Intellectual property is now center stage for every business everywhere. And it’s imperative your business makes the best use of its IP assets. That means making it part of your long and short-term strategy. But more important, you must make the right investments in developing, acquiring, protecting and managing your IP assets.

Your business value is your intellectual property assets. Historically, most business value was based on physical assets – building, machinery, and infrastructure. These assets were the basis of a competitive advantage. That’s changed. Now the bulk a company’s assets are intangible – brands, trademarks, patents, copyrights, trade secrets, designs, etc – that comprise its creativity, innovation, and competitive advantage.

Large warehouses and factories are rapidly being replaced by powerful software, innovation and intellectual property as the main source of revenue for the majority of large and small companies around the world. Even industries where physical production is dominant, such as automobiles, consumer products, and computers to name a few, are relying on IP to keep them relevant in today’s fiercely competitive market.

Your IP enhances the value of your business in the eyes of investors and financing institutions. Quality IP acts as a signal to potential investors that your company is more likely to succeed than your IP poor competitors. A 2010 report by the OECD found quality IP also prompts investors to invest faster and in larger amounts. In the last 10 years, some big investment funds, such as BlackRock, are moving into the IP funding business. They’re investing in IP assets because the value can be established. IP assets secure their investment beyond just relying on the management to succeed in bringing the product or service to the market.

The key is making the right investments in your IP assets to get the biggest return for your company and investors. Unlike tangible assets which depreciate over time, your IP assets appreciate in value the more they are used. Investors will value your company based on its assets, your operations and strategy, and how you use your IP to generate future profits. A good example is brands. Many of the highest valued companies today, such as Starbucks, Apple, and Disney, invest hundreds of millions of dollars protecting, promoting and using their brands.

Leveraging those assets through direct sales and licensing are two ways of investing in your IP assets. Licensing out your IP is an effective strategy for getting the resources to complete IP development, expand it into new market segments (and customers), and generate more revenues from your IP. Some of the biggest and most successful companies such as IBM and P&G, are just some of the companies generating hundreds of millions of dollars licensing out their technologies, patents and trademarks.

Licensing in (acquiring) IP is a third way. In some cases, licensing in disruptive technology or a hot brand can increase your company value overnight. I saw this first hand when I was at the studios licensing some of the biggest kids entertainment properties. In one case, several companies went public and saw their IPO skyrocket as a result of having acquired these licenses. When the prequel Star Wars movie series was announced, several small companies that had licensed the original series were quickly acquired by their larger competitors seeking to get a bigger piece of what proved to be a multi-billion dollar licensing bonanza.

Continually investing in your IP assets increases your business value, competitive advantage and attractiveness to investors. Unlike hard/tangible assets, such as machinery and equipment, which depreciate over time, your IP appreciates as more is invested into its development and use in the marketplace. Like physical assets, your IP assets must be maintained, accounted for, valued, monitored closely, and managed carefully to get the highest return on your IP investment.

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