Intangible Asset Backed Lending: Starts By Ensuring Economic – Competitive Advantage Clarity…

October 30th, 2013. Published under Asset backed lending.. No Comments.

Michael D. Moberly    October 30, 2013    ‘A business blog where attention span matters’.

There is no doubt, receptivity among the business lending – financial services sectors’ to (intangible) asset-backed lending proposals is well beyond merely being some an esoteric, on the horizon capability.

What can quicken the pace of realizing this inevitability is for management teams’, particularly those engaged in (intangible) asset intensive – dependent business’s to achieve greater operational familiarity with their intangibles that in turn brings greater business, economic, and competitive advantage clarity to what intangibles’ are and their contributory value as real enhancements to a business’s overall value, its sources of revenue, along with the structural, intellectual, and relationship capital  necessary for sustainable profitability and growth.

But, well articulated and persuasive clarity about intangibles lies with business management teams and the lending sector alike.  With respect to the former, absent a strong voiced economic – competitive advantage enthusiasm for intangibles that converts to a well reasoned demand (for asset backed lending consideration) expectations that lenders will self-initiate is unlikely.

Precisely how intangibles contribute to – compliment existing business practices to render them more effective and efficient often occurs overtime, and for many, absent immediate notice by a management team or their direct oversight.  In other words intangibles frequently evolve and become embedded as intellectual, relationship, and structural capital and seldom with fanfare or immediate notice until it becomes evident that new and/or additional efficiencies have occurred or there’s been a rise in product/service sales, company reputation, brand, value, competitive advantages, etc.

As management teams acquire greater confidence in their operational familiarity, clarity, and enthusiasm for intangibles and ultimately elect to ‘lift the veil’ to learn to learn what prompted or influenced lucrative economic – competitive advantage advances, it’s increasingly likely they will find it emanated from employee’s intellectual and structural capital directed toward improvements in relationship capital among stakeholders and consumers.  This level of operational familiarity can merely be a matter of unraveling the origins of a single asset and identifying, assessing, and tracking its contributory value to specific changes – improvements.

Such exercises, for both intangible asset intensive – dependent business management teams and prospective lenders, trigger recognition that intangibles really do constitute stand-alone assets which deliver value, serve as sources of revenue, and drive competitive advantages with spill-over effects enterprise-wide.

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

 

Intangible Asset Backed Lending… Confidence!

October 28th, 2013. Published under Asset backed lending.. No Comments.

Michael D. Moberly    October 28, 2013    ’A business blog where attention span matters’!

What can management teams’ of intangible asset - intellectual property intensive/rich companies do to elevate (win) the confidence of prospective lenders to become more receptive to intangible asset backed lending proposals?  To be sure, the answer is not easy!

For starters, it’s essential that lenders fully understand and distinguish the terms intangible assets and intellectual property (IP).  Frequently, intangibles and IP are perceive as being synonymous, when in fact, IP is one category, type, or subset of intangibles.

Any (intangible) asset backed lending proposal must be framed in a manner that brings financial, business, and risk clarity to the intangible assets proposed as constituting collateral, i.e.,

  • what they are, what they aren’t, and the various forms they take
  • how they’ve been managed, safeguarded, and utilized
  • how to objectively assess their contributory value, unravel their ownership, and identify risk
  • how they’re currently positioned (leveraged, convertible) into competitive advantages and sources of revenue.
  • how the assets contribute to the business’s sustainability and serve as foundations for future (company) growth and value.

Each of these elements must be meaningfully characterized in a manner that resonates with lenders and can approximate conventional business lending scenarios.

Secondly, an (intangible) asset-backed loan proposal must respectfully articulate a forward looking rationale that allows a lender to be more ideologically receptive to modifying conventionally constructed business loan applications grounded in tangible-physical assets as the sole source(s) of collateral.

In the current and irreversible global business environment in which it is an economic fact – business reality that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets, not physical (tangible) assets, this can be responsibly articulated as the objective economic fact that it really is!

Thirdly, to elevate the probability of lender receptivity to business loan proposals predominantly collateralized by intangibles, holders of the assets must be engaged in the stewardship, oversight, and management of those intangibles, i.e., have in place coherent, reasoned, and effective practices, policies, procedures, and strategic (business) plan for identifying, developing, utilizing, and converting their assets into value, sources of revenue, and competitive advantages.

(This paper evolved primarily from Mr. Moberly’s experiences and research.  A 2002 survey conducted by Howrey, Simon, Arnold, & White titled ‘Investor Attitudes on IP Protection’ proved very useful as well.)

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Managing Intangible Assets: Start With Achieving Economic-Business Clarity!

September 12th, 2013. Published under Intangible asset training for management teams.. No Comments.

Michael D. Moberly   September 12, 2013   ‘A blog where attention span matters’.

An essential starting point for elevating managerial familiarity with intangible assets is to bring business, economic, and operational clarity to what intangibles’ are, how/where they originate, and what contributions they make internally and externally to a company’s bottom line.

