The Importance of Intellectual Property Valuation and Protection
A recent spate of initial public offerings, high-profile mergers and acquisitions, and litigation has thrust intellectual property (IP) into an increasingly critical position in global economics. However, many organizations often fail to understand the value of and the risks to their IP, even when that IP accounts for a high percentage of the company’s value.
With limited resources and bottom line pressures from stakeholders, companies need a high rate of return on their intellectual property (IP) investments and appropriate protection for it. Not taking action could pose a serious threat to the success of the organization.
What Is Intellectual Property?
Intellectual property is a general term for the set of intangible assets owned and legally protected by a company from outside use or implementation without consent. Stemming from its ability to provide a firm with competitive advantages, defining IP as an asset aims to provide it the same protective rights as physical property. Obtaining such protective rights is critical as it prevents replication by potential competitors—a serious threat in a web-based environment or the mobile technology sector, for example.
An organization that owns IP can realize value from it in several ways, namely through utilizing it internally—for its own processes or provision of goods and services to customers—or sharing it externally. The latter can be achieved through legal mechanisms such as royalty rights.
There is an extensive international system for defining, protecting, and enforcing intellectual property rights, comprising both multilateral treaty schemes and international organizations. Examples of such treaties and bodies include the Trade-Related Aspects of Intellectual Property Rights (TRIPs), World Intellectual Property Organization (WIPO), World Customs Organization (WCO), United Nations Commission on International Trade Law (UNCITRAL), World Trade Organization (WTO), and European Union (EU). Nonetheless, there are variations in the respect for and enforcement of rights at a local level.
Types of Intellectual Property
IP as an asset category can be divided into four distinct types—copyrights, trademarks, patents, and trade secrets.
Copyrights
Copyrights, among the most widely used types of IP, are a form of protection granted to the authors of original works of authorship, both published and unpublished. A copyright protects a tangible form of expression (i.e. a book, work of art, or music), rather than the idea or subject matter itself. In the United States, under the original Copyright Act of 1909, publication was generally the key to obtaining a federal copyright. However, the Copyright Act of 1976 changed this requirement, and copyright protection now applies to any original work of authorship immediately from the time that it is created in a tangible form.
Trademarks
Trademarks are another common type of IP. A trademark, as defined by the U.S. Patent and Trademark Office (PTO), is “any word, name, symbol, or device, or any combination, used, or intended to be used, in commerce to identify and distinguish the goods of one manufacturer or seller from goods manufactured or sold by others.” While it is not as robust as the international protection regime for copyrights, the Trademark Law Treaty Implementation Act provides some international protection for U.S.-registered trademarks.
Patents
As compared to other types of intellectual property, patents are among the most valuable, costly, and difficult to obtain. A patent is defined by the PTO as “the grant of a property right to the inventor,” providing the owner “the right to exclude others from making, using, offering for sale, selling, or importing the invention.”
Patentable items may include objects or processes such as new technology or business methods, but excludes more abstract items such as web sites or ideas. Sufficient documentation from the applicant coupled with verification of originality by the PTO is required before the grant can occur, and is then typically valid for 20 years from the date of application.
Once received, a patent owner may grant licenses to others for use of the invention or its design and may charge a fee for such usage. Patents are valid only within the United States, including territories and possessions; however, 130 countries have agreed to honor patents across borders through instruments such as the Patent Cooperation Treaty (PCT).
Trade Secrets
Any idea or fact that is not disclosed by a business comprises the fourth type of intellectual property: trade secrets. A trade secret is a unique form of IP in that it does not have a defined time horizon—an issue could remain secret simply while filing for a patent, or it could remain closely guarded for the lifetime of the firm (i.e. Coca-Cola’s recipe).
A trade secret, by definition, is proprietary or business-related information that a company or individual uses or to which they possess exclusive rights. To be deemed a trade secret, the information must meet several requirements: that it is genuine and not obvious, provides the owner with competitive or economic advantage and thus has value, and is reasonably protected against disclosure. Examples of trade secrets include the aforementioned recipes, business methods, strategies, tactics, or any other piece of information that gives the business a competitive advantage.
A company’s future profits may be affected by Intellectual Property. IP Valuation is an important process for every company regardless of size to undergo on a regular basis. Contact the experienced professionals at Rueppell Law (Connect@Rueppell-Law.com) today! When it really matters, Rueppell Law is there for you and will help evaluate your IP assets.
