Effective asset management is a critical part of running a successful business.
That message has been reinforced by the many middle-market companies with weak balance sheets which have succumbed to the weak economy and frozen credit market. A commonly overlooked asset is intellectual property.
According to Dictionary.com, intellectual property is defined as original creative work manifested in a tangible form that can be legally protected, e.g. by a patent, trademark or copyright.
Some middle-market companies are leaving themselves vulnerable and are missing out on potential revenue streams by either too narrowly defining IP or simply ignoring what they have.
“Every business has a minimum of at least one form of IP. All businesses have a trade identity or brand under which they do business,” said Brenda Speer, an IP attorney. “In addition, most companies have copyrights at the least in their Web site content and other marketing materials and white papers.”
Properly managing your IP assets includes identifying and protecting them. It is possible for unprotected IP assets to be taken and used by anyone for their own benefit.
There are four different types of IP protection:
Trade secrets cover confidential, proprietary information and need to be protected by non-disclosure agreements and employment agreements.
Trademarks apply to brands, and these rights start to accrue as soon as the mark is used in commerce. Trademarks are best protected with a state or federal registration.
Copyrights apply to original works and arise at the moment of creation of the work, but must to be registered if you want to fight an infringement in court.
Patents protect inventions and are filed with the U.S. Patent Office. However, it is critical to know that disclosure of a patentable idea before a patent application is filed can be fatal. Unique to the United States is a one-year grace period after disclosure of an invention to file a patent application, but that is not the case internationally. The best practice is to file first, then disclose.
“The bottom line is that anything with commercially exploitable value should be protected and that protection enforced,” Speer said.
Leveraging IP assets starts by recognizing the intrinsic value of what you have and then putting it to work. Perhaps the best example is in a company’s brand. If you are going to buy Google, how much would you pay for the functionality and algorithm without the Google name?
“The intrinsic value of the brand is built over time and doesn’t require a major one-time investment,” said Michele Fagin, a business lawyer at Sparks Wilson. “You want to pick a brand that can help promote what you do today and that provides the flexibility to leverage it for tomorrow.”
Fagin is fond of asking clients: “What would you rather own, all the Intel patents or the Nike brand?”
The customer recognition of a brand can be as valuable as the product itself, because, over time, the product might no longer exist, but the company brand name still does.
Fagin advises companies to think about how best to exploit their IP today and how it will be used tomorrow – then ask what needs to be done today to make the IP valuable for tomorrow’s business needs and make it a part of the daily business.
That way, you are ready when tomorrow comes.
The next step is to determine a way to monetize IP assets, which can be a significant portion of a company’s revenue stream.
You can make money from patents by developing a product and selling it to the marketplace in hopes of making a profit. However, developing a product from scratch and taking it to market can be very expensive.
In some cases you can look for strategic partners to sell or license your IP to while still maintaining the right to sell or use it yourself. This allows you to leverage your IP while you build your own business.
“Licensing your IP is an effective way to raise capital which can be very difficult today,” said Brian Alleman, CFO of Taeus. “Look at your portfolio. There may be valuable assets not being used that can be sold to raise cash needed to for final new product development or fund the go-to-market activity.
When licensing or selling IP, pick a buyer or licensee carefully, he said, “because you will live with these people for a long time,” plus, you might be enabling a significant competitor or, the buyer might be trying to keep the technology off the market.
On the other hand, a well-vetted buyer can be very strategic and significantly help your business grow.
For example, if the licensed technology is widely adopted as the standard, you now have a much larger market in which to do business than if you had to “go it alone.”
The keys to leveraging IP assets are to recognize what you have, protect it and work to strategically monetize your IP whenever possible.
Ann Snortland, principal of Snortland Communications, is the spokeswoman for the Peak Venture Group Middle-Market Entrepreneurs. She can be reached at firstname.lastname@example.org.