Generating revenue streams: putting your intellectual property assets to work

May 2014 | PROFESSIONAL INSIGHT | INTELLECTUAL PROPERTY

Financier Worldwide Magazine

In difficult economic times like these, many business executives and owners have their minds on the bottom line – streamlining processes, reducing overhead and trimming ‘fat’ to maximise profitability. It’s a highly useful effort, but some executives can get ‘tunnel vision’ and overlook opportunities to create revenue streams. Adriano Pedrelli, a Chicago-based consultant to small and middle-market organisations, says “In my experience one of the most overlooked areas is a company’s intellectual property assets.”

Intellectual property (IP) assets are those incredibly useful and strategic vehicles – patents, trademarks, copyrights, trade secrets, internet domain names – companies rely on to protect their products, brands, processes and to create competitive advantages. Nevertheless, many companies often overlook their IP as a source of revenue.

You should determine what assets make up your IP portfolio and begin assessing the value of those assets, whether a public or private company, venture capital firm, financial analyst, chief executive officer, business owner or investment banker. Understand the extent of your IP assets, and strategise how best to leverage that value.

Place a value on IP assets

First, analyse the value of your IP. “Although often overlooked or postponed indefinitely in view of day to day business operations, it is fundamental that a business conduct an audit of its patents, trademarks, domain names and other IP to identify what’s in their portfolio,” says Mr Pedrelli. Determine whether your company employs the correct methods to protect and maintain those assets. Often, companies will find that IP assets are spread throughout the company and that efforts to identify, protect and maximise their value are inconsistent.

Another reason to conduct an audit of your IP assets is to eliminate uncertainty – critical if preparing to buy or sell a company or any portion of it. Knowing what’s in your portfolio will save a lot of undue stress during an already stressful process.

Maximise IP asset value

Next, determine how you want to leverage your IP assets. Focus on the assets that generate revenue and strategise how to maximise those revenue streams. Some companies that have a large portfolio of patents or trademarks should assess which of these assets they want to maintain and which they want to licence or sell. Companies have to pay maintenance fees on all of their patents and trademarks, so it is a good idea to regularly assess what can stay and what should go in your IP portfolio.

Does it work? In one instance, a small company owned a portfolio of computer-related patents. Instead of trying to build products itself, it began licensing the patents to other companies. With more than $100m in revenue, the company’s licensing program is paying impressive dividends. Mr Pedrelli reminds us that “When incorporating a licensing strategy into a business plan, it is essential to have a strong fit between the objectives and capabilities of the licensee and the licensor in order for the arrangement to be successful. This win-win scenario of maximising the value of the intellectual property can create a powerful result for all involved.”

Other common options include leveraging the value of your IP assets as collateral to secure financing.

Pay attention to your company’s internet presence. Cyber-squatters prey on companies by registering company names or trademarks with the intent of selling it to its rightful owner. One instance of cyber-squatting can cost your business tens of thousands of dollars in legal fees. In addition, competitors might be using your company name or your product name(s) as meta-tags to drive traffic to their site instead of your site – potentially stealing sales. This situation happened to a manufacturer of motorcycle repair products that discovered it was losing web traffic and potential sales to a competitor who used their product name in their meta-tags. They stopped the problem by filing a patent infringement and unfair advertising lawsuit against the competitor.

As if this was not problem enough, hundreds of new domains are going online over the next few months, exacerbating potential issues. Maybe you are fine with another company having a domain name <yourcompany.bicycle>, but how would you feel about <yourcompany.sucks>? If you know what IP assets generate the most revenue, you can devise practical strategies for how to best approach the changing challenges of the internet.

As a rule, businesses like certainty. Putting a dollar value on your IP assets eliminates uncertainty and produces valuable assets to leverage for additional revenue streams. An experienced intellectual property attorney and a similarly experienced financial analyst can help companies put their IP portfolio in order.

John L. Ambrogi is a partner at Partridge IP Law. He can be contacted on +1 (312) 634 9506 or by email: jla@partridgeiplaw.com.

John L. Ambrogi

Partridge IP Law