Archive for February, 2011

More System Risks

February 21st, 2011. Published under Uncategorized. No Comments.

Experience clearly points to events such as this would and have produced vicious downward cascading that would adversely affect the confidence of lenders, shareholders, and consumers which…

If readers buy into this premise that there are indeed systemic risks to IP and intangible assets…the question remains how to avoid, or at minimum, mitigate the adverse cascading effects.

Systemic risks to a company’s IP and intangible assets should not be viewed in isolation nor as unrelated, snap-shots-in-time events.

Perhaps a better way to convey systemic risks to IP and intangibles is that ‘the assets’ are, out of absolute necessity’ often times shared internally and externally.  In other words, disintermediation may not be a viable option due to time, resource, launch, and contractual (partnership, strategic alliance) constraints.

The primary company must examine/consider how critical any ‘intermediaries’ are to producing – manufacturing a new product relative to the overall necessity to indeterminately sustain uncontested and unchallenged control, use, ownership of the IP and intangibles and monitoring their value and materiality.

List moberly’s characteristics of IP as ‘system risk exposure points’

Conventional IP enforcements work far to slowly to be of any significant value in recovery or recouping losses, or avoiding financial disaster of the companies involved…

Steven Schwarcz of Duke University School of Law wherein he described it (systemic risk) as ‘the probability that cumulative losses will occur from an event that ignites a series of successive losses along a chain of (financial) institutions or markets comprising a system’.

That definition is surely relevant to SME’s and SMM’s which seldom have the resources, inclination, time, and/or internal expertise to recognize the systemic (inherent) risks necessary for sustaining control, use, ownership and monitoring value and materiality of their IP and intangible assets. 

IP Audits and Assessments: Conventional Approaches No Longer Meet Business’s Needs!

February 18th, 2011. Published under Due Diligence and Risk Assessments, Investing in intangible assets.. 4 Comments.

Michael D. Moberly   February 18, 2011

In my view, it’s just rather straightforward.  In today’s knowledge (intangible asset) based economy conventional intellectual property (IP) audits – assessments are no longer sufficient to provide company management teams and boards with the necessary depth, type, and level of strategic information and business insight to meet the needs of the current fast-paced, aggressive, and increasingly competitive business (global transaction) environment.

Traditionally, intellectual property (IP) audits and/or assessments endeavor to identify, often through hand-me-down templates and check-lists, the status and (legal) defensibility of a company’s intellectual property.  And, if an auditor, usually an attorney, is experienced and so inclined, their work may also include ascertaining whether evidence exists that the IP (subject of the audit) may be hemorrhaging, i.e., in some state (all, or in part) of mis-appropriation, infringement, or compromise, in other words, whether the asset is hemorrhaging value and competitive advantages. 

Most traditional approaches to auditing intellectual property tend to be, in my view, time bound descriptions of a specific IP’s status, or, what I often refer to as ‘snapshots-in-time’.  However, in today’s increasingly competititive, predatorial, legacy free, and ‘winner-take-all’ global business environment, the status (stability, value, defensibility) of IP and its complimentary – supportive intangible assets can change quite rapidly.  That is, the assets’ competitive advantages and value can be undermined, entangled in legal challenges, or experience substantial erosion through misappropriation, infringement, or compromise. 

Consequently a snap-shot-in-time approach to an IP audit/assessment seldom reflects or projects the very real possibility the asset(s) will experience changes in (a.) value, stability, and sustainability at some point during the life, value, and functionality cycle of the asset, and/or (b.) the assets’ economic-competitive advantage linkages or contributions to other current or future projects, product development or relevance to a company’s strategic planning, stakeholders, and its value – supply chain.

So, I frame the rationale and methodology for conducting IP audits and assessments through a different lens and with different objectives, that is, to bring relevant, actionable, tactical, and strategic insights to management team and boards about their intangible (IP) assets.  Such insights constitute essential information that should be readily available to management teams and boards whose companies operate in economies and business environments dominated by intangible assets of which IP is an element.

