and /or insurer.

Source: KPMG analysis

1

2

3

4

Mitigate your risks during
creation & development
process of IP

Keep your IP secret
before its registered andin the public domain

Make sure you maximise
the value of your IP
through registration

Enforce your rights
during exploitation /monetisation of your IP• Make sure your idea
does not already exist• Do not disclose your idea
to 3rd parties prematurely• Make sure NDAs are inplace with employees
and third parties• Make sure the future
ownership is wellarticulated, especially if
you are collaboratingwith 3rd parties• Think carefully if the best
strategy is to register
your IP or keep it as atrade secret; this will
depend on the risk andyour business potential• Bolster IP’s cyber andphysical security• Improve governance(e.g. make sure youremployees and business
partners are properly
briefed and trained)• Prevent reverse
engineering• Select the right type ofprotection (different
types of IP protection will
give you different rights)• Be smart about
registering broad or
narrow patents (risk ofinvalidation vs risk ofcompetitors innovatingaround)• Actively manage your IP
applications (e.g. does itmake sense to delay thejudgement?)• Think carefully about
geographical scope• Plan IP strategy tomaximise value of yourIP portfolio• Create a fund (or use
insurance) to cover the
potential cost of litigation• Be smart about using
patent thickets / clusters
to enhance yourprotection• Keep monitoring yourlicensing agreements to
reduce any value
leakage• Build a reputation as‘enforcer’ of your rights

9

1

The growing
importance ofintellectual
property

10

Safeguarding intellectual property to enhance corporate value

What is intellectual property?
Intellectual property is a type of intangible assets that can take multiple different forms, including
copyrights, patents, trade marks, etc.
An intangible asset is an identifiable non-monetary
asset without physical substance. The identifiable
criterion is met when the intangible asset isseparable (that is, when it can be sold, transferred or
licensed), or where it arises from contractual or otherlegal rights (IAS 38).
Intellectual property (IP) is a sub-set of intangible
assets distinguished by the fact these are created bylaw. Typically, it is the product of original thought andcreativity with recognition or financial benefit as aresult of it.
There are multiple types of IP, including copyrights,
patents, trade marks, industrial designs, geographicalindications, and trade secrets.

Copyrights / Database rights

Patents

Trade marks• Literary works such as novels,
poems, plays, reference works,
newspaper articles.
• Computer programs, databases.
• Films, musical compositions, andchoreography.
• Artistic works such as paintings,
drawings, photographs, andsculpture.
• Architecture.
• Advertisements, maps, andtechnical drawings.

• An exclusive right granted for an
invention, which is a product or aprocess that provides, in general, a
new way of doing something, oroffers a new technical solution to a
problem.

• A word or a combination of words,
letters, and numerals.
• Trade marks may also consist of
drawings, symbols, threedimensional features such as theshape and packaging of goods,
non-visible signs such as sounds orfragrances, or colour shades usedas distinguishing features.

Industrial designs

Geographical indications

Trade secrets• In a legal sense, an industrial
design constitutes the ornamental
or aesthetic aspect of an article.
• An industrial design may consist of
three dimensional features, such as
the shape of an article, or two
dimensional features, such as
patterns, lines or colour.

• A geographical indication (GI) is asign used on products that have a
specific geographical origin andpossess qualities or a reputationthat are due to that origin.
• Geographical indications are
typically used for agricultural
products, foodstuffs, wine and spirit
drinks, handicrafts, and industrial
products.

• Trade secrets are IP rights on
confidential information which may
be sold or licensed.
• To qualify as a trade secret, theinformation must be commerciallyvaluable because it is secret, beknown only to a limited group of
persons, and be subject toreasonable steps taken by therightful holder.

Source: World Intellectual Property Organization

11

Safeguarding intellectual property to enhance corporate value

The growing importance of patents
The global importance of patents has increased significantly over the last 30 years, showing particularly
strong growth in Asia
The number of patent applications has shown
significant growth over the last 20 years worldwide,
increasing steadily almost every year, with a slight
dip in 2009 due to the global financial crisis.

Ranking of the 20 countries
with the most patentapplications 2018

Number of patent applications worldwide from 1990 to 2018
3,326,300

2018

The patent activity has been particularly noteworthy
in parts of Asia, with China registering almost threetimes more patents than it’s closest ‘follower’ the
U.S. This trend is unlikely to change soon with China
registering a 12% increase in 2018 while the U.S.
patent registration plateaued.

2017

3,162,300

2016

3,117,500
2,878,600

2015

2,672,200

2014

2,556,100

2013

2,356,500

2012
2011

In Europe, the patent applications have grown fromc. 75,000 in 1998 to around 170,000 in 2018.
However, this growth has not been the same in all
European countries with the UK being one of theexamples where the patent application rate hasplateaued and has even slightly declined over thelast 20 years. While patent applications have stalled,
the UK has shown a significant growth in trade markapplications.

2,158,200
1,997,400

2010
2009

1,855,900

2008

1,930,000

2007

1,874,700

2006

1,791,700

2005

1,703,200

2004

1,568,200

2003

1,484,300

2002

1,444,400

2001

1,457,500

2000

1,378,000

1999

1,268,400

1998

1,214,800

Source: Statista; KPMG analysis

China
United StatesJapan
Republic of Korea
European Patent Office
Germany
India
Russian Federation
CanadaAustralia
BrazilUnited Kingdom
MexicoFranceHong Kong SAR
IranSingapore
Italy
Indonesia
Thailand

1,542,002
597,141
313,567
209,992
174,397
67,89850,05537,95736,161
29,957
24,857
20,941
16,424
16,222
15,986
12,823
11,845
9,821
9,754
8,149

Application
growth (2017to 2018)+11.6%
-1.6%
-1.5%
+2.5%
+4.7%
+0.3%
+7.5%
+2.9%
+3.3%
+3.6%

-3.1%
-5.1%
-4.4%
-0.2%
+20.2%-21.1%
+8.4%
+1.5%
+4.8%
+3.6%

12

Safeguarding intellectual property to enhance corporate value

Patents across industries
The use of patents has been particularly widespread in computer equipment and communications

In the U.S., manufacturing has historically been themost active sector for patent registration, particularly
the high tech driven manufacturing sub-sectors,
including computers, communications equipment,
and electronics.
In Europe, only 3 out of 20 most patent-intensive
industries are related to services. The other 17 are
sub-categories of manufacturing, including
communication equipment as the most patentintensive type of manufacturing.
In the UK, technology driven industries held thelargest share of patent grants in 2017 (e.g. civilengineering held 11.5% of all grants). Meanwhile,some emerging industries like ‘nano-technology’
showed the greatest annual increase in patentregistrations (17.1%).

Patent Intensity in the U.S. (patents / 1000 jobs in the given industry), 2009 - 2013
Computer and peripheral equipment
Communications equipment
Other computer and electronic products
Navigational, measuring, electromedical, and control instruments
Semiconductors and other electronic components
Basic chemicals
Other miscellaneous
Electrical equipment, appliances, and components
Medical equipment and supplies
Pharmaceutical and medicines
Other chemical product and preparation
Machinery
Resin, synthetic rubber, and artificial and synthetic fibers and filaments
Plastics and rubber products
Fabricated metal products
Other transportation equipment
Motor vehicles, trailers and parts
Nonmetallic mineral products
Textiles, apparel and leather
Aerospace product and parts
Furniture and related products
Primary metal
Wood products
Paper, printing and support activities
Beverage and tobacco products
Food

Source: Intellectual Property and the U.S. Economy: 2016 Update; KPMG analysis

658
582
255
146
144
113

88
80
75
73
53
48
31
19
16
16
16
14
10
9
5
4
3
2
2
1

Above mean

13

Safeguarding intellectual property to enhance corporate value

The growing importance of trade marks
The number of trade marks has followed a very similar growth pattern, again dominated by trade markgrants in China
The number of trade mark registrations has
increased significantly worldwide over the last 20
years, showing a similar pattern to patents. The main
driver of this increase has again been China,
registering more trade marks than the rest of theworld together and still showing phenomenal growth
rates (almost 30% from 2017 to 2018).
A large number of trade mark intensive industries
tend to be in manufacturing, with manufacturingsectors being significantly more prominent than the
sectors related to services (12 of 20 most trade markintensive industries are in manufacturing). However,this trend is less obvious compared to patents.
As indicated previously in the report, trademark
registration has been very strong in the UK (both,from domestic as well as international businesses).
This might be driven by multiple reasons, including
increasing awareness of the potential benefits trade
marks can provide to the strength of the brand, as
well as the general ease of obtaining trade marks.
This number is expected to increase further as thelegislation changes post Brexit.