Precisely how intangibles contribute to and merge with (compliment) existing business practices to render them more effective and efficient often occurs overtime absent immediate notice from management team oversight or monitoring.  In other words intangibles routinely evolve and become embedded as intellectual, relationship, and structural capital without fanfare until it becomes evident that new and/or additional efficiencies have occurred or there’s been a rise in product/service sales, company reputation, brand, value, competitive advantages, etc.  If a management team elects to ‘lift the veil’ to learn how, why, and drill down to learn what prompted/influenced those positive changes, they will often find embedded intangibles such as…

employee sparked intellectual and structural capital (know how, processes) directed toward improvements in relationship (capital) among stakeholders and consumers.

To achieve this level of operational familiarity in assets’ stewardship, oversight, and management context, can merely be a matter of unraveling the origins of a single asset and determining – assessing its contributory value to the improvements.

Such exercises are informative and frequently prompt varying levels of management team self-reflection not just about the contributory value of intangibles, but perhaps more importantly, reorient their training to reflect the development and integration of intangibles.

Another positive outcome of this exercise is that management teams will be more inclined to exude an appreciation for intangibles that spills over to all employees.

What Is Intangible Asset Management?

Effective management of a company’s intangible assets occurs when management teams are consistently committed to…

Being attuned to – engaged in the stewardship, oversight, and monitoring of the assets’:

    • collaborative – contributory value,
    • materiality, and
    • risks to the company, its core mission, competencies, and strategic planning initiatives

Executing effective processes and procedures to ensure:

  •  control, use, ownership, and value (of the assets’) can be sustained (preserved and monitored)
  • throughout the assets’ respective life, value, and functionality cycle
  • to accommodate specific business needs and/or strategic initiatives.

Pursuing prudent strategies to:

  • leverage and showcase their intangibles
  • build and strengthen competitive advantages, structural and relationship capital throughout the value-supply chain, among consumers and stakeholders.

Bringing business clarity to:

  • the development and effective-efficient utilization of intangibles, and
  • converting them into sources of revenue, value, and competitive advantage.

Examining asset’s:

  • relevance, contributory, and collaborative value to company products, services, processes, and transactions, etc.,
  • in play in joint ventures, strategic alliances, mergers, acquisitions, etc.

Ensuring intangibles are routine action-discussion items on c-suite and board agendas.

Consistently exploring ways to

  • utilize intangible assets to create efficiencies
  • effectively and attractively bundle (wrap, package) intangibles to make them more useful, increase their contributory value, create new sources of revenue, competitive advantages, or enhance brand and reputation.
  • mitigate asset risks.
  • position intangibles to attract external sources of investment and/or  leverage (articulate) as collateral for asset-backed lending proposals.

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

 

Oakland A’s Moneyball Draft of 2002…Intangible Assets?

September 11th, 2013. Published under Analysis and commentary. No Comments.

 Michael D. Moberly   September 11, 2013    ‘A blog where attention span matters’.

The frequently overlooked, under-used, and under-valued 900 pound elephants always present in conference rooms…

Unfortunately, for many companies, their intangible assets remain the overlooked, under-used, and under-valued ‘900 pound’ economic and competitive advantage elephant’ sitting un-noticed, unattended, and unclearly defined in conference rooms globally.

Below reflects  a perspective gleaned from an interaction between Oakland A’s General Manager Billy Beane and his player scouts and development staff extracted from the film Moneyball regarding the famed “Moneyball” draft of 2002.

Beane:  We’re trying to solve a problem here, but you are trying to solve the problem as you still see it, which is the same way Major League Baseball has approached it for the past 120 years by finding ballplayers to replace ballplayers!  You want to find another Jason Giambi and Johnny Damon, but both are gone, their history!

Scouts:  I think we all know what the problem is.  There is a lot of experience in this room and you need to let us do our job of replacing two key players, Jason Giambi and Johnny Damon.

Beane: But, you are not looking at the real problem!

Scouts: No, we are very aware of the problem!

Beane: OK, so what’s the problem?

Scouts:  We have to replace two star players.

Beane:  NO!  The problem we are trying to solve is that you scouts are sitting around talking the same old ‘body’ non-sense, like you’re selling blue jeans and looking for another Fabio!  We’ve got to think differently about how we find ballplayers, assemble a team, and put a team on the field!

Scouts:  Sounds like fortune cookie wisdom to me.

Beane:  NO!  It’s just logic!

Beane:  There is epidemic failure in the game of baseball. Baseball is medieval.  Teams are asking the wrong questions because they don’t understand what is really happening. This leads the people who run MLB teams to misjudge their players. People who run ball clubs think in terms of buying players!

Beane:  Their goal should not be to buy players, their goal should be to buy wins, and in order to buy wins a team needs to buy runs, and what I see is an imperfect understanding of where runs come from or how runs are generated!

Scouts:  But baseball is not just about numbers. Google boy here just doesn’t know what we know.  He doesn’t have our experience or our intuition.  There are ‘intangibles’ that only baseball people like us who know and understand.  You are simply discounting what baseball scouts and player development staff have done for the past 120 years.  So, we don’t care what you think, because MLB thinks the way we think with our evaluative experience and our intuition.  This is not a game about statistics it’s a game about people!

