Albert Ferraloro
Director, Management & Strategic services
Not recognising intellectual property (IP) as a key business asset in amongst all other assets of a business is a real risk many companies face today. This is despite IP assets typically representing anywhere between 50%-85% of the capital value of a company. Not having an understood IP strategy to suitably capture and manage these valuable assets typically results in a reactive approach to all things IP rather than a more consider proactive approach which in turn can lead to a range of unwanted and costly outcomes such as:-
- IP loss resulting from a combination of poor IP management practices and personnel leaving to work with, or as, competitors;
- Key IP not being suitably protected resulting in loss or erosion of competitive advantage or opportunities to extract value not being recognised;
- Competitors having a stronger IP position and/or being more IP aware and able to make business difficult for a company; and
- Lack of awareness of a company’s IP landscape leading to wasted time, $$$, resources, or worse, potential IP infringement of 3rd party IP rights.
Directors play a very important role in helping their organisation to secure their IP position by helping to promote awareness around the importance of IP and the value that suitably captured and protected IP can represent for the business. They should seek to ensure that proper governance frameworks are in place to manage valuable IP assets including the adoption of an IP strategy for the business which aligns with the company’s business objectives.
We are often asked by our clients, ‘what questions should our Directors be asking of the management team in terms of our IP assets?’ The following bullet points highlight several key issues that businesses should be addressing as part of a sound IP management strategy and that company Director’s should be taking an interest in:-
- What is the current IP position of the company?
- What internal practices and procedures are in place to underpin the company’s IP strategy and are these being actively administered?
- What are the primary threats and opportunities around IP that the company is currently facing and what strategies are in place to minimise/maximise these threats/opportunities?
- Is the business aware of and keeping abreast of what its competitor’s IP position is in the market-place?
- Has proper consideration been given to the potential for any FTO implications/concerns around new product offerings?
- Are appropriate steps being taken in respect of reviewing IP assets and IP implications when entering into JV or other collaboration arrangements with 3rd party companies (and similarly in respect of any M&A activities that the business is involved in)?
- What is the IP budget for the business, what are the key components of the budget and how is the business tracking compared to this?
- Is suitable resourcing being provided around IP management activities and what else can be done at Board level to ensure the business maintains a preferred proactive approach to IP matters rather than a less desirable reactive one?
Directors need to acknowledge that they owe shareholders a duty to properly manage non-physical assets (such as IP) well in the same way that they require to manage physical assets well. It is important that they encourage regular reporting of key IP matters at Board meetings and longer term assessment of IP strategy goals and practices to ensure they remain relevant for the business. Importantly, Directors need to be prepared to stand behind and enforce IP rights when required which, as well as highlighting to competitors and the industry that the company is serious about protecting and enforcing its IP rights, can have the added effect of boosting investor confidence and raising the value of the IP assets themselves.
For more information, contact me on +61 8 9216 5100 or albert.ferraloro.com.au