Ranking of the 20 countries
with the most trademark
registrations 2018

Number of trademark grants worldwide
from 1998 to 2018
7,743,400

2018
5,460,600

2017
2016

4,616,700

2015

4,418,400
3,588,400

2014
2013

3,097,400

2012

3,045,100
3,129,700

2011

3,376,700

2010
2009

2,789,600

2008

2,527,300

2007

2,339,500

2006

2,172,600

2005

2,094,500

2004

1,797,200

2003

1,793,100

2002

1,740,500

2001

1,692,600

2000

1,652,000

1999

1,552,500

1998

1,584,600

China
United States
India
EUIPO
TurkeyBrazilRussian Federation
United Kingdom
Germany
Republic of Korea
Italy
MexicoAustralia
Iran
Switzerland
Spain
China, Hong Kong SAR
CanadaBOIP
Vietnam

4,995,813
384,716
369,793345,379
210,258
191,813
189,127
176,925
161,997
161,664
145,053
127,500
125,034
111,655
90,40572,94072,40462,04954,301
49,769Source: Statista; EUIPO, IPR-intensive industries and economic performance in the European Union, 2019; KPMG analysis

Applications
growth (2017to 2018)+28.3%+4.3%+20.9%
+5.8
-1.2%
+9.8%
-9.7%
+12.4%-2.6%+14.5%
+4.0%
+2.7%
+6.8%
+7.3%
+1.7%
n/a*
n/a*

+2.1%
n/a*
+11.1%

14

Safeguarding intellectual property to enhance corporate value

Industrial designs growing at a slower rate
The number of industrial designs has grown at a slower rate than patents and trade marks but still shows
positive trends
The number of industrial design grants has increased
from 243,000 in 2000 to 813,000 in 2018, more thantripling in less than 20 years. The growth has beenslower in the last decade, however, with a lessobvious rate of increase year by year.
China has dominated the industrial designs league
table, with the European Union also showing
significant numbers.
As is the case for patents and trade marks, mostindustrial design intensive industries are related to
manufacturing. However, while patents and trade
marks are also widely used in the digital industries,that is not the case with industrial designs, which
potentially explains why the growth in the industrial
designs granted has been slower in the last decade.

Ranking of the 20 countries
with the most industrial designs
registrations 2018

Number of industrial design grants
worldwide from 2000 to 2018
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000

812,800
711,400
706,000
731,600
601,900
641,600
686,700
589,200
536,000
447,300
357,300
348,500
304,500
277,700
263,400
278,100
265,000
240,600
243,000

Source: Statista; KPMG analysis

China
EUIPO
Republic of Korea
Germany
TurkeyItaly
United States
Japan
United Kingdom
Spain
Switzerland
BrazilRussian Federation
India
Australia
UkraineIranCanadaMoroccoHong Kong SAR

536,251
105,116
50,67848,36045,73537,67433,44927,967
24,68818,606
10,625
8,725
8,540
8,198
7,594
6,559
5,520
5,136
4,977
4,547

15

Safeguarding intellectual property to enhance corporate value

Expenditure in R&D (as % of GDP) indicates the potential value
generation of trade secrets

Another type of intellectual property is trade secrets.
While patents, some copyrights, trade marks andsimilar IP is intentionally publicised to make a claimon the ownership of these intangible assets, trade
secrets are by their nature confidential and meant toprovide competitive advantages without disclosing
this information to the public.
The true value of trade secrets is, therefore, difficult if
not impossible to quantify. However, we can makeassumptions about the speed of creating new trade
secrets as businesses engage in research anddevelopment activities. The share of R&D spend (as% of GDP) has increased in most major economies
across the world in the last decade, indicating an
increase in the generation of new intellectual capital,
some of which is kept confidential and has been
turned into trade secrets.
Most major OECD countries spend 2-3% of their
GDP in R&D which indicate the significant potential
size of the total trade secret assets. It should be
noted that even though in the UK the R&D spend has
been below the OECD average, the government has
recently committed to support a substantial increasein R&D funding.

R&D spend as % of
GDP

Korea
IsraelSwedenTaiwanJapan
Austria
Denmark
Germany
United States
OECD - Total
FranceChina
European Union (28 countries)
Singapore
United Kingdom
CanadaItaly
Spain
RussiaTurkeySource: OECD; KPMG analysis

2010
3.47

2011
3.74

2012
4.03

2013
4.15

2014
4.29

2015
4.22

2016
4.23

2017
4.55

3.94

4.01

4.16

4.09

4.18

4.26

4.39

4.55

3.21

3.25

3.28

3.30

3.14

3.26

3.27

3.40

2.81

2.91

2.96

3.02

3.01

3.06

3.17

3.30

3.14

3.25

3.21

3.32

3.40

3.28

3.16

3.21

2.73

2.67

2.92

2.96

3.08

3.05

3.13

3.16

2.92

2.95

2.98

2.97

2.91

3.06

3.10

3.05

2.71

2.80

2.87

2.82

2.87

2.91

2.92

3.04

2.74

2.77

2.68

2.71

2.72

2.72

2.76

2.79

2.28

2.31

2.31

2.33

2.35

2.34

2.34

2.37

2.18

2.19

2.23

2.24

2.28

2.27

2.22

2.19

1.71

1.78

1.91

2.00

2.03

2.07

2.12

2.15

1.83

1.88

1.91

1.92

1.95

1.96

1.94

1.97

1.96

2.09

1.94

1.94

2.10

2.19

2.09

1.95

1.66

1.67

1.59

1.64

1.66

1.67

1.68

1.66

1.83

1.79

1.77

1.71

1.71

1.69

1.69

1.59

1.22

1.21

1.27

1.31

1.34

1.34

1.37

1.35

1.35

1.33

1.29

1.27

1.24

1.22

1.19

1.21

1.05

1.01

1.03

1.03

1.07

1.10

1.10

1.11

0.80

0.80

0.83

0.82

0.86

0.88

0.95

0.96

Most major OECD
countries spend 2-3%of their GDP on R&D
which is a good proxy forthe total value of trade
secrets (although thetrue value is even higher
as these figures do notinclude such items
as customer lists, salesdata, and othermarketing information).

16

2

Determining thevalue of yourintellectual
property

17

Safeguarding intellectual property to enhance corporate value

The increasing value of intangible assets
With the rise of IP prominence over the last 15 years, intangible assets have become more valuable thantangible assets
Intellectual property is often referred to as ‘thecurrency of the knowledge economy’. In terms ofcurrency, the value of IP has appreciated consistently
in recent years. Revenues earnt from leasing IP haveincreased almost 700% between 2012 to 2018 withan expectancy to continually rise to 2024 andbeyond. We have seen in more recent years that thereturn intangible assets can generate has muchhigher potential or multiplier value than that oftangible assets.

Industry revenue of “leasing of intellectual property“in the UK, $m, 2012-2024 (forecast)(a)Components of S&P market value between 1975 and2015(a)Tangible assets

5,068
4,782
4,492

Revenue (USD million)

Intangible assets
100
90

20%

3,854

32%

80
70
60

4,181

16%
3,509
3,231

68%

83%

50
30
20
10

80%

84%

2,157
1,894
1,725

68%
32%
17%

0
1975

2024

2023

2022

2021

Over the last three decades, intellectual capital has become thedominant asset class in terms of the value drivers for companies,
as can be seen in the graph above when looking at the market cap of
the S&P 500 over time, conducted by Ocean Tomo as part of an
Intangible Asset Market Value (IAMV) Study in 2017 (please note thatthe methodology has not been reviewed or approved by KPMG or
Lloyd’s, this is indicative of intangible trends over time).

653
407

2020

• Apple• Alphabet• Microsoft• Amazon• Facebook

2019

• GE
• Exxon Mobil• Microsoft• Citigroup• Walmart

2018

• GE
• Exxon Mobil• Coca-cola• Altria• Walmart

2017

• IBM
• Exxon Mobil• GE• Schlumberger• Chevron

889

2016

2015

2015

2005

2014

1995

2013

• IBM
• Exxon Mobil• Procter & Gamble
• GE
• 3M

1985

2012

Where IP has historically been seen as a legal
device, it is now seen as invaluable strategic tool that
can help businesses gain competitive advantage andprovide a strong foothold in a market. Protection of IP
assets is, therefore, becoming more important thanever before.