Beane:  We will find value in players which no one else sees!  Good players are routinely overlooked or dismissed for a variety of biased reasons, mostly because this is the way we’ve always done it! Are there really other players out there like Giambi and Damon?  No!  So, what we can do is recreate Giambi and Damon in the aggregate!

Scouts:  Yes, but will they get on base?

Beane:  Do I really care how a ballplayer gets on base, whether it’s by a hit or a walk?  On-base percentage is what we’re looking for now!  This is the new direction of the Oakland A’s.  We are now card counters!

Beane:  The truth is, we can find 25 winning players because everyone else in baseball under values them.  So, if we try to approach the game the same way it’s been done for the past 120 years, then we will lose on the field!  MLB teams must adapt or die!

Beane:  It’s a process…it’s a process…it’s a process!

Similar to Billy Beane’s perspectives, intangible asset strategists  have an attitude about…

  • the way many management teams and companies conduct business and engage in transactions often without regard for the intangible assets they are producing and will inevitably be in play, and
  • the economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability today lie in – evolve directly from intangible assets. (Brookings Institution, Intangibles Project) 

It’s simply no longer business as usual, regardless of management teams’ wishes or past practice!

 

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Intellectual Property Theft – I Can Invent, Manufacture, and Commercialize Faster Than They Can Steal…?

September 5th, 2013. Published under Intangible asset protection. No Comments.

 Michael D. Moberly    September 5, 2013     ‘A blog where attention span matters!’

Three ironies…

The first irony is that some companies tout an ‘I can invent faster than they can steal’ strategy at a time when intangible – knowledge-based assets have clearly outpaced tangible (physical) assets as the dominant source of most company’s value, revenue, value and ‘building blocks’ for growth, profitability, and sustainability.

For example, the source of value of products such as computers, cellular phones, pharmaceuticals, even some branded consumer products, has, in most instances, shifted from its physical content to its knowledge (intangible asset) content.  Corporate and institutional investment in intangibles such as R&D, brand development, and intellectual, structural, and relationship capital is growing at a substantially faster pace than tangible investments throughout most all developed countries. (Blair, Margaret M., Wallman, Steven M.H. Understanding Intangible Sources of Value.  Brookings Institution. 2000)

The second irony to a ‘I can invent and commercialize faster than they can steal’ strategy is that it’s being touted at a time when corporate and state sponsored business intelligence, economic espionage, information brokering, and data mining and cyber espionage have become more intensive.

The Office of the National Counterintelligence Executive (ONCIX) Annual Report to Congress on Foreign Economic Collection and Industrial Espionage and the American Society for Industrial Security’s Trends In Proprietary Information Loss Survey, and  SANS Institutes’ Study on Cyber Espionage, just to site a few, consistently indicate that ‘the U.S. continues to be threatened by the theft of proprietary economic information and critical technologies.

ONCIX’ Annual Reports consistently point out that risks to sensitive (proprietary) business information and advanced technologies have dramatically increased in the post-Cold War era as foreign governments – both former adversaries and allies – have shifted their espionage resources away from military and political to commercial targets.  The information assets sought are not simply technological data but also financial and commercial information that will deliver a competitive edge in the global economy.

Contrary to some companies perceptions,, leading-edge technologies are not the only assets being targeted.’ (ONCIX Annual Report to The President on Economic Espionage)

A company’s plans, intentions, and capabilities are of interest to competitors and economic adversaries alike because the perspectives-insights gleaned can be used to undermine the targeted company’s competitive advantages, erode its profitability, and stifle momentum for its projects and initiatives.

Implicit in the third irony of the ‘I can invent and commercialize faster than they can steal’ strategy evolve around company turf protection that doesn’t allow information asset protection and computer/IT security practitioners to fully recognize and/or act on their ‘risk commonalities’ to create efficiencies and improved information asset protection.

Perceptually, computer/IT security is often considered the dominant domain for information protection, especially in light of the significant amount of (tangible) resources organizations routinely dedicate to protecting he data and information in their computing – IT systems.

Some computer/IT security practitioners would have us believe that all valuable information evolves from and is stored in computers and IT systems.  Therefore, their logic continues, as a company’s computers and computing systems are (presumed to be) secure, so is the company’s proprietary-sensitive information, trade secrets, proprietary know how, and intellectual property.

But, the question; is the system secure?, carries less meaning today.  The more meaningful question is; has the company’s proprietary-sensitive information, trade secrets, and other valuable intellectual capital adequately protected against events and/or acts known to be competitively – economically harmful?  An often overlooked (neglected) aspect of computer/IT security is that proprietary – competitive advantage assets exist in many formats other than (solely) electronic bits and bytes!

As these realities become more routine action items on company management team agendas, they may be less inclined to summarily dismiss the benefits of adopting a more strategic view about protecting, preserving, and monitoring the value of their intangible assets.

Every Management Team Knows Intangible Assets Have Value, Or Do They?

