What's your intellectual property worth?
When you are part of the management of a thriving business, chances are that in your career you will get to deal with a company sale with a management buy-in. In that case, good legal counsel is essential. But when is the right time to engage him or her?
To see the flight that intellectual property has taken as part of the total market value of companies, all we need to do is look at the most valuable companies in the world. In 2005, Microsoft was in the top five, which also comprised oil companies and large financial institutions. In 2019, the list looks very different: the five most valuable companies in the world are Amazon, Apple, Alphabet, Microsoft and Facebook – and they are also daring each other.
These disruptors take the lead in revealing and protecting their intangible assets. That is logical, because the value of these companies does not lie in the amount of products they sell. Their value lies in the platform they built and the data they collect. This calls for a different way of looking at intellectual property.
Uncharted territory
“Technology companies with a more traditional market approach or start-ups that undertake business in the wake of a disruptor pay less attention to their intellectual property”, says Kriek Wille, partner and lawyer in the Intellectual Property and Digital Media department at Van Doorne. “It is unknown territory for many boards of directors. For lawyers that is, however, different.
Moreover, intellectual property is difficult to quantify because it is intangible. Those companies that do want to do something with it, often don’t know where to start.”
This is despite the fact that the mapping of intellectual property, and thus its value, is of great importance to a company – whatever stage it is at.
For example, a start-up can put the intangible assets on the balance sheet and thus directly influence the value of the company, possibly enticing the interest of investors. A successful scale-up that is about to be taken over by a major competitor must have its intellectual property in order to know what a good price for the company is or for specific parts of it. In both cases: by investing in intellectual property, money can be earned.
Holistic view
Even companies for whom a start or an exit is not (yet) an issue, would do well to make their intellectual property transparent. “In order to grow, you need to have your house in order. Management needs to know what intangible assets it has and what that is worth in order to be able to build on them,” says Wille. “Look holistically at all the knowledge the company possesses and everything that makes the company unique. It could be the customer list, the director’s business network or the architecture of the IT system. It definitely goes beyond a patent or copyright.”
Trade Secrets Mapping ToolVan Doorne came up with the ‘Trade Secrets Mapping Tool’ in order to be able to quickly and completely screen companies’ intangible assets. “We came up with this tool because we often see, in practice, that things can be done better, without having to cost a lot of money”, says Wille. “A business secret – say the customer database or the user data – is much better protected if only the responsible department has access. That’s one of the many recommendations we give. Effective safeguarding of intellectual property does not always have to be costly or complicated.” |
Investors want to know about your intellectual property strategy
A few years ago, three friends started a business around a wonderful concept: a platform where colleagues share knowledge and exchange experiences. One friend wrote the software, the other took care of the commercial side and the third was responsible for internal affairs and finance.
However, when the software developer left the company and an investor sought, it turned out that the intellectual property was not owned by the company. For example, the rights to the software were still in the hands of the friend who had left, and the user data were owned by the CFO. Plus, the knowledge that was still present in the company was not in any way protected.
The Van Doorne team, including specialist Kriek Wille, mapped out the vulnerabilities and corrected them with relatively simple interventions. Soon after, an investor was found.
