Most entrepreneurs have at least a sneaking suspicion that intellectual property is important to their business and its long-term success. At the same time, few entrepreneurs understand just how important intellectual property is.
Intellectual property assets are one of the largest asset classes held by corporations. In fact, by some estimates, intellectual property assets represent 40 percent or more of the value of U.S. corporations. Interestingly, among the most successful companies—the S&P 500 companies—intellectual property assets are even more important, representing 80 percent of the value of these corporations.
It is safe to state that there is no other class of assets that represents such a significant portion of a company’s overall value yet gets as little attention as intellectual property.
The statistics also provide important insight into the role of intellectual property assets in the success of companies. Notably, the most successful companies tend to have a higher-than-average percentage of their valuation coming from intellectual property assets. This correlation suggests that companies that are able to harness their intellectual property tend to excel compared to their competitors.
The expanding importance of intellectual property also poses risks to entrepreneurs. There is an ever-growing number of accusations that companies have infringed, misappropriated, or outright stolen another company’s intellectual property. A quick Google search for “patent infringement,” “trademark infringement,” “trade secret lawsuit,” or “copyright infringement” will provide a litany of examples of these lawsuits.
Considering the importance intellectual property plays in the success of companies and the risks it poses, entrepreneurs simply cannot justify ignoring it as an asset class or leaving it entirely in the hands of outside lawyers.
There are real, tangible advantages for companies that develop an IP plan. Considering that you are reading this book (and have made it through the discussion of the legal concepts), it is a fair bet that you understand the need to develop an IP plan. But you might not have considered all the advantages that will come with this planning process.
Without an IP plan, your company will almost certainly miss opportunities to capture value from its intangible assets. Companies without an IP plan plod along haphazardly. They protect some assets but not others. And, without a plan, they have no way of knowing whether the assets they have protected were a priority. If they were not a priority, then they have just wasted resources. Businesses that fail to plan will never manage to systematically capture the value of their most valuable assets.
Having a plan will ensure that your company is positioned to fully leverage the goodwill associated with your brand, protect your valuable inventions, and ensure that your confidential information remains protected. The companies that take the time to implement IP plans are able to harness their intangible intellectual capital and convert it into protected, valuable intellectual property assets. These are the companies that end up with large caches of IP and that tend to excel in the market. Although planning alone is not enough, a company cannot hope to truly harness its intangible assets without creating an IP plan.
Be like the most successful companies – develop your IP plan.
In addition to allowing you to maximize the value of your intellectual capital, an IP plan will allow you to minimize the risk of infringing on the rights of others.
Developing a plan will allow you to identify and eliminate potential issues at the outset. If your branding could create potential trademark issues, the best time to address it is before you have invested time and money to develop your brand. Similarly, if a competitor has a patent that potentially implicates your business, learning about it at the outset will allow you to tweak your product or service to avoid a dispute.
Developing a plan will also help you avoid being sued. Intellectual property lawsuits are on the rise, and large companies or cutting-edge technology companies are not the sole targets. These lawsuits are expensive in terms of both money and time. The total bill to defend a suit will run into the six or seven figures. And beyond the out-of-pocket costs, IP lawsuits can require hundreds of hours of time by your company’s personnel, distracting you from your primary goal of running your business.
There are no guarantees in life, but developing an IP plan will allow you to significantly reduce the risk that your company will be accused of wrongdoing. This peace of mind (and the decrease in potential fees and expenses down the road) justifies the time and expense involved in developing an IP plan now.
As with any planning project, developing an IP plan will allow you to systematize your approach to these issues. Companies that operate without an IP plan tend to make decisions about their intellectual capital on an ad hoc basis. The employees who ultimately have to make the decisions about these issues do not have an established way to approach these decisions or a systematic way to address them. The result is that the entrepreneurs involved have to reinvent the wheel for each decision, costing themselves time and money.
As part of the IP plan you develop for your company, you will create systems to methodically work through IP issues. This, in turn, will make the decisions more routine. As a result, each subsequent decision requires considerably less thought and analysis. Rather than start from scratch for each issue, you will apply the decision-making framework that you established as part of the planning process to each new problem.
Investing the time to create an IP plan on the front end will pay huge dividends in time and money saved over the course of a company’s life.
Build An Innovation Culture
One of the side benefits of creating an IP plan is that it will tend to make innovation a part of your company’s DNA. The planning process has a number of benefits for your company’s innovation culture.
Taking the time to develop the plan will, in and of itself, cause you and your fellow employees to focus on innovation issues. During the planning process, your company’s employees will be focused on IP issues—maybe for the first time in the company’s history. This focus will tend to impact company culture, sending the message to your employees that innovation (and protecting innovation) is important to the company’s success.
The value is not limited to the planning process itself. The ongoing implementation and maintenance of the processes that you develop during planning will also help to ingrain an innovation culture into your company. As part of the IP planning process, you will develop systems and procedures to periodically discuss innovation issues with your employees. This ongoing focus will have an impact on your employees, as they will consistently receive the message that innovation is important to the company.
The innovation culture may initially start with a focus on protecting the existing innovations and ensuring that future assets are protected. Over time, however, this culture will tend to build on itself. The repeated focus on innovation will lead your employees to think in terms of innovation during their daily tasks. The result will, in almost every case, be a more invigorated workforce that creates innovations that would never have existed without this culture shift.
Thus, developing an IP plan has the potential to not only capture the value of innovation but also create innovation where none would have existed otherwise.
Part of the planning process will involve appointing an IP team, including a single point person who is ultimately in charge of your IP efforts. As we will discuss more fully in an upcoming chapter, the purpose of the team is not to create a bureaucracy. Indeed, most thought leaders agree that small businesses and startups are better positioned for innovation precisely because they are more agile and able to adjust. The purpose of the IP team is to centralize decision-making and to ensure that there is a team that is always focused on turning intangible assets into protected property.
Without a designated IP team, many businesses end up letting things slip through the cracks. If you have not delegated the responsibility of handling IP issues to a particular employee (or set of employees), this will generally mean that no one is minding the store. Appointing an IP team firmly places responsibility for developing your company’s IP in the hands of specific employees. Knowing that this falls within their job responsibilities, these employees will take the time to ensure that the necessary tasks get done.
Developing a plan will, thus, create a chain of command and reduce the chances that issues fall through the cracks in your organization.
Make Important Decisions Before They’re Urgent
There are a number of decisions that you will need to make with respect to intellectual property issues. Between harnessing and protecting your intellectual capital and addressing an accusation of infringement by others, entrepreneurs will need to address intellectual property issues as part of their business.
Without an IP plan, you will find yourself in high-stress situations because the IP problems that arise will often be both important and urgent. Your company will need to make decisions while it is facing pressing issues and disputes.
Developing an IP plan, on the other hand, allows you to make a number of important decisions when they are not urgent. As part of the planning process, you will appoint an IP team, develop systems and procedures, and develop plans for how to handle various decisions. Each of these decisions will streamline, and to some extent, automate decision-making in the future. Thus, when faced with an urgent IP task, a company with a plan will simply execute the plan it has in place.
Click on the links below to navigate between pages of intellectual property resources.