The professionally condescending adage, ‘talk is cheap’, unfortunately remains indicative of some attitudes held by management teams about the value of intangible assets.  It is only in the past twenty years that we have come to realize that intangibles’ have taken on a new character, that is, they have passed from merely being an instrument through which companies acquire and manage other assets, to being primary assets themselves and the emergence of intangible assets as commodities which require continual protection and definition of ownership rights.  (Branscomb, Anne Wells. Who Owns Information?  From Privacy to Public Access.  Basic Books, 1994).

Today’s companies increasingly find themselves producing an entirely different type of product, i.e., knowledge – intellectual capital, which has become a dominant form of economic – competitive advantage muscle.  Nearly all of the world’s most innovative, successful and wealthy companies are those that wield, manage, and safeguard their knowledge (know how and intellectual capital) effectively.

Michael Dertouzos offers a different view about the value of information assets, i.e., he says, most people believe…

  • information can be easily replicated or replaced, therefore, it has little, if any, value
  • information is passive and exists in abundance, therefore little value is attached other than to its owner or originator.  (Dertouzos, Michael. What Will Be, How theNew World of Information Will Change Our Lives.  Harper Edge. 1997)

Such perspectives often play out as management teams’ rationale for applying only the most cursory (minimal) measures to protect and preserve the value of their intangible assets.

Another perspective readily found in both public and private sectors’ is the assumption that there is a correlation in how certain information is characterized or classified and its value, i.e., top secret, secret, confidential, proprietary, sensitive, etc. Presumably the higher the classification level, the greater its value.  But, given today’s extraordinarily sophisticated and globally predatorial data mining and open source intelligence and analysis capabilities, any presumed relationship between classification and value has largely diminished because the targeting of ideas and innovation routinely occurs long before classification processes are applied.

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Intangible Asset Strategist: Management Team Motivations

August 25th, 2013. Published under Fiduciary Responsibility, Intangible asset training for management teams.. No Comments.

 Michael D. Moberly    August 25, 2013     ‘A blog where attention span matters’.

It’s not merely unsubstantiated marketing jargon. The phrase ‘knowledge, intangible asset-based global economy, and the economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and profitability evolve from intangible assets are real. Management teams’ reluctance to recognize and aggressively engage this economic fact and business reality are respectfully, but most assuredly, ‘behind the curve’.

The truth does not lie somewhere in the middle. One would think that economic fact, standing alone, fiduciary responsibilities aside, would be sufficient inducement for management teams to immediately engage their intangible assets.  Unfortunately, for various reasons, few management teams have achieved sufficient operational familiarity with intangible assets in general, or their intangible assets in particular. Instead, some still find intangibles’ unwieldy, challenging to grasp, and difficult to assess, differentiate, and effectively utilize and therefore are reticent to open this proverbial ‘can of worms’.  Challenges also are in part due to intangibles…

  • lack a conventional physicality
  • are seldom, if ever, included in business school curricula, and
  • are seldom, if ever reported on company balance sheets or financial statements, unless they’re bundled together under the accounting catchall of ‘goodwill’.

In today’s tightly wound, highly compressed, and increasingly aggressive and predatorial (global) business transaction environment, management teams that continue to overlook, be dismissive of, or routinely hand-off intangible asset issues to legal counsel or accounting departments, are respectfully obliged to read further!

Intangible assets can expand and mature very rapidly within a company.  If not recognized, developed, safeguarded, and monitored from the outset, the probability they will be at risk to compromise, misappropriation, or meld into open – public domain sources is predictably high.  And, once a company’s intangible assets, whatever form they may take, i.e., unique knowhow and/or competitive advantages, etc., enter the public domain, re-covering their real (full) contributory value, uncontested use, and competitive advantages will be costly, time consuming endeavors that carry a low probability of achieving a completely favorable outcome.  Having an experienced intangible asset specialist – strategist in place can go a long way toward mitigating, if not alleviating such inevitabilities and persistent risks.

How does this translate…Stone v. Ritter in particular, (but also, In Re Caremark and In Re Disney) are three cases that draw attention to the importance, if not fiduciary responsibility, for companies to have effective intangible asset stewardship, oversight, and management practices (procedures, policies) in place.

Yes, these are Delaware cases, and yes, they are 2006 and 1996 decisions respectively, but they warrant management team attention because they bring much needed clarity to the necessity that management teams, c-suites, and certainly boards be kept apprised of what’s going on inside their company in the form of a (a.) good faith duty, and/or (b.) duty of loyalty.  Both are intended to ensure a company has sufficient (intangible) asset monitoring and reporting (compliance) systems in place to keep decision makers and strategic planners apprised, i.e.,

            with timely and accurate information (about intangibles) that is sufficient to allow them within their

           respective scope of responsibility) to reach informed judgments concerning a company’s compliance

           with law, and business performance and ultimately, intangible assets.

The business rationale for engaging intangible assets is much deeper than Stone v. Ritter alone…Respectfully, a significant, but unknown number of management teams, c-suites, and boards have yet to realize they have an obligation to seek and otherwise be provided with on-going status reports regarding their intangibles.  So, perhaps a reminder that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, sustainability, and profitability originate in intangible assets will serve as a sufficient impetus – motivation to not merely take notice, but actually kick start this obligation within a company to act now, act effectively, and act aggressively.

