Seven top tips to assess the value and relevance of intellectual property.
Recently I was asked to comment on the strength of a patent portfolio. The default answer was of course - it depends…
As it turned out, the client was seeking investors for their business and had prepared a reasonably comprehensive Information Memorandum (IM). The IM however had only one page on their intellectual property. A savvy investor was the one who wanted the commentary around the IP.
The ensuing exercise brought home a number of key issues.
Tip 1. Business Model
The strength of an IP portfolio cannot be assessed without the context of the business model. For example, a valid trade mark registration may be of little value if it just covers a redundant brand or market.
Tip 2. The ‘Right’ Stuff
Check the scope of the rights along with term and validity. Basic stuff, but often overlooked.
Know why the rights are there. Something to leverage from? Or litigate on? Or just a deterrent? The value of the rights depends on their reason for existing and how they integrate into the business model.
Tip 3. Intangible vs Tangible
Eighty percent of the value of a business is in its intangible assets. Yet, most focus on the financials relating to the other twenty percent. An IM needs to reflect the true value of a business and what measures have been taken to secure the intangible assets and enable opportunities arising from using them well.
Tip 4. Competitive Edge
Check if everything is aligned to maintain and extend the competitive edge. For example, the patent may be for a small but vital feature. Does the marketing of the product reflect the importance of that feature?
Tip 5. Redeeming Weaknesses
Are any weaknesses redeemable? Is it possible to amend existing rights or file for more? For example, patents for improvements could be filed in potential markets which do not have patent cover for the base invention.
Tip 6. Mixing It Up
Is there a mix of rights and when were they filed for? A single family of rights (particularly if they have a short term) can leave a business vulnerable. A mixture of rights and terms suggest ongoing innovation.
Tip 7. Communication
Is the business communicating well with their IP advisors? They can ensure that the IP rights gained are aligned with the business model now and going forward. IP advisors can also help showcase intangible assets for IMs.
IP rights are not an add-on, they are an integral tool in realising the true value of business. Whichever side of the deal you are on, be aware of how an understanding of IP can help you assess the value of an investment.