40

Top 5 S&P
companies(2)Whilst acknowledging the changing landscape ofmarkets and sectors over time, the rise of major
technology companies indicates the paradigm shift ofvalue that is increasingly held in IP, often off thebalance sheet. It is now regularly observed thatcompanies that effectively manage IP often win in thelong term(1).

Industry revenues increased by almost 700%
between 2012 and 2018 with a prediction ofcontinued increase in the future. It is forecast thatrevenues of IP and similar products (except
copyrighted works) in the UK will exceed $5bn by 2024.

Source: (1) HBR, Discovering new value in Intellectual Property; (2) Top 5 S&P companies by market capitalisation
Graph sources: (a) Statista, Industry revenue of “intellectual property” in the UK 2012-24; (b) Ocean tomo, Intangible asset market value study, 201718

Safeguarding intellectual property to enhance corporate value

Finding the value of your IP
There are three common approaches to value an IP asset that can be used regardless of the purpose of thevaluation; some challenges still remain, however
If you don’t measure it, you can’t manage it. The firststep in being able to use IP for competitive
advantage is to understand the true value of it.
Choosing the most suitable valuation method isessential in ensuring that the asset can be accurately
valued and validated by investors to justify apotentially higher market cap and thus realise the‘true’ value of a company relative to its resources.
There are many valuation methods that will dependon the nature of the asset and the amount of
information that can be retrieved about the asset.
Depending on the circumstances of the valuation andthe information available, one approach may be
favourable over the others. There are three common
approaches to valuation – cost method, income
method and market approach. Some factors toconsider when valuing your IP may include the typeof IP in question, the purpose of the valuation and theamount of information available under each method.
There is a range of challenges when it comes to IP
valuation, however, which means that the reliance on
the IP value described in the corporate accounts (e.g.
for insurance purposes) can be problematic.

Three common approaches tovaluation:

Common challenges:
IP generated during the day to day business

1

2

3

Cost
approach(backward
looking)

Incomeapproach(forward
looking)

MarketapproachThis method
The income
takes into
method values
account the costs
the asset bythat wereconsidering theincurred by the
economic income
business in thethat could becreation of the IP. generated in theIt can also
future by the
include potential
asset andcost of recreating presented as thean IP asset or
net present
developing avalue.
product that issimilar in nature.

Such IP under most accounting GAAPs cannot be recognised on the balance
sheet and is, therefore, “invisible” to the outside investor. In order to understandthe true value, one would need to do a bottom up valuation of the business or
try to split the overall business value into its components one of which is IP.
Separating value between multiple (tangible and intangible) assets in abusiness can be complex as businesses often have more than one IP and otherintangible assets.
IP which was brought on the balance sheet as part of acquisitions (either
IP itself or businesses which have IP)

This method
indicates themarketappetite forsimilar assets;
however, relies
on comparable
transactions.

Such IP would be recognised under the most common GAAPs, e.g. IFRS andUS GAAP. There is a great ambiguity in terms of the recognition criteria for thisIP. For example, some organisations may prefer to have a greater allocation
towards goodwill (and have a one-off large impairment risk), whilst others may
prefer to have greater intangibles values (and amortise those on a regularbasis). That means that the reliance on the valuations in the accounts (e.g. forinsurance purposes) may be problematic. Furthermore, accounting standards
require amortisation of finite life intangible assets but the determination of theremaining useful life of the IP can be subjective. This would also mean that
depending on the useful life chosen, this may have an impact on the value ofthe asset (especially if valued under an income approach).
It should also be noted that although IFRS permits revaluations following initialrecognition of the IP, the adoption of this accounting policy is only permitted if
the future value is determined by reference to an active market, which is rare
given that intellectual property is often unique. US GAAP, for example, prohibits
the revaluation model, which means the value of any recorded IP asset only
represents the value at a point in time and does not reflect an ongoingdevelopment or improvement of the asset.

Graph source: (a) Intellectual Property Office, Hidden Value: A study of the UK IP valuation market; KPMG analysis

19

Safeguarding intellectual property to enhance corporate value

The importance of valuing your IP
Valuing IP may allow organisations to not only meet regulatory requirements and follow standard businesspractices but also allow to capture broader commercial benefits
In most cases, IP valuation is event-driven when it isnecessary to agree a figure for a specific purpose,
often a transaction or a dispute. However, there is abroader range of purposes that companies can
exploit to leverage the value of IP for their own
benefit to gain competitive advantage.
In recent years, the C-suite has realised the
additional value that can be leveraged in IP, resulting
in commercially-driven business cases for valuation
where a specific outcome is in mind. This can range
from supporting the share price to raising capital,commanding a premium, rethinking performance
metrics for more accuracy and setting true market
rates for licenses.
In some instances, it is difficult to separate the valueof IP and the broader business value (particularly,
other types of intangible assets like customer
relationships and brand). However, the better yourunderstanding is of the true value of your IP, theeasier it will be to protect it.

Necessity

Opportunity

Emerging

Required by regulationand practice

Meeting a commercial
need for a business

New types ofrequirements

Examples:Examples:Examples:•Business combination accounting(M&A activity)•

Raising equity funding•

Raising debt funding for collateral•

Negotiating licensing agreements•

New forms of IP insurance•

Determining IP value in insolvency
proceedings•

Establishing franchising arrangements••

IP litigation proceedings•

Structuring partnerships/ JVs

Development in financial reporting ofintangible assets
Asset utilisation checks

Transfer pricing e.g. for tax planning

Buying/ Selling assets

•

•

•

Pension asset transfer•

Setting reserve for IP auction•••

Compliance with market requirements
e.g. IPO•

Portfolio assessment

Hidden pockets of value for creditor
benefits in distress situations•

ROI calculation•

IP ownership dispute resolution•

Strategic business insights•

Investor remuneration dispute

Source: Intellectual Property Analysis; KPMG analysis

20

3

How to manage
the value ofintellectual
property

21

Safeguarding intellectual property to enhance corporate value

Violation of intellectual property rights
Violation of intellectual property rights typically manifests in four key forms

Intellectual property rights can be violated bycompetitors, counterfeiters, or even suppliers or
employees. Threats can come from a myriad ofdifferent sources or directions which increases theneed for tighter IP controls – both through applying
for registered rights as well as practical controls (e.g.
non-publication process before patent, invention
disclosure to ensure that all IP is appropriately
captured and, therefore, appropriately protected).

Most violation cases impact intellectual property thathas been gone through official protection measures(e.g. trade mark registration), showing that theregistration itself can act as a foundation on which toenforce your legal rights but can not guarantee full
protection from infringement itself.

ExamplesCopyright
infringement

Reproducing, distributing,displaying or performing a work, or
to make derivative works, without
permission from the copyright holder(excluding fair use).

A major film studio sued its directcompetitor for copyright infringement,
claiming that it had stolen dozens ofdistinct ideas from its epic spaceopera media franchise.

Patentinfringement

Using or selling a patented
invention without permission from thepatent holder.

A biopharmaceutical company
proved that the use of specific active
ingredient in its competitor’s hepatitis
C drugs, infringes its U.S. patent,
resulting in a $2.54bn pay-out.

Trade markinfringement

Using a trade mark that is identicalor confusingly similar to a trade
mark owned by another party, in
relation to products or services which
are identical or similar to the products
or services of the other party.

A leading shoe manufacturer filed alawsuit against a clothing retailer
alleging that the retailer's products,
which contain a specific well known
design element, constitute "counterfeit
products.

Trade secret
Appropriation

Discovering trade secrets throughlawful methods of reverse
engineering or employee poachingor through unlawful methods,
including industrial espionage.

Two individuals (a businessman anda scientist) stole a major American
chemical company’s secret methodof making product whitener titanium
dioxide and sold it to a Chinesecompetitor.

Things are different with trade secrets where thestrength (or lack of) of protective measures will
directly correlate with the probability of appropriation.