Admittedly, intangible assets constitute a difficult theory of corporate law.  It’s far from rising to the level of rocket science to recognize that trying to hold members of a company’s board (personally) responsible for poor management (stewardship, oversight) of a company’s intangible assets is a difficult theory in corporation law to prevail.  It is, nevertheless, essential that these management team bodies assume a more ‘hands on’ position with respect to a company’s intangible assets.

Intangible asset strategists are not impediments to productivity or efficiencies….In Stone v. Ritter the court found that important and necessary information failed to reach ‘the board room’ because asset monitoring and communication of intangibles’ either fell short or were non-existent.  So, a significant element of the Stone decision was that personal liability may attach, along with damages, if there’s a failure to, (a.) implement an effective information dissemination system, coupled with (b.) a regular system of asset monitoring to ensure boards have correct and sufficient information to make informed decisions.

It’s quite likely some company decision makers will regard the contributions of an intangible asset specialist-strategist being unnecessary or possibly even an impediment or hindrance to the seemingly go fast, go hard, go global objectives of many companies.

On the other hand, management teams and boards who maintain an attitude of being dismissive or not attaching a higher priority to this managerial responsibility are doing so at their financial and competitive advantage peril.  That’s because there remains this pesky, but irreversible global reality that 80+% of most company’s value and sources of revenue are directly related to intangible assets.

So, when the responsibility is framed in this factual economic context, management teams are remiss, at minimum, if they elect to seek the expertise and skill sets…

  • to consistently identify, unravel, develop, utilize, bundle, and effectively and efficiently extract as much value as possible from its intangibles, and
  • simultaneously safeguard and monitor those assets’ value, materiality, and risk.

So, instead of assuming satisfaction with past practice, or worse, assuming all things intangible are either legal or accounting decisions, not strategic business decisions, management teams and boards are obliged to critically and objectively ask themselves, ‘has the time come’?

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com

 

 

Entrepreneurs and Patents…

June 22nd, 2013. Published under Due Diligence and Risk Assessments, Enterprise risk management., Intangible asset protection. No Comments.

Michael D. Moberly    June 21, 2013     ‘A blog where reader attention span matters’.

There are and infinite number of interpretation to what is routinely referred to as what ‘the American dream’ and an equal number of paths how to achieve it.  The notion of ‘the American dream’ has certainly embedded in political rhetoric as one need only watch C-SPAN and listen to countless elected politicians consistently apply those three words to produce – elicit a myriad of emotions, imaginations as well as anger and frustration among their so-called target audience at the time.  The lingering effects of the 2008 economic recession are still very much evident in most sectors as many Americans and certainly citizens in numerous other countries struggle to find sustainable paths to surface from their own economic breakdowns.  Collectively, these persistent downturns has made first, retaining, and second, re-achieving ‘the American dream’, however one wishes to personally characterize it, elusive.

But, this piece is not about painting a new or conventional portrait of ‘the American dream’, rather it’s about the one twentieth of one percent of those individuals engaged in entrepreneurism and R&D who are seeking their version of ‘the American dream’ which often commences with making application for and hopefully having a patent issued for their work and achievement.

Due largely to the nature of my business consultancy, I encounter entrepreneurs of all stripes engaged in some truly remarkable endeavors.  These very purposeful encounters over the years have lead me to conclude that while there are numerous rationales for entrepreneurs to seek a patent for their idea – innovation, one rationale seems to repeatedly surface, which is, seldom are they familiar with, nor have they been apprised of options or alternatives to the ‘conventional patent route’.  Instead, I often characterize entrepreneurs as being singularly focused on seeking and securing conventional intellectual property, i.e., a patent.

There’s little doubt, being in a position to seek and possible secure a patent is indeed a privilege and achievement which very few others can put on their resume.  Further, in many instances, obtaining an issued patent will shine a well deserved light on one’s expertise and assign instantaneous credibility, short-lived as it ultimately may be among colleagues, peers, and even competitors.

Too, once a patent is issued it provides the holder with well deserved grounds for expressing pride in their labors, which in many instances have evolved over many years, depending on the product, testing, re-testing, etc.  Of course some do in a singularly boastful manner while others are far more humble and even self-deprecating in their characterizations.

But, I often find it puzzling, particularly with individual entrepreneurs, who, for the most part are very thorough, objective, and ‘driven’ researchers, why and how they readily gravitate to ‘going the patent route’ versus taking time to genuinely explore perhaps just as viable alternatives and/or options.

For the countless entrepreneurs I have had the pleasure of meeting over the past 25+ years, is their seemingly innate penchant for ‘going the patent route’ while conveying little if any awareness or interest in exploring alternatives to safeguard and commercialize their innovation against the realities of the increasingly predatorial global business environment in which any idea, patented or otherwise, is in a constant state of risk of infringement, misappropriation, theft, counterfeiting or a target of economic espionage.