The end goal of course, is for companies to be (a.) well positioned to utilize their IP (and other intangible assets) as effectively, efficiently, and profitably as possible, (b.) well informed about current and horizonal risks relative to their business environment and types of transactions their company is routinely engaged in which intangibles and IP are almost always in play or part of the deal.  

In short, conventional ‘snap-shot-in-time’ IP focused audits/assessments are ill-suited, in my view, to ‘bring to light’ assets’ vulnerability to – probability of infringement, compromise, or misappropriation, each of which constitute ever present, yet evolving risks and threats.

Too, from an IP holders’ perspective, the windows and/or time frames to commercialize IP or position (leverage) other such (intangible) assets to begin reaping the economic – competitive advantage benefits due, are narrowing, somewhat analogous to the rapid pace of today’s cable network and on-line news cycles, wherein certain events can literally ‘go viral’ in a manner of minutes, but they also can, with equal downward speed, be relegated to inconsequential historial blips on our respective radar screens. 

So, a 2011 version of an IP audit and assessment should, again, include objective and strategic insights, not just about a company’s registered IP, but also about – address the complimentary and supportive intangible assets that contributed to bringing that IP to the forefront.

So, in this highly charged, competitive, and evolving global business (consumer) environment, the notion ‘that everyone get’s their 15 minutes of fame’ seems quite relevant to today’s IP arena.  That is, the best business strategy, insofar as IP is concerned, is to take full advantage of that proverbial ’15 minutes’  but also try to extend that time frame for as long as is feasible.  And, that, in my view, is how the 2011 version of IP audits and assessments should be framed and executed, i.e., include an objective determination if sufficient asset management, stewardship, and oversight have been (are) in place to sustain the necessary control, use, ownership, and monitor (the assets’) value and materiality.

So, the notion that one can hold onto their IP, much as if it were a bank ‘certificate of deposit’ in the 1980’s, in which there was, at the time, some certainty CD’s would mature, draw interest, and increase in value over time with virtually little risk, is no longer a reality relevant to today’s business IP – intangible asset dominated environment. 

Some would correctly make the case, as I would, that trying to hold onto one’s IP for indeterminate periods actually increases its vulnerability – probability to compromise, infringement, circumvention, becoming ‘boxed in’, being at the mercy of ‘trolls’, or simply becoming irrelevant.  Any one of those calamaties, should they materialize, can significantly undermine-erode the IP’s value, demand, and attractivity, particularly in the eyes of would-be investors, buyers, and/or alliance partners. 

A harsh reality in those instances, should certain risks materialize, is that a governments’ issuance of a patent may become little more than a handsomely framed document hanging on one’s wall, behind which, there are some ill-fated thoughts of ‘I wish I had done something differently’!

Too, it is a very costly and lengthy undertaking to mount and prosecute a legal defense of one’s IP if misappropriation, infringement, or compromise is suspected.  In other words, to do so, requires not only some ‘very deep economic pockets’, but the holder must be sure their IP protection ‘house is in good order’ before seriously contemplating such a strategy, otherwise, the odds of being on the losing end of the litigation and/or losing the rights to one’s IP altogether are poor.  And, if the holder is a start-up, early stage firm, or even a mature small or mid-size company, such costs frequently serve to deter them from intitiating such processes and ultimately pursuing what is (was) rightfully theirs.

As a holder of IP, it will always serve a company’s near and longer term interests to be able to demonstrate that the asset (subject of an audit, assessment) retaining its projected value, and that its demand and usefulness, in the marketplace, remain stable and sustainable. 

So, re-framing or re-formatting conventional intellectual property audits/assessments to focus more on the value and sustainability of IP and identifying the key intangible assets that support and compliment that IP, its value, and its sustainability, in my view, would provide all parties, be they holders of intellectual property, would be investors, prospective buyers, or stakeholders, with a more objective and strategic perspective regarding the IP’s current and future ‘state of affairs’.  A key benefit of this latter approach of course, is that management teams and boards would achieve a higher level of confidence (about the IP and intangible assets their company produces and possesses) from which they could engage in more sound strategic planning and significantly less risky business decisions .

