Keys to Effective Intangible Asset Assessment and Management
Apr 30th, 2020 by Michael Dilworth | Recent News & Articles |
It’s widely recognized that intangible assets (things like brands, data, content, software code, confidential information, inventions, industrial know-how, design rights, customer lists, regulatory approvals and strategic plans) account for 70% or more of a modern company’s true value, with the potential for an even higher percentage in the technology sector. Because these assets are intangible, however, a specific type of mindset and discipline is needed to safeguard these assets from copycat products or technologies that can dilute market share, blunt your competitive edge, and ultimately cripple profits.
With so much of a company’s growth and profitability tied to intangible assets, it is imperative for directors and executives to identify and value intangible assets as much as fixed assets like plants and machinery.
Why It’s Critical to Assess the Value of Your IP Portfolio
Because your IP comprises such a large portion of your company’s true valuation, the ability to accurately assess your portfolio’s value is crucial to strategic planning and the formulation of key business decisions. Specifically, maintaining a comprehensive and up-to-date understanding of your IP portfolio’s value is advantageous for essential initiatives including the following:
● Raising Capital – Your IP rights outline your stake in the market, defining the technologies to which you have laid exclusive claim. Market exclusivity conferred by IP protection is far more attractive to investors than a prospect with little to no safeguards in place against a market flooded with similar or identical products. Knowing the value of your IP portfolio gives you a powerful tool in making your case to investors when you are seeking funding for product research, development, production, and marketing.
● Increasing Value – Successfully navigating a merger, acquisition, sale, or the establishment of a partnership hinges on knowing and being able to prove your value. Particularly in the technology space, this involves the understanding of and capacity to delineate the value of your IP, and the steps you have taken to safeguard it and your competitive leadership in the market.
● Providing Leverage – Your properly protected IP can also be a source of additional revenue for you via licensing. You will command a better price for your legally protected intellectual property if you understand its full value going into licensing negotiations.
How to Assess the Value of Your IP Portfolio
It’s clear that a comprehensive and consistently updated valuation of your IP portfolio is critical to making key business decisions and to optimizing profitability in a range of opportunities from M&A to licensing. While the task of IP portfolio assessment may appear to be a daunting one, the following keys can help ensure your assessment is as accurate and efficient as possible.
● Know Your IP’s Role – The first thing to keep in mind when assessing the value of your IP portfolio is to know the context in which you plan to use it. Are you developing technologies with the goal of eventually manufacturing and selling your own unique product or process? Or perhaps you plan to derive income from licensing your IP to another company with the capacity to carry out a larger-scale production and launch. Maybe you see a merger or acquisition on the horizon and want to be able to claim your full worth in the transaction.
Whatever your goals, knowing in advance how your IP fits into your overarching business model and objectives will help you approach portfolio assessment with focus, providing you with the context you need to frame the data to its greatest efficacy.
● Know What to Consider – There are many factors to consider in assessing the value of your IP portfolio, but the most foundational criteria center on the validity of the legal protections in place and the usefulness of the protected technology. The degree to which your IP portfolio can withstand legal challenges directly impacts its value. Patents, trademarks, copyrights, and the like which are well-supported with evidence and managed carefully will make for a more valuable portfolio.
Likewise, the more useful the IP, the greater its value. Here it is important to consider how the products that covered by your IP will meet a need, solve a problem, or advance an industry. You’ll want to consider as well the potential positioning of the products—if you are in possession of IP that can lead to a groundbreaking invention or a one-of-a-kind product that will revolutionize the way people live or practice medicine or communicate, your portfolio’s assessment will reflect this value.
● Know What Resources to Use – IP portfolio valuation is a multifaceted undertaking that is best carried out with a comprehensive approach incorporating human intelligence and digital data mining. Leveraging software to conduct multi-level searches that sift through and synthesize immense volumes of data combined with a strategic reliance on data analysts and legal counsel will provide you with a usable map of the IP landscape and your position in it.
Perhaps more so than in any other industry, leaders of technology firms will find their market position and profits best served when they prioritize protecting their intellectual property. Successfully managing your IP portfolio gives you the leverage you need to raise capital, develop products, successfully navigate company transactions, and drive ROI—and it all starts with assessing your portfolio’s value.
Image Credit: Ministerie van Buitenlandse Zaken (Flickr @ Creative Commons)
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.