Editor’s Note: This is part ten of a series entitled “Building an IP Aligned Enterprise: A Guide for Corporate and Technology Leaders. We will discuss the importance of valuing your IP portfolio and the various ways to capitalize on your intangible assets.

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Over the course of this series, we’ve outlined the benchmarks your enterprise will want to meet on its journey toward a mature state of IP alignment. Establishing a functioning and successful IP strategy that is aligned with your overall business strategy is a multifaceted endeavor which requires engagement from all innovation and brand stakeholders within your organization. 

The reason for putting so much effort toward bringing your enterprise into full IP alignment is a simple one: markets favor enterprises who possess the most valuable assets, and in the innovation space, those assets are largely intangible. In fact, as we’ve previously discussed, often over 70% of the market value of a technology enterprise is comprised by intangible assets like patents, trademarks, and trade secrets

At this stage of mature IP alignment, you’ve put in place the processes, safeguards, and ongoing activities necessary to capturing emerging IP assets, protecting that IP from costly vulnerabilities, and monitoring the competitive landscape for possible threats or opportunities. As your strategies align, these processes have become ongoing functions of your daily business operations, working toward the common goal of strengthening your market position and your bottom line. 

Now that you’ve built a highly effective infrastructure around all stages of your IP’s lifespan, it’s now time to put it to work. In this final piece, we’ll explore how to think about the value of your IP portfolio and the possible avenues to leverage, monetize, and enforce your IP on an ongoing basis within your IP aligned enterprise. 

Assessing the Value of Your IP Portfolio

Determining the value of your IP portfolio is a complex process that often involves your IP counsel, outside consultants, and the use of various software tools and methodologies. A formal valuation process is typically conducted at key moments, such as M&A transactions, but may not be comprehensive over the entirety of your IP portfolio. Rather, it is important to maintain a clear awareness of your IP’s value to your enterprise and to the market in general.  

There is no one way to look at IP valuation. A portfolio’s value may differ depending on many factors and business objectives. Maintaining a clear standard for measuring and evaluating your portfolio’s value is key to knowing what appropriate actions to take when certain opportunities present themselves. 

Understanding the value of your IP more generally is a fundamental factor in making decisions around how to manage your portfolio. Patents and trademarks, for example, require regular investment in the form of annuities or fees to maintain your ownership rights. If a particular asset or group of assets aren’t contributing to the value of your company, then you need to decide whether or not to pay the money to maintain your proprietary rights. If you do decide to maintain your IP, perhaps you’ve assessed that the value of those assets lies in your ability to license or sell them.  Having a clear framework for these decisions and opportunities can not only save money in paying fees but provide new revenue opportunities.

The value of your intangible assets will vary depending on how you choose to monetize or leverage them. For instance, a patent may be worth one thing to you if another company elects to license the use of your innovation for their products. Your IP could hold different value to you if you’re using your patents in a bid to raise outside capital, or if you’re looking to obtain patents with a defensive posture against certain key competitors. Its value is further differentiated in the case where a patent is used to develop, manufacture, and market a product under your brand.  This is where alignment between your business and IP strategies is vital to ensure that resources aren’t wasted in acquiring and maintaining assets that don’t help to advance your business’s goals.

As you can see, there are many variables that go into assessing the value of your IP. Circumstance, as well as further developments in the wider technological landscape, play an important role in determining that value. Your IP legal counsel in concert with the rest of your Innovation Committee will be central to the valuation process as you pursue opportunities to leverage, monetize, and enforce your IP portfolio.

Licensing & Selling Your Patents and Trademarks

For most companies, only about 10-15% of the patents in their portfolio are actually in place to protect their commercial applications, leaving a large number of unused assets that can be potentially transformed into streams of revenue. Upon assessing the value of your IP, choosing to license or sell your patents or trademarks can be a lucrative strategy to monetize your assets.

In the case of an out-licensing agreement, your company retains title or ownership over the asset while an outside party is free to use the IP as stipulated in a deal to develop, manufacture, and sell their own products. The licensee will pay royalties to you over a specified term either as a fixed amount or a percentage of the revenue they generate using your technology. These agreements can be exclusive to one licensee, but a non-exclusive license will allow you the opportunity to generate multiple streams of revenue from one asset. 