Another underlying rationale for this post is that company value has literally shifted from collections of physical (tangible) assets to combinations and collections of intangible (non-physical) assets of which intellectual property is one element.  This makes it all-the-more necessary then, that decision makers, would-be investors, buyers and stakeholders of companies with relatively intensive bundles – portfolios of IP and intangible assets should receive far superior insights and guidance about those assets than what is typically reported in conventional template-check list types of audits-assessments.  

This level of information, for example, would have more relevance to (a.) buy, don’t buy, or (c.) invest, don’t invest decisions.  And, if the assessment (audit) includes not merely the IP’s legal status and defensibility, but also, (a.) information about the assets projected life, value, and functionality cycle, (b.) pre and post transaction contexts, and (c.) criticality assessments (i.e., adverse affects) to prospective buyer’s – investor’s mission should certain risks materialize, all parties stand to benefit.  Presented in this context then, the conventional IP audit and assessment would assume many ‘due diligence’ characteristics which again, in today’s hyper-competitive and predatorial business transaction environment are not just helpful, they’re necessary and a fiduciary responsibility!

Additional perspective worthy of introducing to the conventional IP audit/assessment equation is a comprehensive (strategic) understanding and appreciation for the ‘demand’ of the IP (intangible) assets, i.e., somewhat synonymous with its commercialization opportunities.  In this context, an IP audit – assessment should include a relevant, but exhaustive characterization of a company’s current and projected business and competitive landscape to provide management teams and boards with insightful perspectives about ‘demand’ (for that specific IP) emanating from the global business-competitor intelligence industry.

Ultimately, what’s needed is a much more forward looking approach that literally alters the conventional precepts of IP audits-assessments to include much needed due diligence features conducted by experienced practitioners who are well versed in a range of issues that can adversely affect – jeopardize the anticipated (projected) benefits of a transaction in which IP (intangible assets) are key.

So, while I recognize and respect the need for speed and confidentiality in executing business transactions, and by extension, (offensive, defensive) IP audits and assessments, it has come time, in my view, for parties to convey less concern about the speed in which a transaction (deal) can be formulated and more attention towards ensuring the the IP and complimentary-supportive intangible assets that will inevitably be in play remain intact and sustainable relative to their value and revenue producing capabilities, in addition, of course to their legal defensibility in both pre and post transaction contexts.  That’s something that a conventional ‘snap-shot-in-time’ audit seldom provides.

So I advocate (practice) the inclusion of virtual and perptetual elements to IP audit and assessment processes.  By that I mean, inserting mechanisms to continually monitor and objectively assess (measure) changes in asset value relative to the original (business) objective and/or purpose for conducting the audit/assessment.  By doing so, prospective investors, buyers, and alliance partners, and stakeholders can be provided with much needed asset tracking (monitoring) capabilities relative to the (IP, intangible) assets they’re about to purchase and/or make investment and adjust-leverage their decisions accordingly, should it be necessary.

It’s my view and practice then, to, at minimum, re-phrase some of the key questions posed in conventional IP audits and assessments, e.g., ‘is the intellectual property protected’ (presumably by a patent)?  Instead, replace such conventional questions with I view as being more important preceeding questions, that literally go to the heart of the matter, such as, ‘has the know how – intellectual capital on which the intellectual property value-use is premised, been adequately safeguarded and managed from its inception’?

Again, to fully appreciate the relevance of re-phrasing those traditional ‘IP audit questions’, it’s important to recognize that conventional IP protections/enforcements, i.e., patents, trademarks, copyrights, etc., should not be presumed to have any deterrent effect on would-be infringers and/or misappropriators globally.  In many, if not a majority of instances today, conventional IP protections are routinely disregarded, outpaced, and/or circumvented by a growing global body of sophisticated entities that routinely materialize as well organized economic and competitive advantage adversaries.

