IP Strategy Can Tip the Balance

Financial News, January 14, 2002 | Go to article overview
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IP Strategy Can Tip the Balance


Byline: Koos Rasser Guest Comment

The key to success for any company is its ability to attract investment capital, ultimately determined by the market's assessment of its future earnings potential.

This assessment increasingly depends, not only on a company's profits and revenue streams, but also on its intangible assets - which are often not clearly identified on the balance sheet.

Intellectual Property (IP), which covers patents, trademarks, business practices and styles, is an important tranche of these intangible assets. The financial community is increasingly making the presence or absence of a company's IP strategy a factor in its investment decisions. In other words, companies could be missing out on financial backing by not taking IP seriously enough.

This was clearly borne out by a survey we recently conducted in the UK among more than 100 fund managers, analysts, private equity firms and venture capitalists. One in four respondents said that they would turn down an investment opportunity if a company's IP strategy seemed inadequate.

A staggering 94% believe that the presence and quality of a company's IP strategy is important to the protection of its market position. A majority of 60% linked IP strategy to share price performance. The consensus is that the importance of IP will increase still further.

Despite this, the financial community can sometimes find it all but impossible to gauge whether a company actually has an IP strategy. It has to rely on what are, at best, secondary indications (number of patents filed, for example), or simply assume that a well-run company will probably make sure it has one.

There is clearly an opportunity for companies that are able to communicate their IP strategy to the financial world.

To achieve this, IP needs to move from the laboratory (in the case of patents) or the marketer's cubicle (in the case of trademarks) to the boardroom. This is the only place where an IP strategy can be meshed perfectly with the overall business strategy and where tough decisions, such as to litigate or licence, to invest or abandon, must be made.

Truly effective companies are those where the chief executive and the chief financial officer can speak knowledgeably and passionately about their IP.

IP started entering US boardrooms 10 to 15 years ago, and there are some remarkable success stories.

In the late 1980s, IBM realised it needed to defend itself against a perceived Japanese threat and launched a focused effort to once again become number one in patent filings.

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IP Strategy Can Tip the Balance
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