Selling or licensing your technology requires developing a set of criteria and a process for identifying potential buyers or licensees, negotiating terms, and enforcing the obligations over the term of the license. These are tasks best overseen by your Innovation Committee.

Licensing opportunities may arise when a competitor or other outside party infringes on your intellectual property rights. Instead of heading straight to litigation, if tolerable to you and if in alignment with your business strategy, you could attempt to strike a licensing deal in order to avoid an infringement lawsuit. Even in the case of litigation, licensing agreements are often part of a settlement outcome. In any event, when both parties recognize their mutual interest, they each stand to benefit monetarily.

Other Leveraging Opportunities 

There are a number of ways to derive value from your intellectual property. While not a comprehensive list, the following are some common ways your company can leverage your IP as part of your overall business strategy. 

  • Product Development: Perhaps the most obvious use of your valuable intellectual property, developing your own products seems like a natural step in the evolution of your IP. Assigning a value to the IP before embarking on a development strategy will help you to make more informed decisions around the resources you allocate toward that endeavor.
  • Raising Capital: When trying to raise capital for future expansion or innovation initiatives, investors will be more confident in your company if your IP portfolio is backed up by an active protection strategy. Patents and trademarks are assets and need to be valued as such when entering into any fundraising activities.
  • Partnership and M&A Opportunities: A strong patent portfolio can make you an attractive partner for establishing joint ventures or joint development opportunities with outside parties. Such arrangements can afford several advantages including shared costs, cross-sharing institutional knowledge, broader R&D capabilities, and an enhanced market presence. Partnerships can also help facilitate potential mergers or acquisitions of complimentary or innovative companies on the leading-edge of technology.
  • Divestitures: Demonstrating the value of your IP puts you in the strongest position when negotiating the sale of your business or a business unit. After all, the market value of your enterprise is determined largely by the intangible assets you control. Building out a patent or trademark portfolio with such an exit strategy in mind can allow you to leverage those assets further.

Enforcing your Assets

You didn’t invest tremendous resources moving into a state of IP alignment and acquiring valuable patent and trademark assets only to see an infringer or counterfeiter step in and try to capitalize on your technology or brand. Enforcement is a necessary part of owning intellectual property. 

Enforcing your ownership rights over your intangible assets goes beyond seeking monetary damages. Patent and trademark owners must stake their claim in the marketplace.  Often, IP owners will seek injunctive relief in addition to monetary damages or may attempt to settle a dispute by negotiating a license agreement with the infringer. This strategy can help to avoid costly litigation and provide monetary compensation in exchange for past and even future use of the technology.

Remedies can also be sought through the US Patent and Trademark Office.  Often coupled with a litigation filing, companies can attempt to invalidate patents of their competitors which they believe may be too similar to their own technology through various post grant proceedings.

In the end, a patent or trademark is only as valuable as your willingness to defend it against infringement or counterfeiting. Your market share and your reputation are at stake. It’s the role of your IP counsel to gauge your company’s tolerance for how aggressively it will enforce your valuable intellectual property rights.  

Conclusion

In achieving this mature state of IP alignment, you’ve recognized the profound value your intangible assets hold in terms of the overall strength of your enterprise, and you’ve integrated a comprehensive IP strategy in nearly all facets of your business. Capitalizing on the asset value you’ve worked so hard to obtain is the ultimate goal of a functioning IP strategy aligned with your overall business plan. 

As we’ve seen, determining the value of your IP is dependent upon the circumstances around which you’ll deploy your assets and for what purpose. There are many avenues for monetization available to an enterprise with a robust aligned IP strategy. No matter how you choose to leverage your IP assets, it is your willingness and ability to defend your IP against infringement that ultimately gives your assets their value and helps to solidify your long term market position.

             Thomas DeFelice

This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. The opinions expressed in this article are those of the author only and are not necessarily shared by Dilworth IP, its other attorneys, agents, or staff, or its clients.