As readers know well, there are numerous variables and influences that come to bear on entrepreneurs with respect to the path they choose for safeguarding and commercializing their original idea.  Aside from the demands made by would-be investors, including venture capitalists, angel investors, etc., one influential variable, I’m quite confident, even though I have never heard it specifically expressed in these terms, is that ‘idea holders’ opt for the patent route because they mistakenly assume that if/when a patent is issued, the stewardship, oversight, and management of their intangible asset (idea, innovation) becomes magically guaranteed, thereby relieving them of absolutely essential chores, which of course, is simply not the case!

I respectfully and admirably recognize possessing an issued patent represents for many entrepreneurs the ultimate ‘brass ring’ if you will, that will define, in many instances, one’s professional career.  Any assumption though that ‘going the patent route’ is the only option to achieve the necessary protection, and thus serve as the singularly best path to successful commercialization of an idea and possible profitability, is one that numerous professions and institutions wish to preserve and are not so courteous to those who want entrepreneurs to at least be exposed to equally viable alternatives.  To be sure, part of the challenge lies in the reality that there is no intangible asset strategist available to objectively articulate viable alternatives and objectively describe, with no malice, the reality that all forms of intellectual property, i.e., patents, trademarks, and copyrights have been the victim of some major hits in the past 20 years.

Let’s be clear, intellectual properties, i.e. patents, trademarks, copyrights, etc., are merely one type or category of intangible asset. The primary difference is that a patent, once issued by the U.S. Patent and Trademark Office (USPTO) or other countries’ counterpart, will assume a tangible/physical property only insofar the issuance letter one receives which can be framed and hung on an office wall as a testament of one’s persistent and challenging work.

Too, I suspect, respectfully so, that deference is often attached to patent (only) strategies by entrepreneurs due to the time honored, but flawed assumption that an issued patent conveys a more personal sense of ownership and certain legally defensible rights of protection, technically speaking, over say, a trade secret.

Too, a constant source of nourishment to ‘patent only’ strategies is the widely held, but mistaken assumption that an issued patent constitutes a standalone deterrent to, or safe harbor from, would be infringers, misappropriators, counterfeiters, and economic espionage in general.  To that I say, in today’s increasingly aggressive, globally predatorial, and winner-take-all R&D and business transaction environments, ‘idea holders’ can be assured that depending on the nature and subject matter of their patent, it will likely be in a constant state of risk from a host of legacy free players, independent (information) brokers, and certainly state-sponsored entities engaged in economic (industrial) espionage.

Some years ago, I would characterize/frame the likelihood that an entrepreneurs’ idea, innovation (or patent) would be stolen, infringed, or counterfeited, etc., in the context of probabilities.  Since the early 2000’s, I believe I have taken a wiser and more reasoned and realistic approach by framing such likelihoods, not as mere probabilities, rather as inevitabilities if relevant precautions and safeguards are not taken that extend beyond the presumptive deterrents and safeguards in conventional intellectual property.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com

Intangible Assets: Untested – Impractical Theoretical Concepts…Not!

June 10th, 2013. Published under Intangible asset training for management teams., Intangibles as strategic assets. No Comments.

Michael D. Moberly   June 10, 2013    ‘A blog where attention span matters’!

I routinely have the opportunity to talk with a cross-section of business leaders and entrepreneurs about my favorite topic; intangible assets.  One particularly stimulating conversation occurred with a very astute colleague and yes, it was about intangible assets.

My colleague certainly intended no disrespect to me or other intangible asset advocates and strategists by suggesting, that the development, use, and exploitation of intangible assets remains largely theoretical. Without elaboration, I presumed she meant intangibles in general, lacked sufficient practical, business (bottom line) relevance to move outside the theoretical realm, a position which I obviously disagree!

Having taught in higher ed for 25+ years, I can say, without hesitation, that a significant percentage of the time when I uttered the word theory in a classroom or at a professional association presentation, the initial reaction among students as it often is with even the most astute business persons, is fairly consistent and tends to occur in the following order, (1.) a muffled, but audible sigh, followed by (2.) a glazing of the eyes, as if to say, we’re going to take a nap now while this guy (me) tries to explain a theory which we’re already inclined to presume has little, if any, relevance to the ‘real business world’.

As a reaction to the consistency of such scenes, I adapted my classroom and now business presentations to characterize
‘theories’ somewhat differently, by pointing out that theories, be they about intangibles or other issues are merely thoughtful and generally well researched attempts to explain particular activities, behaviors, or phenomena.  This approach has worked better and one I still apply today as a more seasoned intangible asset trainer and strategist.

Unfortunately however, there remain some audiences who are inclined to rudely characterize theories as merely constituting an academics’ guess, hunch, untested opinion, or supposition which is certainly not applicable to intangible assets.

Still it’s frustrating to hear otherwise intelligent, experienced, savvy, and successful business persons be dismissive or worse, reject well established and globally recognized economic facts about intangible assets by characterizing them as unsubstantiated (theories) that will not hold up to the scrutiny, rigors, and stresses of today’s aggressive and competitive business (transaction) environment.

In my business realities, a theory is an expression of a concept or idea that is testable, replicable, and is based upon well-grounded hypotheses. And, in the world of business management, economics, and organizational behavior intangible assets have become an undeniable economic fact and global business reality wherein 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, stability, sustainability, and profitability lie in – evolve directly from intangible assets!

