For some, intellectual property (IP) has emerged as a significant source of potential revenue. Experts estimate that many businesses could generate as much as 5 percent to 10 percent of their operating income from their IP assets; IDC Research projects that 40 percent of corporate revenue will come from IP assets by 2010.
Companies that treat their IP as nothing more than a cost center may miss out on prime opportunities to improve their bottom lines.
From protection to management
In recent years, companies of all kinds have come to recognize the potential of IP assets to generate revenue. Computer-related IP has often received the most publicity, but IP comprises a far broader range of assets, including ownership of formulas, processes, brands, patents, trade secrets and trademarks.
Proactive companies are now managing such IP as strategic assets. They assess IP in terms of cash flow, profitability and return on investment -- in short, the types of factors that drive shareholder value.
The first step? Companies interested in leveraging their IP for revenue generation should perform an intellectual property audit. Through an audit, a company can:
* Identify strengths and weaknesses of every IP asset
* Identify the IP assets that merit continued protection because of the value they provide to the company
* Identify the IP assets that can be abandoned because they carry little or no value
* Collect market intelligence on competitors' R&D and patenting activities
* Evaluate options for optimal commercialization of IP assets, including underutilized IP assets that could be licensed to third parties
* Identify the next steps to take to manage and optimize the portfolio
The big picture
The ideal audit process will provide a company with the foundation it needs to formulate an IP strategy that complements overall corporate strategy. But companies need to weigh additional considerations -- global, domestic and company-specific -- before implementing their IP strategies.
On the global front, for example, the World Trade Organization has expanded IP rights around the world, and more countries are developing technology, all in a climate of conflicting IP law enforcement. Domestically, courts regularly issue decisions that impact IP rights, while the changes in financial and SEC reporting continue to evolve.
Within a company, IP management can impact legal, technical, marketing and other areas. Business units may view IP as an additional source of funding for research and development initiatives.
Further, by taking on a revenue-related role, IP will likely play more prominently in future mergers, acquisitions and divestitures. Some companies might pursue acquisitions only to gain possession of IP, immediately divesting the target's other assets.
In any case, due diligence includes comprehensive analysis of IP assets to fully understand potential benefits and liabilities. And divestitures should allow sufficient time to identify which IP assets should be retained.
Few businesses with intellectual property assets can afford to relegate them to mere cost-center status. By developing an ongoing, proactive IP management strategy, companies can build valuable new revenue streams and improve their bottom lines.
Reach JIM TRAVIS at (630) 575-4250 or firstname.lastname@example.org.