Companies strive to increase the value of their assets and the revenue earned from those assets. These assets may include intellectual property, but companies often struggle with identifying an appropriate value for IP assets. The mission to derive more revenue from IP assets is a step in the right direction to maximize their revenue-earning potential, and doing so may drive boards of directors to consider IP assets as an integral part of their long-term investment decisions.
First, companies must take stock of their IP assets by conducting an IP audit or assessment. This type of audit frequently entails interviewing and canvassing the appropriate managers within the company to identify all of the patents, registered and unregistered trade-marks, trade secrets, know-how, copyrights and industrial designs.
The next step should be to consider all IP assets that could be protected. This is a time-sensitive task that should be addressed immediately if it is not part of the company's ongoing operations. For example, if there are inventions that could be the subject of patent protection, one needs to identify those inventions in view of any public disclosures to ensure they can be protected. By the nature of the patent prosecution process, it takes time to obtain a portfolio of issued patents, which may then be exploited. The investment in a patent portfolio also requires the non-monetary commitment of technical time from inventors. This time investment needs to be understood by all of management to ensure a shared commitment to the process and recognition that exploitation revenue may not come quickly.
In carrying out this step it is important to think about IP in its broadest sense when reviewing the company's operations, instead of focusing on the two types most frequently encountered, patents and trade-marks. Even if there has been a public disclosure of an invention or if there is non-patentable subject matter, thus barring one from obtaining patent protection, one should take a broad view to determine whether there is technical know-how that could be packaged as a licensing opportunity.
Another consideration is whether the value of the IP assets is to be realized by excluding competitors from the relevant market or by generating revenues from licensees. If the goal of asserting a patent portfolio is to protect the market by excluding infringers, this is best understood at the outset, since it will impact the strategy for asserting or litigating that portfolio. That strategy may be different if, instead, the goal is to develop and grow a base of royalty-paying licensees.
Patent portfolios may never be exploited in the sense of earning revenue from licensing or litigation. However, they may still have value in defending against a patent assertion by others. When a company receives assertion letters or is named as a defendant in an infringement action, one of the first steps should be to map the company's own IP assets against the products and services of the asserter. The difficulty of recognizing the defensive value of your own portfolio is to develop an estimate of its value.
If one assumes the patent holder litigates its IP against your company and is successful, a worst case scenario is that your accused products or services are forced off the market due to an injunction. One may therefore estimate the present-day value of that lost revenue stream. However, if your company has an IP portfolio that can be cross-licensed or enforced by way of a counterclaim against that patent holder, and if you are able to remain on the market — in whole or in part — your IP portfolio has a defensive value. This value may be measured against your revenue stream that could have been lost if you did not have any IP to counter the attack from the patent holder.
IP assets are valuable, but the challenge in leveraging their value is to ensure they are identified and developed so their full value may be exploited. There is a great deal of education associated with IP assets but their true value is often only recognized when they are viewed unconventionally.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