In my judgment, what prompted Brookings Institution, Athena Alliance, IC Knowledge Center, the Intangible Asset Finance Society and other prominent ‘think tanks’ and professional associations over the years to engage intangibles was by delineating and demonstrating…

  • their
    conspicuous role in most all business transactions…
  •  the need for effective stewardship, oversight, management, exploitation, and monetization of the assets…and
  • the forward looking role for intangible assets in routine business contexts/transactions…
  • the unrelenting reality that conventional financial statements and balance sheets no longer convey an adequate, nor complete picture of a company’s entire (real) financial health absent fully addressing the role and contributory value of intangible assets.

The inclusion of a company’s intangible assets in valuation and management is, to be sure, a more comprehensive, and Im might add, correct approach to accurately describing a company’s value, its sources of revenue, its future wealth creation potential, its sustainability, profitability, and overall stability.  Thus, to respectfully appeal to the various business persons who remain reluctant and/or skeptical insofar as applying intangible assets to their business and/or circumstances, what follows are real definitions, categories, and examples of intangible assets!

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com

Intellectual Capital Calculating Infringement Damages?

May 11th, 2013. Published under Intangible Asset Value, Intellectual capital management.. No Comments.

Michael D. Moberly     May 11, 2013    ‘A blog where attention span matters’.

Here is a hypothetical which represents one of multiple issues in the global arena of intangible assets that I find pose persistently troubling aspects which I have yet to find definitive answers.

Let’s say for example, Company A produced, possesses, and utilizes, what I term ‘proprietary intellectual capital’ (know how) or ‘PIC’ for short.  When I arrive at Company A, as an intangible asset strategist, to conduct training and assessment of their intangibles, it’s apparent management team are respectfully lacking in achieving operational familiarity with intangible assets, i.e., identifying, unraveling, assessing, utilizing, exploiting, etc.

Again, this is a hypothetical, but one which, I would venture to say most every intangible asset strategist and practitioner has or will likely experience.  In this instance a management teams’ failure to recognize PIC as possessing and contributing identifiably specific value, efficiencies, or competitive advantages to their company.

I should say in this management teams’ defense however, this overall circumstance is not uncommon, in that many firms have, deeply embedded, in their routine operations and processes, a myriad of intellectual, structural, and relationship capital which frequently, due to its longevity and endurance is, for lack of a better explanation, taken for granted and remains unacknowledged as a distinguishable (intangible) asset that may deliver contributory value, competitive advantages, or efficiencies, etc., anyone of which could be exploited beyond their current use (status).

An additional (obvious at this point) exacerbating factor to this hypothetical is that the company management team has no perspective for the importance or necessity to preserve (safeguard) the contributory value and competitive advantages particular PIC is delivering and which the company has grown dependant.

So, one dilemma is, should or can PIC’s as portrayed here, be properly and defensibly cast, in an ex post facto manner, as trade secrets?  Admittedly, that’s very doubtful. Or, could the PIC meet, again in an ex post facto manner, the six requisites of trade secrecy when in fact, the proprietary intellectual capital has neither been recognized nor treated in a manner consistent with the requisites of trade secrecy, nor are any procedures in place to safeguard – preserve control, use, ownership, and monitor value, materiality and risks associated with infringement, theft, and/or compromise of this PIC?

A second, and equally important dilemma in my view is that if, not when, this particular PIC is stolen, copied, or otherwise compromised, absent having any specific safeguards in place, does Company A have any recourse at all, in terms of damages, assuming of course, the firm becomes aware, in a timely fashion that such adverse acts have occurred?

As articulated by Scott Hampton of Hampton IP and Economics, Title 35, Section 284 of the United States Code, often referred to as the ‘patent statute’, states that patent infringement damages should be in an amount adequate to compensate the patent holder for the defendant’s infringement of the patent-at-issue.  But, in this hypothetical, Company A, the developer and user of this PIC has neither filed or been issued a patent, so that remedy strategy seems, at best, irrelevant.

When litigation is evident to try to settle infringement, theft, misappropriation, and/or asset compromise claims, plaintiffs will routinely make a determination, usually early in the pre-litigation process, whether to seek lost profit damages, or limit remedies to only a reasonable royalty, again it’s certainly questionable whether either applies in this hypothetical.

Let’s recall now that today, globally speaking, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets of which conventional intellectual properties are one.  But, a significant percentage of companies purposefully or otherwise, opt out of the conventional IP path.

Hopefully, this brings clarity to my initial dilemma (question), which is, can Company A, with its revenue – competitive advantage producing intangible assets, ever be positioned to seek lost profit damages if a key PIC were to be stolen when conventional intellectual properties, i.e., patents or trade secrets are either not in place or maintained?  More specifically are there satisfactory remedies to firms like Company A proprietary intellectual capital has been misappropriated?

Hampton says there is no single method for calculating lost profit damages, but the most common is a four-part test first recognized 1978 in the Panduit Corporation v. Stahlin Brothers Fibre Works, Inc. case.