Source: KPMG analysis

22

Safeguarding intellectual property to enhance corporate value

The potential loss caused by IP infringement
The cost of piracy is still increasing across industries, even after introduction of streaming services; thelosses caused by IP infringement can sometimes exceed billions of U.S. dollars
The losses caused by IP infringement can bemeasured in tens of billions of U.S. dollars. The
global TV and movie revenue lost through piracy
alone account for more than $40bn and could exceed$50bn in the next few years. This was vividly
demonstrated by the popular Game of Thrones
series which experienced some of the highest piracy
rates ever. Game of Thrones season 7 was pirated
more than one billion times, with the premiere being
streamed or downloaded illegally by 187m viewers
while only 16m viewers watched it legally.

Global online TV and movie revenue lost
through piracy from 2010 to 2022
(in billion U.S. dollars)(1)51.6

Case example – Game of Thrones, Season 7(2)Number of illegal
streams or downloads • Game of Thrones season 7 was
pirated 1.03bn times.
Episode 1

37.4
31.8
26.7

Episode 2

123,901,209

Episode 3

116,027,851

Episode 4

121,719,868

Episode 5

This is a common problem in the film, music, andgaming industry. It is estimated that around 189
billion visits were made to pirate sites in 2018, withhalf of the activity related to the film industry, mostly
through unlicensed web streaming sites.

The increasing IP infringement costs are not limited
to online piracy. As businesses become increasingly
reliant on various types of IP, the potential financial
consequences of IP infringement continue to rise.

6.7

Episode 6
Episode 7

2010

2016

2017

2018
Forecast

187,427,575

151,569,560
184,913,279• Season 7 premiere was watchedlegally by 16.1m viewers but
downloaded or streamed illegallyby 187.4m viewers.
• The speed of piracy was remarkable,with season 7 premiere being illegally
downloaded and streamed morethan 90 million times within threedays of it airing.

143,393,804

2022• Over 189 billion visits were made to pirate sites in 2018. TV-related piracy took
up 49.4% of all activity related to piracy, with only 17.9% for access to film.
• Music was the third most pirated medium in 2018, with a 15.9% share. Only
publishing and software were lower (11.5% and 6.2% respectively).
• Almost 60% of all piracy visits are to unlicensed web streaming sites, whereas
public torrent networks now only equate to 13% of piracy visit activity.

Source: (1) Statista; (2) Washington Post, KPMG analysis

23

Safeguarding intellectual property to enhance corporate value

The rising cost and complexity of IP litigation
The total cost of IP litigation continues to rise, claims are getting bigger and more complex

While the financial impact of IP infringement
continues to rise, IP litigation claims are also getting
bigger and more complex. According to someestimates, the total spend on IP litigation has
increased by 15% from 2016 and 2019.
Meanwhile, the IP claims are also getting larger (themedian damages award for patent infringement
increased from $6.1m in 2016 to $10.2m in 2017.
With the globalisation of markets and supply chains,patent disputes have been increasingly likely to playout in multiple jurisdictions around the world, adding
to the overall complexity and cost. It is still to be seen
if some of the early de-globalisation trends could
sustain in the post COVID-19 environment.

Corporate counsel spending on IP litigation($ billions) by large companies ($750m+ inrevenue)
3.33
3.17
2.89 2.89
2.76
2.42
1.70

2005

2010

2015

2016

2017

2018

2019

Future hotspots for IP litigation

Future hotspots of IP litigation could increasingly begeographies outside the U.S., including China andGermany. It is predicted that some of the industries
with particularly high number of litigations could be
genetics and biosimilars.

China

Germany

Geographies

Genetics

Biosimilars• The total spend on IP litigation has increased by 15%
from 2016 and 2019.
• IP legal decision-makers report managing an average of
11 IP litigation defence matters at the beginning of 2019.
This is down from the 15 matters reported in the 2015
annual survey – a 27% drop.
• IP claims are getting bigger, potentially because claims
are being made later in a product or use life cycle, allowing
claimants to assert higher damages because theinfringement covers longer time frames and larger revenue
streams. The median damages award for patent
infringement in 2017 was $10.2 million, an increase from
$6.1 million in 2016.
• Patent-infringement litigation is also becoming more
complex, covering ever-evolving innovations andtechnologies. At the same time, plaintiffs are moreaggressive, forcing companies to defend against claims
involving numerous sources of alleged infringement.

Industries

Source: Morrison Foerster, Benchmarking IP litigation, 2019; KPMG analysis

24

Safeguarding intellectual property to enhance corporate value

How to think about the IP risk
Internal and external IP risks can both result in a significant damage to the competitive position of anorganisation
There are two types of IP risk – internal and external;
both can result in a significant damage to thecompetitive position of the business and a sizeablemonetary loss.

Internal IP risks

The internal IP risks typically arise from insufficient
intellectual property protection due to lack ofawareness of similar inventions in existence or frommaking mistakes in the protection process.
Meanwhile, the external IP risks typically arise from a
3rd party attempting to invalidate someone’s IP or
claiming infringement of their IP.

Lack of exclusivity /loss of revenue

Both types of risk are very common and a large
number of risk managers and risk owners acrossindustries are unaware of the full exposure to theserisks.

External IP risks
Infringement of 3rdparty intellectual
property rights /cost for defence or
licensing

Source:• Lack of proper intellectual property rights protectionof core products resulting in increased counterfeiting• Missed deadlines (renewal, payments, oppositions)• Insufficient freedom-to-operate analysis• Early disclosure of inventions by employees• Flaws in drafting or application limiting
enforceability of intellectual property rights• Becoming a defendant in IP litigation• Forced licensing under unfavourable conditions• Liability for IP risks and problems of contractual
partners, such as suppliers• Invalidation attempts of intellectual property rights
by competitors or non-practicing entities (NPEs) such as“patent trolls”• Own invalidation attempts against 3rd party intellectual
property rights

25

Safeguarding intellectual property to enhance corporate value

Internal IP risks
Internal IP risks typically arise from insufficient intellectual property protection due to lack of awareness ofsimilar inventions in existence or from making mistakes in the protection process
Internal IP risks often arise due to seemingly minor
nuances in the IP registration process. One businessmight not think about protecting its IP in China as it
only sells in Europe but then decides to start
manufacturing in China, just to have the products
seized by the local customs as it turns out a local
Chinese company has registered the same patentlocally. Another business might not think through thepatent application claims wording carefully enough,leaving the patent open for a challenge. Yet anotherbusiness might rely on its patent without realising theimportance of carrying out a freedom-to-operate
analysis before applying for a patent, just to be sued
for patent infringement by a competitor a few months
later.
This list of examples can be very broad but thecommon factor behind most infringement cases wasa lack of awareness or simple mistakes. A 2015
survey by the UK Intellectual Property Office showedthat 79% of businesses are not aware that telling
people about an invention before applying for apatent could undermine a patent application5. Similar
knowledge gaps can be seen in the context of otheraspects of IP management.

Example internal IP risks
Early disclosure of inventions(1)Lack of proper IPR protection(2)• A leading cancer care company sought to protect
its cancer treatment by applying for a patent.
• A year before it had entered into a confidential agreementwith another company to distribute the products once
they are on sale. The agreements required that the company
keep confidential any proprietary information received.
• Later, a competitor started producing a similar treatment
and the company sued it for patent infringement. The
court rejected the claim, arguing that the confidential
disclosure as part of the distribution agreement constitutes“being on sale” before the patent application was made.

• A small musical instrument business invented anaccessory that helps students hold the violin bow correctly.
They patented this invention in the U.S., Canada, Mexico,
Europe and Australia.
• Years later, the company wanted to start distributing the
product in China but discovered that two factories in
China were already manufacturing and selling counterfeits.
• The company found that a counterfeiter had translated all
32 claims of its patent into Mandarin and registered in
China, meaning that the company would now violate IP ofthe counterfeiter if it tried to sell its products in China.

Insufficient freedom-to-operate analysis(3)Application limiting enforceability(4)• A motor company wanted to launch a motorcyclewith a new engine, for which it had several patents.
• The company did not conduct a freedom-to-operate study
considering that the more limited ‘positive patentability’study was sufficient to proceed with the launch.
• It was later sued by a competitor as one of its patents
made a broad claim which was found to infringe an essential
component of the competitor's engine. The court instructed
the company to halt its launch and motorcycle
manufacturing, resulting in significant losses.

