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Value of Intellectual Property From a Business Perspective
Protecting your Business’s Most Valuable Asset
Starting a New Business
Idea
Plan
Fund
Execute/Prove
Grow/Sustain
Business IdeaIdea
Technology
Brand
Concept
Process
Entertainment
Plus Many More…
Potential Intellectual Property (IP)
Planning
Looking for New Markets
Map Business Plan
Need to Consider Intellectual Property (IP)
Business Plan
BusinessIdea
Makes Money
Need
OUT OF BUSINESS
Business Plan
BusinessIdea
Makes Money?
IN REALITY
Barriers to Entry
EXPERIENCE Know-How
Equipment/Technology
Money Labor
LEGAL/REGULATORY
EXPERIENCE Know-How
Money Labor
Overcoming Barriers to Entry
LEGAL/REGULATORY
Equipment/TechnologyNeed Funding to Overcome Barriers
Business Idea
Funding
Capital
BootstrapFamilyFriends
InvestorsBank Loan
Crowdfunding
Business/Investor/Creditor Uncertainty
Will I be able to get my money back?
Business Idea/Plan Uncertainty
Business Sustainability Uncertainty
Uncertainty
Uncertainty
Uncertainty
Business Idea/Plan Uncertainty
Uncertainty
Uncertainty
Uncertainty
Business Idea/Plan Uncertainty
Uncertainty
Uncertainty
Uncertainty
Business Idea/Plan Uncertainty
How to Get Money Back for Funding
Sustain • Revenue
Sell
• Proceeds from Sale
Bankrupt
• Proceeds of Asset Sales
Business
IP IS IMPORTANT
FOR ALL
Exit Strategy
Sustaining a Business
It is Easier for Competitorsto Copy Once a Business
is Successful
Need a Wayto Prevent Competitors
from Free-Riding on Your Hard Work
Sustaining a Business
Barrier
MoneyBusiness
Idea
Protect Business AgainstCompetitors
Goal
Sustaining a Business
Barrier
MoneyBusiness Idea
Again, Reality!
Uncertainty
Different Kinds & Qualities of Barriers
Competitive Advantages
Regulatory
Intellectual Property
Common Kinds of Competitor Barriers
Competitor Barriers
COMPETITIVE ADVANTAGES-First Mover-Better Technology-Competitors too slow/big-Lower Price
How Investors & Creditors Get Money Back for Funding
Sustain • Revenue
Sell• Proceeds
from Sale
Bankrupt
• Proceeds of Asset Sales
Business Licensing & Keep
Competitors out
Improve Business
Value
Valuable Asset
Intellectual Property
Physical Assets for Startups
Usually Not WorthMuch!
Typical Start-up
Asset Components of S&P 500 Market Value
0%
20%
40%
60%
80%
100%
Intangible 17% 32% 68% 80% 80%
Tangible 83% 68% 32% 20% 20%
1975 1985 1995 2005 2010
*Source: Ocean Tomo
Security Camera
Security Guard
Fence
Forms of Intellectual Property Protection
Alarm System
Forms of Intellectual Property Protection
Security Camera
Security Guard
FenceINTELLECTUAL PROPERTYPatents
TrademarksCopyrights
Trade Secrets
Alarm System
Different Types of Intellectual Property Rights
TECHNOLOGY/INVENTION
Patents
NAME/SOURCE-GOOD WILL
Trademarks
® ™PATENT NO. 1,234,567
Different Types of Intellectual Property Rights
CREATIVEWORKS
VALUABLESECRETS
Copyrights©
Trade Secrets
Sustaining- IP Strengths & Weaknesses Intellectual Property (IP)
Protection is not Perfect. Always Substitutes.
Different Markets/Industries Require Different IP Strategies.
IP Strategies Changes Over Time.
IP is Worth Nothing Unless a Business (maybe not your business) Makes Money on What it Covers.
Sustaining- IP Strengths & Weaknesses Expensive Process to Obtain &
Limited Time for Protection.
Scope of Protection can be Broad and Immediate Once Patent is Granted. Never as Broad as You Initially Think.
Better Suited Where Patented Improvement is Far Superior to Existing Substitutes (Objective) Pharmaceuticals, semiconductors…
PATENTS
Sustaining- IP Strengths & Weaknesses Inexpensive to Register & Can
Almost Last Forever.
Actual Value Slowly Develops Over Time. Impacted by Consumer Experience
with Goods or Services.
Shows Strength in More Mature Industries Where Consumer Choices are More Subjective. Restaurants, consumer goods…
TRADEMARKS
Sustaining- IP Strengths & Weaknesses International Protection
Immediate with Little Expense & Lasts a Long Time.
Scope of Protection Somewhat Limited to Exact (or nearly) exact copies. Can’t Protect Against Non-Copyists.
Best Suited Where the Exact Subjective or Functional Experience Matters. Software, entertainment…
COPYRIGHTS
Sustaining- IP Strengths & Weaknesses Legal Costs are Inexpensive,
but Cost of Keeping the Secret are Not & Can Last Almost Forever.
Trade Secrets can be Valuable.