According to the Panduit test, to obtain damages, the profit, in this instance, Company A could make but for the infringed intangibles, a real patent owner must prove…

  • demand for the (patented) product or presumably process.
  • the absence of acceptable non-infringing substitutes in this market space.
  • manufacturing and marketing capacity to exploit the demand, and
  • the amount of profit (the patent owner), i.e., Company A would have made.

Hampton also points out there are other means of proving lost profit damages in addition to the Panduit test, such as measuring increases in the cost of product inputs.  Could Company A then plausibly characterize the latter as costs related to the development (internally) or acquisition (externally) of other suitable intellectual capital to replace that which had been misappropriated – comprised?

Let’s be clear. I am only exploring potential remedies or defensible strategies to secure economic – competitive advantage relief for companies operating in the increasingly and irreversibly competitive and predatorial knowledge-based global economy where growing percentages of most company’s value, revenue, profitability, and sustainability are inextricably linked to intellectual, relationship, and structural capital, i.e., intangible assets, most all of which are quite vulnerable when effective processes – procedures are not in place, i.e.,

  • to sustain – preserve asset control, use, ownership, value, and monitor their materiality and risk.
  • for asset stewardship, oversight, and management.

A special thanks to Scott Hampton, Hampton IP and Economics for the inspiring this post (www.hamptonip.com)

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com

Intangible Assets: Management Team’s Responsibility To Engage!

May 7th, 2013. Published under Intangible asset training for management teams., Managing intangible assets. No Comments.

Michael D. Moberly    May 7, 2013    ’A blog where attention span matters’! 

Asset risks can materialize instantaneously, sequentially, and simultaneously and rapidly cascade throughout an enterprise to produce long lasting, and with increasing frequency, permanent adverse economic (competitive advantage) effects, so, in today’s increasingly predatorial global business environment….

First, the responsibilities associated with safeguarding (preserving use, ownership, and monitoring value, materiality, and risk to intangible assets are now akin to fiduciary responsibility (Stone v. Ritter).  They should not be construed as merely constituting new business jargon or optional tasks that can be dismissed or neglected, i.e., it will get done as time permits, when the resources become available, or when competitors do it.

Second, in today’s increasingly ‘flat world’ (Thomas L. Friedman) in which R&D, global business transactions, and company operations are routinely conceived, shaped, driven, and executed by the interconnected flow of data and information, i.e., intangible assets, it makes it all the more important that management teams converge their expertise to ensure the intangibles that are in play, are effectively safeguarded and positioned to realize the economic and competitive advantage benefits which they are capable of delivering without succumbing to risks, challenges, or other forms of asset compromises.

To better enable this, practices, processes, and strategies must be in place, along with a (enterprise-wide) culture that recognizes and appreciates intangible assets, and possess levels of alertness and skill to sustain sufficient control of and monitor key assets’ value, materiality, and risk.

Third, the time frame(s) when most companies can realize the greatest value from their increasingly intangible asset intensive products and services continues to erode, variously due to…

  • the abbreviated value and functionality cycles’ of intangible assets.
  • the absence of (conventional) market entry barriers and enforceable intellectual property law which allow for…
    • global cadres of ‘instantaneous’ competitors and infringers, and
    • extraordinary profits gleaned from (intangible) asset theft, infringement, piracy, and counterfeiting operations that pollute legitimate supply chains.

Fourth, intangibles’ development, acquisition, and utilization must be aligned with core business (and security and risk management) strategies rather than being considered primarily as intellectual property-based legal processes and/or decisions. That’s because, conventional forms of intellectual property enforcement, patents primarily…

  • no longer serve as deterrents, safe harbors, or consistent indicators of asset (company) value.
  • can advance a company (economically, competitively) only so long as a company can sustain unchallenged – undisputed use, ownership, and value, of its IP.
  • are relatively easy prey (vulnerable) to global networks of legacy free players and increasingly sophisticated entities engaged in predatorial data mining, business/competitor intelligence operations and economic espionage.

Fifth, safeguards for intangible asset intensive firms and transactions can be best addressed not solely through legislative mandates which, while generally being politically well-intentioned, are often unenforceable on a global scale, particularly in regions with highly country-centric IP and technology transfer law.  Rather, effective intangible asset safeguards are a product of real attitudinal and operational adjustments in a company’s outlook, strategic thinking and planning coupled with a strong recognition that key intangibles, particularly those linked to ‘operational know how’ are highly sought after globally, and therefore consistently at risk.

Sixth, it’s virtually impossible today to engage in any type of business activity or transaction in which intangible assets are not in play and integral to achieving a favorable outcome. Ultimately then, the line between a company achieving profitability and fighting for its financial survival is now more closely linked than ever before, to its ability to

  • identify, mitigate, and safeguard against risks to its intangible assets ranging from disputes, challenges, theft, infringement, or other forms of (asset) compromise while simultaneously extracting – exploiting value and converting intangibles into sources of revenue.

Indeed, intangibles have become embedded in even the most routine business operation and/or transactions. Absent this acknowledgment, the result is often that substantial asset value, competitive advantage, company reputation, and market space may be irreversibly lost, undermined, or er

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com

 

ode.