• A lumber yard patented a new product, describing it
as a “board for use in constructing a flooring surface forexterior use (such as a deck)”. It noticed that a competitor
had started producing a similar product and sued it.
• The competitor explained that there was no infringement asa "board" means "piece of elongated construction material
made from wood cut from a log” while its product was
produced from a composite plastic / wood particle. The
patent application did not specify that the “board” can beproduced from a broader set of materials.
• The court dismissed the infringement case.

Source: (1) LexisNexis; (2) CNBC; (3) Mondaq; (4) WIPO; (5) Intellectual Property Office, “Intellectual Property Awareness Survey: Engaged Business 2015”26

Safeguarding intellectual property to enhance corporate value

External IP risks
External IP risks typically arise from a 3rd party attempting to invalidate someone’s IP or claiming
infringement of their IP
External IP risks are primarily related to different
types of invalidation attempts, activities of patenttrolls, or risks with contractual partners. According tovarious studies, the majority of patents (that havebeen granted via the rigorous patent registration
process) are actually invalid (according to someestimates, 70-80%). This means that any challenge
to these patents would potentially go to court andcould result in partial or full invalidation. This is often
as a result of the mistakes made in the drafting thepatent claims as mentioned in the internal IP risks
section.
Many attempts to invalidate patents are brought by
the so-called patent trolls (a form of non-practicing
entities (NPEs)) that try to aggressively enforce
patent rights against potential infringers without everintending to produce products or deliver services
protected by those patents. Major leading businesses
have settled such claims from NPEs which have costhundreds of millions of dollars, but it should be notedthat a disproportionate number of patent trolls target
smaller companies – according to some estimates,
more than 50 percent of businesses targeted bypatent trolls make less than $10 million in revenue
per year6.

Example external IP risks
Becoming a defendant(1)Invalidation attempts by competitors(2)• A major book publisher alleged that Dan Brown,
author of the bestselling ‘Da Vinci Code’ had infringed
the copyright of its book ‘Holy Blood, Holy Grail’, claimingthat Dan Brown had told the story and stated historicalfacts in ‘the same manner’ as expressed in its book.
• The claimants' case was dismissed noting that "...there isno copyright infringement either by textual copying or non
textual copying of a substantial part of ‘Holy Blood, Holy
Grail’...”.
• The case, however, illustrated how the most unusual claims
can force a business to engage in a legal case.

• A technology company was sued for infringing
a patent of a device for displaying computer
text on a television monitor.
• The technology company launched a defence by arguingthat more than a year before filing its patent application thecompany that filed the suit had submitted a proposal for saleof the invention (making the patent invalid).
• The court agreed that the patent should be invalidated andruled that there is no infringement.
• According to various studies, the majority of patents are
actually invalid (according to some estimates, 70-80%(5)).

Forced licensing(3)Problems with contractual partners(4)• A patent troll acquired several patents essential to
the 802.11 Wi-Fi standard, and then claimed that every
business (or individual) with a router containing a Wi-Fi chip
was infringing its intellectual property.
• It followed this by sending thousands of letters targeting
hotels and cafes that provide Wi-Fi for customers, asking
them to pay a license fee of $2,500 per location.
• A major router manufacturer then stepped in to defend its
customers and whilst it ultimately settled with the patenttroll for only 3.2 cents a unit, this still meant a payment of$2.7m plus $13m in legal fees.

• In 2010, an Asian telecom equipment business enteredinto a supply agreement with an EU telecom company tosupply wireless phones. In 2012, the EU company granted
the partner’s engineers access to a robotic testing system totest partner’s phones prior to its release.
• Earlier that year, the Asian partner had begun developing its
own phone-testing robot, and asked the EU business tosell or license the robot system; but it declined.
• The Asian partner then tried to steal the trade secrets todevelop its own robot by entering the laboratory withoutauthorization and taking photos.

Source: (1) Legalzoom; (2) Patent, Copyright & trade mark: An Intellectual Property Desk, 15th edition, 2012; (3) EFF; (4) IndustryToday; (5) TUM School of Management;(6) Entrepreneur Europe27

4

How to mitigate
the risk ofthings going
wrong

28

Safeguarding intellectual property to enhance corporate value

Steps for consideration in the IP lifecycle
Several steps are required to manage and protect IP effectively throughout its lifecycle form creation anddevelopment to monetisation

IP risks pose a threat not only to intellectual capital
but also to the overall financial success of theorganisation. It is more important than ever to havean effective risk mitigation strategy that covers thewhole life lifecycle of IP. Effective IP management,from the creation and development stage, through tothe protection and monetisation stage, will help
ensure that all IP related internal risks are adequately
covered. This will also mean that any unexpected
external risks would cause less disruption.
As indicated previously in this report, each step in the
IP lifecycle will bring a new set of risks that will haveto be mitigated. Depending on whether anorganisation decides to register its IP or keep it astrade secrets, there will be different internal andexternal events that could cause financial damage.
Consequently, there will be a number of risk
prevention / mitigation actions that organisations cantake to keep their IP safe. These will include somewell known measures like signing non-disclosureagreements (NDAs) with employees and business
partners, as well as some less known strategies likeregistering patent thickets that reduce the chance ofcompetitors innovating around your IP portfolio.

01
02

03
04

Create and develop
The creation process of the IP, including research and development,
articulation of the idea, prototyping, etc.

Keep it secret
The process of keeping your IP safe after it is fully developed (e.g.
protecting your trade secrets).

Register
The process of registering organisation’s IP rights, including registering
patents, industrial designs, trade marks, etc.

Monetise
Using the created IP to generate royalty flows orachieve exclusivity in the market to increase sales.

29

Safeguarding intellectual property to enhance corporate value

Mitigating risks during creation and development
Most major OECD countries spend 2-3% of their GDP
in R&D, with the total value increasing year by year.
However, as many companies race to bring theirproducts to the market, many of them neglect theimportance of proper IP protection during the IP
development process. This then means that they risk
their inventions being copied by competitors or findthemselves in a situation where they can’t proceedwith IP registration as they have disclosed too muchinformation early in the process.
There are multiple ways the most ‘IP savvy’organisations protect themselves during this criticalstage of IP lifecycle. The best practice includes being
disciplined around signing NDAs with employees andbusiness partners, clearly articulating ownership rights
to the background and foreground IP, safeguarding
access to information (including cyber and physicalsecurity), and carrying out thorough search of existingideas (including registered patents) to make sure thatthe organisation is not infringing someone else’s IP. In
many cases, timely support by legal advisors canimprove protection and save future costs.

Successful development of IP could help organisations generate financial benefits for decades; however, if
the risks are ignored, organisations can find themselves in a situation where all this potential future value
disappears even before the new invention is ready for the market

What could
go wrong?
• Leakage of
information• Ability forcompetitors to use
your innovation if
not properly
protected• Inappropriate
ownership e.g.
multiple IP rights
required• Infringement ofexisting IP

Checklist• Does the idea already exist?
• Is the domain name available?
• Are information protection measures in place?
• What are the relevant IP rights for protection?
• Have all relevant stakeholders signed an NDA?

Best Practice of protecting IP
NDA’s
Before exchanging valuable information
with employees and 3rd parties, the NDA
is a useful mechanism to protect
confidential information such as
financial data, new ideas and trade
secrets. This allows more open andconstructive discussions or negotiations
to occur. There are multiple types of
NDAs e.g. one way, mutual or multiparty to name a few. Further
consideration must be given to
managing ownership rights of any IP
generated by staff members orcontractors.

Limit access to information
Much of today’s IP is stored
electronically, giving rise to a risk of
information breach, including cyberattacks or system hacks. Tight security
protocols should be implemented for all
systems, including high quality firewalls.
The security resources available shouldallocate effort towards value i.e. protect
the information that holds most value
and competitive advantage. Continuous
reviews should be in place to ensurethat only those who need to know it, canactually access the information.

Make sure the idea doesn’t
exist
Developing an idea costs money andtime. Before putting significant effort,
organisations should, therefore, be
confident that the asset has not alreadybeen created. Not only can this be awaste of resource but potentiallyinfringing someone else’s rights canresult in legal proceedings. Patents,
trade marks and copyrights can beaccessed as a matter of public record
but similar inventions can be describedin many different ways, so the bestpractice is to use an experienced IP
attorney who can provide additional
security.