The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at
While visiting my blog, you are encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry about consulting, conducting an assessment, training program, or speaking engagement to your company or professional association at 314-440-3593.

Building A Reputation Risk Intelligent Company Culture…Every Company Should Strive For – Part 1

February 3rd, 2011. Published under Analysis and commentary, Reputation risk.. 1 Comment.

Michael D. Moberly February 3, 2011

There’s little question that a company’s reputation (image, goodwill, relationship capital, etc.) are increasingly valuable (intangible) assets and in most instances, critical to the growth and sustainability of a company.  But, once a company’s reputation has become tarnished, undermined, or been the subject to scrutiny, sometimes, regardless of the reason, whether it be successive missteps, a one time glitch, and/or a pattern of unethical behaviors or neglect, the path back to achieving, even some semblance of operational and revenue normalcy and consumer-stakeholder stature, is going to be a costly multi-year process.

In my view, any initiatives that a company’s management team and board undertake to try return to that previous state of normalcy, in addition to having thoroughly vetted contingency plans in place, may be for naught, if the groundwork for a viable ‘reputation risk intelligent company culture’ is absent from the equation. A ‘reputation risk intelligent company culture’ is an effective and complimentary path that will deliver returns far greater than the alternative!

There have been numerous studies, surveys, and papers published that address various facets of reputation risk, conceptually, practically, and operationally.  Ultimately, reputation risk has been ratcheted up considerably on c-suites ‘to do’ list.  The respondents admissions in those surveys (advocating reputation risk management) have no doubt been driven, in large part, by recent adverse events by companies such as BP, Massey Energy, Craig’s List, and numerous others that have been on the receiving end of stakeholder, consumer, and regulatory agency ire.  In a percentage of those instances, consumer ill-will can be relatively short-lived, in other words, it can ‘bounce back’.  But one need not look far to see evidence in which such ill-will is longer lived, if not permanent and irreversible.  This is particularly relevant in the consumer products and consumables arena.  And, for publicly traded companies, materialized reputation risks frequently manifest themselves as downward spikes in the stock market and an overall loss in company value.

The current state of (company) reputational risk is not entirely an expectation of companies that operate in what we may refer to higher or lower risk sectors , i.e., baby foods, drilling in the Gulf of Mexico, or coal mining compared to say the graphics arts, for example.  Nor is it necessarily due to the reality that risk events can expand and exacerbate so rapidly today.

Instead, its important to recognize that the materialization of some (types of) reputation risk can be attributed to the absence of a ‘company culture’ that understands the (a.) relevance and potential (enterprise wide) adverse and potentially long term impact on a company’s reputation when certain risks materialize, and (b.) how such risks can, sometimes instantaneously reverberate through the media and find resonance with citizens and a company’s consumers and stakeholders that can literally take down a company in a matter of days.

A company’s reaction and the speed which a reputation risk can manifest can be particularly acute if a company has no advance ‘horizonal monitoring and assessment’ apparatus in place that provides timely and objective insights and updates into (a.) the source or sources (internally and/or externally, and (b.) how the risk emanated or evolved in terms of reaching internal consensus on executing an effective and appropriately timed and themed response, if any.

Let’s be clear though, some companies, get precisely what they deserve.  That is, if or when there is a clear pattern of knowingly engaging in ‘risky behaviors’ or giving only  lip service to regulatory mandates and oversight, be it in the Gulf of Mexico, a coal mine in West Virgina, a chicken processing plant in Arkansas, or a toothpaste plant in China, all reasonable and legal efforts should be mounted against them to ‘make things whole’ if that’s possible for the victims and/or complainants.  Obviously, when deaths or irreversible physical injury are a consequence, seldom, can ‘things be made whole’ again.

But, let’s go inside a c-suite and/or board room after a significant reputational risk has risen.  While few companies today don’t have, at least on paper, various types of business continuity and contingency or organizational resilience plans, its instructive to recognize the types of questions that will likely arise in those c-suites and boardrooms.  Obviously, there are variations to each of the questions below, but these three questions are likely to be prominant…

1. what is the origin(s) of the particular reputation risk, how-when did it start, and by whom or what…?

