Intellectual Property May be Worth a LOT More than You Expect, Baby
Mood rings were groovy, “Jaws” was playing at the movies and the Vietnam War was ending. It was 1975 and a new television show called Wheel of Fortune debuted its first spin.
That wheel is still spinning and being stuck in 1975 must work for Pat and Vanna since they are still solving those puzzles and recording new shows today.
Are you stuck in 1975, too? When you value your company, how much do you think your Intellectual Property is worth? When I talk to inventors, entrepreneurs, and others, they often cite 15 or 20 percent, roughly the same as in 1975! And I was under the same mistaken impression until I read a new report.
The Numbers Please
Ocean Tomo, a firm providing financial services centered on IP assets, recently completed an Intangible Asset Market Value Study on the composition of equity market values for the companies listed in the Standard and Poor’s 500.
The results were not at all like the 15-20 percent I had expected. Value for Intellectual Property at these companies is closer to 85 percent! My colleagues in the know about valuations say that number can be well over 90 percent in the case of tech startups. 
That is a lot of value. Typical Intellectual Property defenses today include IT system safeguards, guards at the front entrance, fences, and the use of NDAs. All are good protection in their own regard but are you unnecessarily putting your IP valuation at risk by not knowing if someone is infringing? How would you know?
Maybe you will get a call from a friend who reads a concerning article in a trade magazine or online. Maybe you will see a reference to your intangible asset on a competitor’s website. While these are real possibilities, they’re not the way to protect such a large proportion of your company’s valuation.
SIDE NOTE: To be fair, some businesses likely have much less than 84 percent IP value. Perhaps smaller commodity-driven businesses such as restaurants, retail, supply stores, etc.? Though, even these businesses will have trademark, trade secret, and copyright concerns. I’m still trying to find data that splits these valuations apart by industry or that detail smaller companies. Please let me know of any research or data in either regard.
So why should you and your company pay closer attention to the value and protection of your IP? Here are my take-aways from this article:
• The value of Intellectual Property is THE critical driver of many business valuations. Regardless of whether you’re a small company or a large one, you need to make sure one or more people is looking for ways to increase these valuations.
• Many companies already have significant value in their Intellectual Property and that poses a potential threat to your business. Why? You may infringe on their rights without realizing the problem and the owners of that property will defend its value by whatever means they have at their disposal (insert “ugly lawsuit” here). This concept is the same one used for building a fence around your building: you want to keep the people or companies that might damage the value of that property as far away as possible. The big takeaway here is that a lot of the people I talk with are not careful about infringing upon existing Intellectual Property (think patents, trademarks, or copyrights). While nothing is perfect, avoiding infringement should be a part of any company’s stage-gate process for implementing new ideas.
• If you are the owner of Intellectual Property, you should establish methods for detecting infringement to protect your company’s value. Some of these methods are extremely inexpensive and near real-time.
• I would wager those larger companies, and their IP attorneys, are much more likely to understand the results of this study. Smaller companies should make sure someone is responsible for keeping track of potential problems and knowing when to bring in counsel.
The study notes that the market values may have peaked and aren’t likely to plummet anytime soon. I suggest you think about what you need to protect the IP you have now and are likely to have in the future.
And please don’t pin your company’s fortune to a 1975 strategy. Contact me for 2015 solutions before you take your next spin.
Picture and graphics credits:
 “Mike-Myers-Austin-Powers-1-” by Source. Licensed under Fair use via Wikipedia – 1975, Wikipedia
 Ocean Tomo, LLC (2015), reused with permission