Source: (1) KPMG analysis

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Safeguarding intellectual property to enhance corporate value

Mitigating risks while keeping IP secret
Before IP has been legally protected, it is subject to arange of key risks that can cause major commercial
implications. Before proceeding with formal
protection, the most IP focused organisations think
through their broader commercial strategies. For
example, if you decide that a 20 years protection
period granted by a patent is not long enough,perhaps keeping your IP as a trade secret might be abetter strategy. This can be illustrated by the famous
example of the Coca Cola recipe – still to this day, formore than 100 years no company contractor hasaccess to the whole formula.
Understanding the difference in government regimes
globally towards IP is also important as the level ofprotection available varies considerably. Thinking
about the right decision as part of a wider, diversified
portfolio can help decide which IP protection is theright choice.

Checklist• Will the invention still be useful in 20 years?
• Can the invention be kept secret within thecompany?
• Can the idea be easily reverse engineered?
• Is the invention likely to be discovered soon?
• Do the relevant jurisdictions protect IP well?

Trade secrets vs IP protection is a strategic choice that requires organisations to provide an honest
assessment of the likelihood of success; choosing to keep information secret will require crucial actions toensure the invention is safeguarded against the threats that IP rights would otherwise provide

What could
go wrong?
• Secrets areleaked from within
the organisation• Competitors
reengineer the
innovation• The innovation issoon discovered
and patented by acompetitor• Varyingapproaches bygovernments
globally e.g. Tradesecrets Act/
Directive

Best Practice of protecting IP
Adhere to domestic legislation

Enhance governanceTrade secret law is one of the mostimportant areas of IP but by far the leastconsistent internationally.
Understanding the relevant laws andextent to which the organisation isprotected across the jurisdictions inwhich the invention will be sold isessential. For example, IP infringementin China has been a significant problem
historically. Laws and regulations andother policies have not been enforced
well leading to a reputation for having apoor IP regime, giving rise to multiple
threats.

Enforcing an IPP (Information
Protection Plan) and ‘need-to-know’
policies will tighten the buckle on
information leakage. Additionally,organisations should not expect thatpeople automatically know how totreat information. Regular training inline with current policy will ensure
employees are treating information in
the right way. In the event of loss orunlawfully disclosure of information,an action plan should be in place aspart of a wider governance framework.

Split up the information shared

Prevent reverse engineering

In addition to enforcing NDA’s,
additional measures can be taken to
restrict information held by employees,
3rd parties and suppliers. Organisations
should limit access to information
through need-to-know policy.
Additionally, creating a register tomonitor ownership and control who
knows what can reduce the risk ofknowing too much. Lastly, physical andelectronic security of information will
ensure it is stored securely, reducing
the risk of unauthorised access.

If a secret is embodied in the product,others may be able to inspect it,
dissect it and reverse entitlingthemselves to the innovation. Creating
strategic advantages such as strong
distribution channels, market
awareness, product design can all
prevent the success of a competitor.
Technology can be protected throughobfuscating code or information within
the design to complicate things for
those looking to reverse engineer.

31

Safeguarding intellectual property to enhance corporate value

Mitigating risks during IP registration process
According to some studies, only about half of corporate
leaders understand the value and importance of IP and
are actively involved in strategic planning related to IP1.
This means that IP decisions are often delegated tolower level legal staff who understand IP but don’tnecessarily understand broader strategic implications.
The most ‘IP savvy’ organisations will align their IP
strategy with broader corporate strategy. That meansthat they will think carefully about the best way to
exploit their IP (e.g. by exercising market power, by
selling their IP, licensing it, collaborating with others, oreven donating it for public good). The best
safeguarding strategies will then depend on thisdecision. Some of the obvious protection activities will
include selecting the right type of IP and deciding how
broad or narrow the registration should be, as well as
thinking through the geographical scope of the IP rights
and smart orchestration of the registration process(e.g. patent delay strategies). Before you register yourtrade mark or patents in new markets, it is wise to
conduct searches to determine whether by expanding
into those markets you will infringe a 3rd party’s IP.

Checklist• Do you know which types of IP would provide
the best protection to your invention?
• Have you successfully registered the IP rights
before going to market?
• Do you have a thorough understanding of what
is better to be kept as a trade secret?

Corporate leaders who make sure that their IP strategy is aligned with broader corporate vision and who
think through the most optimal ways of exploiting their IP, will be more likely to find the most suitablesafeguarding mechanisms that could support long term offensive and defensive strategic moves

What could
go wrong?
• Invalidation ofpatents• Failure to register
the most
appropriate typeof IP
• Competitors
innovating aroundthe idea• Failure to pick thebest IP
exploitation
strategy

Best Practice of protecting IP
Select the right type of IP

Delay the grant of patents

Even though all IP types are different, many
companies confuse them and as a result
don’t get the maximum protection they
otherwise would. Different types of IP
protection will give organisations different
rights, including patents protecting yourinnovation, industrial designs protecting yourproduct’s appearance and trade marks
protecting marketing of your product. Quite
often the most IP aware organisations use arange of IP collectively to strengthen theprotection of the same product.

One may ask why it would be
advantageous to slow down theprocedure? Keeping an application
pending can provide commercial
benefits. These would include creating
uncertainty for competitors and the scopeof the innovation, more flexibility toamend the claims at a later ate (as it
evolves). However, there are costs
attached to this strategy so this should
be weighed against the benefits.
Maintaining a close and aligned
relationship with an IP attorney is helpful
in controlling the speed of the process.

Go broad or narrow
Patent applications can expose businesses
to unexpected issues later down the line.
Protect the innovation too narrowly andyou will increase the chance of a patent
being granted but it will also allow others toinnovate around the description of yourinnovation. Submit a too broad application,and your patent might be rejected by thepatent office or invalidated by a competitor. A
typical rule of thumb for most organisations
will be to go as broad as possible and (ifrequested by the patent office), narrow it
down. Although there might be alternative
strategies of registering multiple overlapping
narrow patents.

Decide geographical scope
One of the main IP risks is the lack ofproper worldwide protection. Asinternational rights are costly and time
consuming to acquire, manyorganisations focus on their main target
markets. This can cause some issues,
however, as an application submitted in
one country can be translated by acompetitor in another language andsubmitted in another country (e.g. there
have been multiple such cases in China).
The best in class organisations will plan
this with a long time horizon in mind.

Source: (1) Harvard Business School, Strategic Management of Intellectual Property

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Safeguarding intellectual property to enhance corporate value

Mitigating risks during monetisation of IP
How an organisation exploits the IP portfolio isheavily dependent on the sector. Pharma is often
defined purely by the patent portfolio, trying to getmarket exclusivity for as long as possible. Manyother industries frequently see cases of businesses
engaging in license agreements to earn royalty flows.
As an example, some technology companies
generate close to $1b p.a. in licensing revenues.
There are multiple ways organisations can try toprotect themselves, including forming their own ‘rainyday’ funds, creating patent thickets, and carefully
monitoring licensing agreements, including
conducting compliance audits. Having a clear market
reputation as someone who protects its IP will also
help deter potential infringers. Furthermore,
performance monitoring of your IP portfolio (e.g.
through licensing compliance audits) will help you
allocate your resources to protecting the assets thatreally matter and bring commercial success of yourorganisation.

Checklist• Do you know which revenue streams will beutilised?
• Have you had the pricing reviewed by an expert?
• Have you conducted a royalty audit?
• Have you outlined your IP strategy?
• Are external licenses needed to develop yourinnovation further?

The monetisation of IP can have multiple forms, including seeking market exclusivity or engaging inlicensing agreements to earn royalties

What could
go wrong?
• Unpredictable andpotential loss of
future cash flows• Incorrect pricing
can undervalue
the asset ROI• Failure to identify
IP as a value
generator• Loopholes
exploited bycompetitors• Licensees notcomplying withcomplex royalty
provisions leading
to underpayments

Best Practice of protecting IP
Create a fund to cover the
potential cost of litigation
An internal ‘rainy day’ fund can ensurethat the organisation will be protected incase of an unpredictable case of
infringement. This is particularly
relevant for small and medium sizedbusinesses that could risk going out ofbusiness in case of sudden cash flow
difficulties. Some ‘IP savvy’organisations sometimes use externalfunds (or insurance) to support theirinternal capital.

Patent thickets / clusters
A key challenge, particularly in the caseof patent ownership, is the risk ofcompetitors innovating around any
single patent. Some IP focusedorganisations are protecting themselves
by trying to create a cluster ofoverlapping IP rights, requiring thepotential competitors to reach licensing
deals for multiple patents from multiple
different organisations before they canenter the market. This strategy,
however, has negative connotations as
it is sometimes viewed as limiting
innovation.