2. how likely is it that this risk will subside (die down, run out of steam) on its own volition, making a formal response from the company unnecessary or toned differently…?

3. what type/manner of company response to the various reputation risks will resonate best with consumers, stakeholders, and the supply-value chain?

While we’re inside that c-suite or board room, it’s also instructive to examine, in a case study context, the decision by Craig’s List (September, 2010) to shut down its ‘adult services’ section.  While, in my view, this clearly fell into the proverbial ‘no-brainer’ category.

While I pretend to have no insider information on this matter, I am genuinely confident there were numerous meetings over the previous months (well prior to September, 2010) among the company’s hierarchy, in which ‘what should we do about the adult services section’ was repeatedly a part of their discussion agenda, albeit probably unwritten.  After all, the propriety of the ‘adult services section’ was not a single source phenomena.

I am equally confident the room in which those discussions took place had a fair number of legal, public/media relations, reputation risk, and financial advisors on hand, each offering their perspectives and prognostications about the outcomes of various courses of action under consideration.

Again, while I was not a ‘fly on the wall’ to hear those discussions first hand, so to speak, I’m thinking it’s not rocket science to assume the consensus reached in most of those meetings, at least up to the September 4th decision to suspend the adult services section, had something to do with the economic fact – business reality that the adult service section was a consistent revenue generator to the tune, it’s been reported, of $37+ million per year.

I further suspect, during some of the initial discussions among Craig’s List managerial-strategic hierarchy, when the ’what should we do about the adult services section’ question was posed, on multiple occasions consensus was reached to ‘ride this risk out’ for as long as possible.  If that were true, I would be inclined to interpret it as, unless and/or until the adverse public reaction rises to some, perhaps pre-determined level, e.g. 15+ state’s attorney general’s filing civil actions and going public with their admonitions, only then would the option of closing down the adult services section be executed.

Presumably, the strength, depth, and ‘width’ of the adverse reaction, among other things, was being assessed.  Should my assumptions be close to correct, which I suspect they are, I would be inclined to characterize Craig’s List response in the context of ‘no decision is a decision’. Ultimately, the situation Craig’s List soon found themselves in, was, pure and simple, ‘company reputation risk management 101‘ instead of a graduate level course it should have been.

It perhaps would be unfair to overlook the reality that if such (adult) services were not in demand, particularly in a semi-anonymous web-based format, ala Craig’s List, it’s likely, from a business perspective, Craig’s List would have made the decision to discontinue that particular offering probably at the initial hint of problems (reputation risks) on the horizon. By doing so, it’s likely they could have leveraged that decision (to discontinue their adult services section) in a manner that they could reap strategic and perhaps well deserved accolades from their stakeholders and consumers versus being on the receiving end of civil actions from a growing list of detractors, special interest groups, and politicians at the start of the mid-term political-election campaigns, i.e. August-September, 2010 which certainly provided the proverbial ‘low hanging fruit’. Bad timing on their part perhaps?  But, I would say it’s another good business reason to invest in a ‘reputation risk intelligent company culture’.

Reputation glitches, such as the one Craig’s List experienced, represent genuine ‘wake-up calls’ for management teams and boards to immediately, closely, and objectively examine how or whether their company culture (a.) is attuned to and observent of reputational risk, (b.) genuinely reflects the company’s public behavior, and (c.) consistently meets the expectations of its customers, consumers, stakeholders, and clients?

(This post was inspired by a paper produced by Deloitte titled ‘The People Side Of Risk Intelligence: Aligning Talent And Risk Management.)

The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at
While visiting my blog, you are encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry about consulting, conducting an assessment, training program, or speaking engagement to your company or professional association at 314-440-3593.

Will Conventional Business Plans and Missions Statements Remain Relevant In Intangible Asset Driven Economies?

February 1st, 2011. Published under Business plans and mission statements.. No Comments.

