Executive summary
Intellectual property (IP) plays a crucial role in protecting technical, marketing, and organisational innovations. It facilitates the commercialisation of new products and services and helps consumers identify and distinguish them.
A robust IP protection strategy can enhance a company's ability to attract investors, thereby securing financial resources to further invest in innovation and its protection.
This study aims to elucidate the relationship between IP and private equity investments, focusing on how Private Equity (PE) and Venture Capital (VC) investments in Europe correlate with trade mark and patent filings of the recipient firms. Investment data is sourced from Invest Europe's comprehensive records on PE and VC across Europe, while IP data is retrieved from the EUIPO EU-TM Register and EPO’s PATSTAT.
A brief word on innovation
Innovation involves not only introducing new inventions and approaches to the market but also transforming existing ones into practical products or processes with real-world utility. This process is inherently economic, aiming to recover investments and retain competitive monetary benefits. Thus, the success of innovation hinges on effective investment and the ability to secure these financial returns2.
Sustaining innovation enhances a product or service to better meet the needs of existing customers and attract new ones. Leading companies pursue sustaining innovations to stay on top of the game. The result can be new patents for new product advances, as well as trade marks for new goods and services that emerge.
Disruptive innovation is when start-ups and small businesses devise and develop new products to challenge those of established companies. There is low-end disruption when start-ups claim a new segment within existing markets, and new-market disruption when they create a brand-new market untouched by the incumbents.
2. What is known in economics as “appropriability mechanism”.
Intellectual property
Various forms of intellectual property – such as patents, utility models, designs, copyrights, trade secrets, and plant varieties – specifically protect the inventive phase of innovation. Trade marks, certification marks, and geographical indications safeguard the marketing phase, market positioning, and product differentiation. Complex protection strategies may involve using trade marks to protect innovations, particularly non-patentable ones like services, or complementing patents post-expiration. Designs can also function as marketing signs. The most successful innovators leverage multiple forms of IP to protect and capitalise on their innovations (EUIPO, 2019).
The significance of a trade mark is multifaceted. Firstly, it contributes to the recognisability of the company. A strong trade mark helps consumers recognise and remember a company's products or services, which is crucial in a competitive market. Secondly, it creates an emotional connection with customers, who are more likely to choose a trade mark they trust. Thirdly, it adds value to the company. In all cases, IP protection helps secure investments in associated products and services and maintain competitive advantage, highlighting its symbiotic relationship with investment.
Private Equity and Venture Capital investments
Between 2007 and the first half of 2023, the European private equity and venture capital industry invested €809 billion in 56,042 companies of the European Union3. Of this, 20% went to companies with existing patents, 40% to those with trade marks, and 15% to firms with both forms of IP protection.
3. European Union as of November 2024; U.K. excluded over entire period.
t €809bn
invested in companies of the European Union3 between 2007 and the first half of 2023
Figure 1: Distribution of amounts invested in IPR filing companies vs Non-IPR filing companies
Note: Total investment is €809 billion in EU27 companies in the sample between 2007 and the first half of 2023. The chart above represents the amounts invested in companies with patents and trade marks filed vs. companies with none filed.
i €156.5bn
invested in patents IPR-filing companies
u €319.5bn
invested in trade marks by IPR-filing companies
The relationship between Private Equity investment and Intellectual Property
The EPO/EUIPO (2023) found that startups with patent or trade mark activity are more likely to obtain PE or VC financing than those without IPR protection. This study adds evidence of a symbiotic relationship between investment amounts and the registration of intellectual property rights in firms receiving PE or VC financing.
Intellectual Property right portfolio before investment
Companies with pre-existing trade marks received significantly higher investments: 55% more at the venture stage, 45% at the growth stage, and 68% at the buyout stage.
Variations in funds raised from companies with previous trade marks, in different stages of development.
+55%
Venture
+45%
Growth
+68%
Buyout
Firms with patents also received higher investments, particularly at the buyout stage.
A 10% increase in the trade mark stock correlates with a 3.4% increase in finance raised.
Intellectual Property right portfolio after investment
PE and VC financing also helps firms secure IP protection for their innovations. Firms receiving higher investments are more likely to expand their IPR portfolio, with a 100% increase in investment potentially increasing the odds of subsequent patent or trade mark filings by approximately 10%, after controlling for previous IPR activity.
Evidence supports a correlation between IPR portfolios and obtaining PE and VC funding, both before and after investment. The type of IPR and the development stage influence this relationship. The study's findings and available data allow for future expansion, addressing methodological limitations, and achieving greater precision in conclusions.
Intellectual Property filings across Europe
Intellectual property rights are recognised and protected across the EU27. France and Germany have the highest number of companies with intellectual property filings, reflecting the scale of their private equity and venture capital ecosystems. But size is not everything. Countries from Austria and Slovakia to Estonia and Finland show dynamism in creating and protecting their innovations.
Italy averaged 2.5 trade mark filings per company, highlighting a strong culture of brand protection. Denmark averaged over 1.5 patent filings per company, showcasing its research and development prowess.
For more information, see section Literature review
2.5
trade mark filings per company in Italy
1.5
patent filings per company in Denmark
Intellectual Property power in every sector
In every sector in which private equity and venture capital invests, companies protect their intellectual property with patents and trade marks. Information and Communication Technologies (ICT) has a high proportion of companies with trade mark filings, but fewer patents, showing how private equity and venture capital backed companies use brand names to protect software and other technology. Meanwhile, in the agriculture sector, companies averaged more than one trade mark filing, reflecting the importance of protecting intangible value even in the most traditional of industries.
Biotech and Healthcare have in excess of 2 patent filings per company, demonstrating the high levels of discovery taking place at companies at the leading edge of life saving and enhancing treatments.
Consumer goods averaged over 1.5 trade mark filings per company, reflecting the power and value in the brands that Europeans consume every day.
For more information, see section Literature review
ICT
1
Trade mark filing per company
b
Biotech and Healthcare
2
patent filings per company
m
Consumer Goods
1.5
Trade mark filing per company
v