Monitor licensing agreements
There are multiple obvious monetisation
models of IP, including generating sales
from exclusivity in the new market or
licensing IP to other parties for their use
or exploitation in their markets. The
licensing model often involves complex
agreements between the licensee andlicensor, including limitations of grant oflicense, basis of royalties, etc. The more
precise the terms, the less opportunity for
any third parties to exploit loop holes.
Regular license compliance audits is thebest practice many businesses follow.

Build market reputation
Having a market reputation of always
enforcing / protecting (or not) your rights
to specific IP is likely to change
behaviours of your competitors, including
counterfeiters and patent trolls. Lack ofwillingness to actively protect your IP or
pursue potential infringers will signal tothe market that your organisation ispotentially vulnerable. The most ‘IP savvy’organisations will make sure that they are
ready for a strong offensive and defensive
response to adverse IP related events.

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Safeguarding intellectual property to enhance corporate value

Insurance solutions: Risk transfer can help
Insurance solutions can offer extra protection in case of an unexpected turn of events related to internal
intellectual property management
One way organisations can protect themselves is IP
insurance. Insurance solutions can offer extra
protection in case of an unexpected turn of events
related to internal intellectual property management.
There are two typical types of insurance solutions
that can help with IP risks:
1) Defensive products that would protect theinsured against someone making a claim
against its patent or a claim about the insured
infringing someone else’s patent (e.g.
infringement liability product or indemnified
party infringement liability);
2) Offensive products that would help
businesses when pursuing a case against a
3rd party that has knowingly or innocently
infringed your IP (e.g. enforcement(abatement) product);Some insurers also over ‘after the event’ productsthat help manage the costs of supporting an IP
infringement position at court.
Access (or lack of) to risk transfer solutions canresult in a significantly different financial outcome incase of an IP infringement case.

Example scenarios: how risk transfer can help(1):CaseexampleScenario
without
insurance

Scenariowithinsurance(Individual policy terms
and conditions would
apply)

Patent dispute

Contractual indemnity

David vs Goliath

An innovative investment broker has
developed a platform which they
provide to clients but has notregistered any patents asdevelopment of the software has
been ongoing. It has recently
received a notice that it is beingsued by a competitor for
infringing 5 patents. The estimatedcost of defending the case is £4m
and potential damages are
estimated to be around £9m.

A multi-million pound toy
manufacturer, sells products via aretailer and also provides acontractual indemnity to thisretailer, stating that if the retailer issued by a 3rd party in respect of IP
infringement caused by the goods, itwill defend the retailer against all
defence costs and damages.
The retailer receives notice that they
are being sued in relation topatent infringement. The retailer
makes £6m profit, the manufacturer
makes £1m profit.

A very promising technology startup
is in the process of securing thesecond round of funding when it issued by a major industry player
for infringing one of its patents.
The startup appoints a
representative for its defence andreceives the quotation for defence
costs through the trial for in excessof £2m.

The company loses the case. The
cost of defence and damages
awarded by the court run to c.
£13m, causing considerable
financial difficulties and forcing
them to issue a profit warning.

The manufacturer agrees to defend
the retailer and itself. The costs ofdefending both are estimated at£2.5m and damages of £4m basedon the profits generated by theretailer.

Unable to afford the cost of defence,the startup has no option but tonegotiate a settlement from aweakened position or continue tofight the case and risk bankruptcy.

The company loses the case. The
cost of defence and damages
awarded by the court run to c.
£13m, but it is reimbursed by the
insurer.

The costs of defending both are
estimated at £2.5m and damages of£4m based on the profits generated
by the retailer. Both arereimbursed by the insurer.

The startup notifies its insurer andagrees to the appointment of anexperienced representative tofight the legal case. The appointed
representative is reimbursed by the
insurer.

Source: (1) Tokio Marine Kiln scenarios

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Safeguarding intellectual property to enhance corporate value

Future opportunities for the insurance industry
There are multiple attractive opportunities for insurers to drive better awareness of the power of IP
insurance, while working diligently to continue enhancing risk modelling and pricing, offering better risk
coverage and broader preventative insurance solutions
And yet, there is significant scope for the insurance
industry to do more to support organisations inprotecting their IP portfolios.

Finally, in horizon 3, there could be opportunities for
insurers to expand product coverage and offer IP
related risk prevention and response services.

1

Eight opportunities

1

IP is a highly valuable business asset (not just‘legal rights’) and should be adequately captured inclient and insurer / broker conversations.

2

Current policy wordings are often too complex(e.g. IP risk owners are unsure if they are protected
through their media policies).

3

Market / position IP insurance as a means of giving
leverage to businesses to enforce their legal
rights (and, therefore, protect competitive position).

4

Insurance incumbents and InsurTechs have an
opportunity to introduce Next Gen IP risk
modelling tools to assist underwriting.

5

Many organisations find the existing IP infringement
cover too expensive, forcing them to seek
alternatives and avoiding purchase of broader cover.

6

Launch IP risk management services to support
organisations in preventing internal and external IP
risks from happening and responding if they do.

7

Insurers can enhance coverage to include theresidual value of IP (e.g. by sharing the potential
upside of infringement cases to manage pricing).

8

Develop stronger IP claims management function(in-house or through external IP agencies) tomaximise the residual IP value.

3

Bringing IP tothe forefront of
conversations

Revisepositioning

6

4

Product development

In horizon 2, insurers need to make a step change in
IP risk modelling. This would result in more accurate
pricing and could lead to different ‘risk taking’behaviours. Furthermore, insurers need to rethink thepositioning of IP insurance. The recognition that IP isa valuable business asset (and not just “legal rights”)
and that insurance can provide a true leverage in thecase of infringement (e.g. by allowing a ‘capital poor’business to sustain a legal defence) could play amajor role in increasing the use of IP insurance.

Positioning / Marketing

In short term (horizon 1), insurers need to think about
ways of simplifying policy wordings of the existing
offensive and defensive products and bringing IP tothe forefront of insurance conversations between therisk owner and an insurance broker / insurer toimprove awareness of the existing solutions.

Insurance opportunities to maximise the value for the ownersof IP portfolios(1):Launch IP
Safeguard
solution

Improve risk
modelling2

8
Simplicity ofwordings

Transform IP
claims function

5
Improve
pricing

Horizon 1

Source: (1) KPMG analysis

Horizon 2

7
Enhance IP
insurancecoverage

Horizon 3

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Safeguarding intellectual property to enhance corporate value

Transforming the IP insurance – broader coverage and value-add
services
Many organisations, particularly those without significant capital, find it difficult to enforce their legal IP
rights and could benefit from additional leverage provided by the insurance industry or alternative
investors
One of the most frequently observed risks,particularly for small and medium sized businesses,
is the inability to enforce the legal rights they have.
This usually happens due to insufficient amount of
capital which means that larger competitors can starta legal challenge and refuse to seek a settlement,
knowing that the smaller competitor will not be able
to sustain an adequate defence. The future insurance
market could transform its relevance by providing therequired financial support that would allow
businesses increase their ability to engage in legal
defence and would force ‘attackers’ to seek
settlements. Some businesses are already seeking
similar leverage outside the insurance market byapproaching various alternative investors.
Furthermore, covering the actual value of IP (insteadof just legal costs) would suddenly enhance the valueof IP as a collateral and further increase therelevance of IP insurance. This would have to go‘hand in hand’ with IP safeguard solutions and betterrisk modelling which would give insurers the required
confidence of the risks they would be taking.
Considering the potential sizeable downside risk
(particularly, in the case of insuring the IP value ofmajor corporations), there might be opportunities fora range of alternative capital driven solutions.

The world
without IP
insurance

Transformed
IP insurance
offering(illustrative)

Source: (1) KPMG analysis

✓

✓

✓

X

X

Small business
invents a uniqueproduct

Patentapplication is
successful

The business starts
licensing the
product to major
market players

Major competitors
start challenging
the validity ofpatentThe business engages
in complex legal
proceedings but soon
runs out of money

IP safeguard solution

Enhanced IP insurance coverage• Helping businesses test if their ideas are
unique and don’t infringe existing IP.
• Providing a toolset to keep IP secureduring the R&D process and after.
• IP valuation advice.
• Shaping the optimal IP portfolio
management strategy.
• Regular IP portfolio audits andcontinuous IP mining.
• IP response toolset in case of
infringement (or legal challenge).