Most Companies Have Some Form of Trade Secrets Financial/pricing information,
customer lists… TRADE
SECRETS
Sustaining- Generating Revenue Intellectual Property can
be A Source of Revenue A Valuable Asset
Important to Sustain a Business
Important to Exit Strategy
Generating Revenue with Intellectual Property
Own Lease (Rent)
TYPES OF PROPERTY CONTROL
Generating Revenue with Intellectual Property
Keep RentOwn
Sell
Generating Revenue with Intellectual Property
Keep Rent
Make/Use License/Franchise
Own
INTELLECTUAL PROPERTY
Sell
Assign
Example
OwnINTELLECTUAL PROPERTY
Yum! Brands, Inc.
Yum! Owned Franchisee Operated
Note: KFC wassold to several
companies & Pepsi Co.spun off as Yum! Brands
Generating Revenue with Intellectual Property
Buy RentDo NOT Own
Generating Revenue with Intellectual Property
Buy RentDo NOT Own
INTELLECTUAL PROPERTY
BUT WANT TO USE
License/Franchise
Assign
INTELLECTUAL PROPERTYLicense
RISCSEMICONDUCTOR
FABRICATOR
ARM Holdings plc
Example- Semiconductors
Example- Intellectual Property Financing
Buy
BANK
Loan
BUSINESS
Collateral• Accounts Receivable• Inventory• Assets
Example- Intellectual Property Financing
BANK
Loan
BUSINESS
Collateral• Accounts Receivable• Inventory• Assets
Foreclosure
Sell
Example- Intellectual Property Financing
Create
BANK
Loan
BUSINESS
Collateral• Accounts Receivable• Inventory• Assets
INTELLECTUAL PROPERTY
Example- Intellectual Property Financing
BANK
Loan
BUSINESS
Collateral• Accounts Receivable• Inventory• Assets
Foreclosure
Sell
INTELLECTUAL PROPERTY
General Best Practices- Intellectual Property
Owner/Officer
Employee
3rd Party Supplier
#1 Partnership/Operations Agreements
#2 Employment Agreements #3 Supplier
Agreements
Intellectual Property- Due Diligence Checklist All of the intellectual property
identified- anything missing?
Does the business still own the intellectual property?
Has any of the intellectual property been abandoned?
Any legal defects in the intellectual property?
Any potential lawsuits related to the intellectual property?
Specific Industry Recommendations
LifesciencesSoftware Industrial/Mfg.
Software & Computer Technology
• Establish Ownership Through Employee & Consultant Agreements• Do not Just Rely on Work for
Hire Doctrine
• Don’t Create Copyright Infringement Time Bomb• Understand Limits of
Licenses for Underlying Tools
Copyrights
#1
Software & Computer Technology
• Register Domain Names & Social Media Accounts• Make Sure You Have Them
• Conduct Trademark Search• Reduce lawsuit risk
• Register Marks• Get Rid of Cyber squatters
• Consider Future/Large International Markets
Trademarks#2
Software & Computer Technology• Consider Industrial Design
Protection for the Look of the Interface• Inexpensive Way to Protect the
Decorative Aspects of Your Interface
• Consider Filing a Utility Patent for New Technical Functional Features• In most countries, patent
protection is only available for technology that improves computer function
#3
Patents
Software Example
Agreements Ensure IP Ownership
Develop Software (Copyrights)
Brand Clearance & Reservation (Trademarks)
Leverage Brand into Future Products
FLAPPY BIRD
Toys
Agreements Ensure IP Ownership
Develop Software (Copyrights)
Brand Clearance & Reservation (Trademarks)
Leverage Brand into Future Products
Software Example- Extreme
Television
Movie
Other Apps
Theme Park
Lifesciences
• Establish Ownership Through Employee & Consultant Agreements
• File Patent Applications• Why
• Market- Protect Market Share
• Revenue- Licensing Revenue
• Defense- Make Competitors Think Twice Before Suing
• Exit Strategy- Enhance Value for Sale#1
Patents
Lifesciences• Identify Key Secrets• Confidentiality Agreements• Establish Procedures • Document Retention Policy• Own Computers• Why?
• Key Information about Business Could Walk out the Door
• Some Countries Provide Data Exclusivity as to Trials Data
Trade Secrets
#2
Lifesciences
• Conduct Search of Potential Marks Before Adopting• Prevent Investing Large Amounts
of Marketing Money in Mark that Can’t Use
• Special Issues for Regulatory Approval
• Register Internationally• Lifesciences products have large
markets/applicability
Trademarks
#3
Industrial/Manufacturing
• Patents, Trademarks, & Trade Secrets are all importantRelative importance depends on industry
• Consumer facing- trademarks
• Commercial Supplier- patents
• Use a Layered IP approach
Patents
Trade Secrets
Trademarks
Develop Technology
Keep Key Processes a Trade Secret
Patent Consumer Facing Technology
Register Trademarks in Key Marks
Leverage Trademark into Other Products
Industrial Manufacturing Example
Patent Trademark
Intellectual Property Used in All Business Stages
Idea
Plan
Fund
Execute/Prove
Grow/Sustain
Contact Information
Chuck Schmal ([email protected])
Woodard, Emhardt, Moriarty, McNett & Henry LLP111 Monument Circle, Suite 3700
Indianapolis, IN 46204(317) 634-3456
www.uspatent.com
Value of Intellectual Property From a Business Perspective
Protecting your Business’s Most Valuable Asset
