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— Industry Insight —
An effective IP management program will help companies identify and monetize IP assets, reduce costs, expand performing assets, repurpose underperforming assets and, finally, prepare for acquisitions or business-unit sales.
If an asset or business unit sale is contemplated, numerous IP management issues arise. The company should conduct an audit of all IP assets -- patents, trademarks, software, trade secrets, etc. -- being sold. Any IP rights the company needs to retain should be transferred or licensed internally, as necessary. As a result, various material agreements will be created that likely need to be disclosed as part of the sale. However, it is easier to effect such IP transfers before commencing a sales transaction, while the business unit is under company control, rather than negotiating with new owners. With advanced preparation, the time, difficulty and cost of any monetization transaction are greatly reduced. Initially, an IP management program will enable companies to identify all company-owned IP and to determine its viability. IP evaluation should focus on five aspects: ownership, status, relevance to future business goals, maintenance costs and breadth of coverage. As an example, certain IP assets such as software, patents and brands will likely become outmoded. If aging IP no longer reflects current and future products, retiring the asset or repurposing it through a license or sale may be beneficial. Alternatively, market conditions may demand that all assets be monetized for short-term cash flow. An IP review committee in conjunction with IP counsel can train innovators, managers and others about IP assets and can also prevent common yet potentially catastrophic mistakes such as premature IP disclosure. By evaluating all company IP, the committee can assess the value of both new and old assets and direct resources for IP creation and maintenance. One way to spur IP creation is periodic brainstorming sessions with key innovators. After such a session, the newly generated IP should be assigned, evaluated and, if resources permit, formally protected. Because of the time it takes for patent and trademark applications to mature, protection of IP rights must be forward-looking and protect products well before their release. A company must resolve ownership issues regarding its IP as soon as possible. As an example, without an assignment or proper employment agreement, patent rights remain with each inventor and can be lost when he or she departs. IP managers that attend brainstorming sessions can help convert a few hours of employee time into valuable assets. With time, an IP management program can classify all IP assets and teach employees how to safeguard them. A consistent policy on this point can prevent problems during future corporate transactions. Sales or licensing can also monetize individual IP assets. Before such an event, the purchaser or licensee may require due diligence. When deciding whether to sell or license IP rights, consider that each choice has advantages and disadvantages. Selling an IP right results in a quick infusion of cash; however, any potential gain should be weighed against potential licensing revenue and the potential revenue from enforcement. Further, once sold, control of the rights terminates. As an example, if the seller's business partner is sued by the acquirer of such IP rights, alienating the business partner may outweigh any gain from the sale. In contrast, if the IP has multiple uses, licensing it to a company for use in another industry or selling the IP rights with an exclusive license-back can reduce unknown risks. A license-back to the seller of the IP rights should always be aggressively sought. Ideally, any license-back should be as broad as the transaction will allow, with licenses to the seller and its affiliates with the right to sublicense. Licensing increases control, allows for subsequent enforcement actions and may be more lucrative in the long term. The disadvantage, however, is that a licensing program is personnel- and time-intensive with delayed rewards. James Fajkowski and Thomas Turano are registered patent attorneys in the intellectual property group of K&L Gates LLP. |
Today companies face unprecedented financial hurdles. To reduce expenses and identify untapped potential income, intellectual property assets should be reviewed and monetized. In a technology-driven economy, neglecting such assets virtually guarantees being outpaced by competitors. Therefore, companies must motivate employees who create IP and safeguard and capture IP assets before employees depart. 
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