• Providing financial support as a leveragefor businesses to discourage larger
competitors of trying to force them into a
weaker legal position due to lack offunding.
• Compensating legal costs (anddamages) due to infringement.
• Providing compensation for the actual IP
value lost due to losing exclusivity in themarket or reducing royalty income.

36

5

The way
forward37

Safeguarding intellectual property to enhance corporate value

Moving forward – four actions risk owners could take
1

2

3

4

There are four actions risk owners can take to minimise
the risk to their IP portfolios.

Enforce your rights
during exploitation /monetisation of your IP

Depending on the size of your organisation, you will also
want to think how IP risk management fits into yourbroader insurance strategy. Some of these risks can be
managed through a range of preventative measures or byusing internal insurance through a captive solution. In
some cases, there are opportunities to use the help of theexternal insurance market or alternative solutions provided
by investors.

Mitigate your risks
during creation &development processof IP

Keep your IP secret
before its registeredand in the publicdomainMake sure you
maximise the value of
your IP throughregistration• Make sure your idea
does not already exist• Do not disclose youridea to 3rd parties
prematurely• Make sure NDAs arein place with
employees and third
parties• Make sure the future
ownership is wellarticulated, especially
if you are collaboratingwith 3rd parties• Think carefully if thebest strategy is toregister your IP or
keep it as a trade
secret; this will dependon the risk and yourbusiness potential• Bolster IP’s cyber andphysical security• Improve governance(e.g. make sure youremployees andbusiness partners areproperly briefed andtrained)• Prevent reverse
engineering• Select the right type ofprotection (different
types of IP protection
will give you different
rights)• Be smart about
registering broad or
narrow patents (risk ofinvalidation vs risk ofcompetitors innovatingaround)• Actively manage yourIP applications (e.g.
does it make sense todelay the judgement?)• Think carefully about
geographical scope• Plan IP strategy tomaximise value of yourIP portfolio• Create a fund (or use
insurance) to cover the
potential cost of
litigation• Be smart about using
patent thickets /clusters to enhanceyour protection• Keep monitoring yourlicensing agreements
to reduce any value
leakage• Build a reputation as‘enforcer’ of your rights

Risk managers can play a major role in helping yourorganisation to manage IP risks. You must make sure that
IP risks are adequately covered in your risk register, thatthe likelihood, potential impact, and interconnectedness
with other risks is properly assessed, and that your risk
management function is represented at board level
discussions about the value generation from your IP
portfolio and other intangible assets.
The sophistication of the IP insurance coverage available
is likely to increase in the coming years, so don’t forget toraise this topic with your insurance broker and/or insurer.

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Safeguarding intellectual property to enhance corporate value

Rethinking your IP strategy
IP monetisation strategy
As you are thinking through the broader IP
safeguarding mechanisms, there areseveral ways KPMG can help you
enhance the understanding (and value) ofyour IP portfolio almost immediately.
These include:• Designing an IP monetisation strategy

Strategic planning on how to create, protect
and exploit your IP, fuelling growth, expansion
into new markets, taking on new distributors,
licensees and partners to develop andcommercialise new businesses and products.
Thinking through the best strategies ofacquiring market exclusivity, managing theirroyalty flows etc.

• Performing IP safeguard stress-testing

IP safeguard stress-testing
Assessment on how your organisation canmanage your IP risks by looking at the designand operation effectiveness of yourorganisational structure, cross-functional
working as well as IP processes and controls todevelop, protect, manage and commercialise
your IP.

• Performing IP due diligence• Performing royalty audits• Performing IP valuation

KPMG IP team includes a unique mix ofstrategists, IP lawyers, corporate financespecialists, accountants, and tax experts
who will be privileged to support you on
your journey to enhance the corporate
value of your intellectual property
portfolios.

IP due diligence
Assessment of the relative strength of a patentportfolio to demonstrate patent validity as partof due diligence for investors, shareholders
and potential purchasers.

Royalty audits
Conducting royalty audits (e.g. in music andtechnology) to recover lost royalty revenue by
inaccurate and incomplete self-reporting bylicensees.

IP valuation
Providing independent IP valuation to support
decision making as part of investment /reorganisation / divestment appraisal or joint
venture / collaboration opportunities for
management, investors, shareholders, andpotential purchasers.

39

Safeguarding intellectual property to enhance corporate value

Contacts

Lloyd’s contacts
Dr. Trevor Maynard
Head of Innovation
Operations
Lloyd’s of London
T: +44 (0) 20 7327 6141
E: Trevor.Maynard@Lloyds.com

Acknowledgements

About Lloyd’s

The following people were consulted or commented on earlier drafts of thereport; we would like to thank them all for their contributions:

Lloyd's is the world's specialist insurance and reinsurance market. Under
our globally trusted name, we act as the market's custodian. Backed bydiverse global capital and excellent financial ratings, Lloyd's works with a
global network to grow the insured world –building resilience of local
communities and strengthening global economic growth.

Lloyd’s– Ivan Spence, Research Associate, Innovation team
– David Franco, Market Intelligence & Development, Senior Manager– Mateo Acosta Rubio, Performance Management, Underwriting Associate

KPMG contacts

KPMG subject matter experts– Viral Desai, Associate Partner, KPMG Corporate Finance Valuations– Lara Quelch, Senior Manager, KPMG Law– Daniel Donovan, Assistant Manager, Strategy

Paul Merrey
Partner
KPMG in the UK
Global Strategy Group
T: +44 (0) 20 7694 5276
E: Paul.Merrey@kpmg.co.uk

Members of Lloyd’s of London Product Innovation Facility– Thomas Hoad, Tokio Marine Kiln, Innovation Manager– Neil Kempston, Beazley, Incubation Underwriter– Dana Cullen, Channel2015, Innovation Associate– Ed Mitchell, MS Amlin, Lead Underwriter– Scott Bailey, Markel, Managing Director, Cyber

Arturs Kokins
Associate Director
KPMG in the UK
Global Strategy Group
T: +44 (0) 20 7311 3398
E: Arturs.Kokins@kpmg.co.uk

Other key inputs– Prof Robert Burrell, University of Oxford– Prof Dev Gangjee, University of Oxford– Dr Henning Grosse Ruse - Khan, University of Cambridge– Paul Cozens and Ben Wyatt, Mathys & Squire LLP– Patrick Wheeler, Collyer Bristow LLP

With expertise earned over centuries, Lloyd's is the foundation of theinsurance industry and the future of it. Led by expert underwriters andbrokers who cover more than 200 territories, the Lloyd’s market develops
the essential, complex and critical insurance needed to underwrite humanprogress.

About KPMG
KPMG in the UK is one of the largest member firms of KPMG’s global
network of firms providing audit, tax and advisory services. In the UK wehave 631 partners and 15,864 outstanding people working together todeliver value to our clients across our 22 offices. Our vision is to be theclear choice in professional services in the UK. For our clients, for ourpeople and for the communities in which we work.
KPMG’s core business is to help your organisation work smarter, evaluate
risks and regulation and find efficiencies. We do this by providing deep
insight into market issues, transparency in everything we do, and using
innovative technology to tackle complex problems. We are focused on theissues that keep our clients awake at night and responding to them as
One Firm. To do that, we strive to create a high performance culture,guided by our values, where
our diverse talent feels included and excels.

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Safeguarding intellectual property to enhance corporate value

Legal disclaimer

This report has been co-produced by Lloyd’s and KPMG. The information contained herein is of ageneral nature and is not intended to address the circumstances of any particular individual orentity. Although we endeavour to provide accurate and timely information, there can be no
guarantee that such information is accurate as of the date it is received or that it will continue to beaccurate in the future. No one should act on such information without appropriate professional
advice after a thorough examination of the particular situation.
Lloyd’s and KPMG accept no responsibility or liability for any loss or damage of any natureoccasioned to any person as a result of acting or refraining from acting as a result of, or in relianceon, any statement, fact, figure or expression of opinion or belief contained in this report. This report
does not constitute advice of any kind. The report was paid for by Lloyd’s.

© 2020 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a
Swiss entity. All rights reserved.
The KPMG name and logo are registered trade marks or trade marks of KPMG International.
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Document Classification: KPMG Confidential