Michael D. Moberly   February 1, 2011

The increasingly competive business terrain in which know how and other intangible assets have become the overwhelmingly dominant drivers and producers of value and revenue, is, in my view, prompting many companies to re-examine the relevance of their often times, conventional and even static business plans and mission statements.  

I am not suggesting there is anything inherently wrong with continuing to write business plans and mission statements, because they frequently do serve as a descriptive (Gannt Chart type) of roadmap of what one wants his or her business to eventually look like and how to get there!

But, for analogous purposes, some (management teams, boards) are inclined to view business plans and mission statements in a ‘constitutional’ like fashion, i.e., either as a ‘living’ document that’s malleable and subject to flexible interpretations to reflect an evolving global business environment, or a more static document that can only be interpreted on the basis of its ‘original intent’. 

I am finding however, more companies, at least some of those that I come in contact with, positioning themselves to become more responsive, more adaptive, and more prepared to execute relatively rapid internal changes, absent being bound to any particular conventional or structured sets of processes associated with traditional business plans. 

Let’s be clear though, my engagements, by choice, are primarily with the small, mid-size, and early stage arena from which its easy to surmise that the standard or conventional business plan or mission statement is becoming less relevant.  I find this particularly evident when I advise company’s about the necessity to ensure the intangible assets they produce and/or acquire are effectively aligned with their company’s strategic planning, hence, its mission statement and business plan. 

Business plan construction is still routinely portrayed in many college (business management) textbooks as being one, if not the very first step one should engage toward developing a new business.  Interestingly, in an MBA course I taught several several semesters ago, I presented this alternative view to the class, in which there were numerous ‘entrepreneurial spirited’ individuals who aspired to start their own businesses, with some already in the early stages.  

For them, my (alternative) view, prompted numerous opposing reactions, particularly from those students who had toiled over writing a business plan and now were clearly wedded to it.

But again, its simply not uncommon to find myself visiting companies which, at first blush, appear to be, for lack of a better term, almost ‘rudderless’ in that they are continually evolving, emerging, and even, what appears to some I’m sure, as being in a perpetual state of ‘re-inventing themselves’.  The reason or rationale for this rather un-conventional management style, according to the management team leaders of those firms, is the necessity to retain sufficient internal flexibility and maneuverability to be able to accommodate their particular transaction space as quickly and effectively as is warranted, which again, is increasingly being dominated by intangible assets which, I am arguing, do not always mesh well with  conventional, highly structured or inflexible business plans or mission statements.  Admittedly, lenders are not always enamored with this alternative view.

And also, admittedly, this alternative view (management styles) does require, in most instances, more attention and oversight from the management team and board.  They need to epitomize (embrace) flexibility, intellectually and conceptually, by being prepared to adapt, change, and have the necessary information, at the ready, to make sound decisions as rapidly as a new deal, proposal, or circumstance warrants.

There’s little question now that ntangible assets have become the key and irreversible underlier to business success and profitability, that is, if they’re recognized, developed, and used effectively.  But, those assets must also be very maneuverable, flexible, adaptable, and ‘bundable’ in order to serve as preludes to accommodating the development and execution of a new product, service, or transaction. 

With respect to company mission statements I see some being replaced by (a.) more broad and generally worded statements drawing attention to customer service, supply and value chains, and regulatory compliance issues, or (b.)  perhaps a series of what I refer to as ‘mini-mission statements’ inter-twined with tactical-strategic planning language geared toward the development and execution of a particular product or service.

Of course, an inextricable and underlying key to all of this, in my view, is for decision makers to have a firm grasp of the intangible assets their company and its employees are producing even for early stage firms, which have come to be so integral, again, when recognized and applied effectively. 

A point worth noting is that is only the producers of intangibles, i.e., employees, who possess the intelligence, wisdom, timing, and sense of foreseeability to recognize when and how to adapt, modify, or change those assets to accommodate a new or different company initiative.  In other words, there must be a ‘company culture’ in place that, among other things, includes the stewardship, oversight, and management of intangible assets.

 The ‘Business IP and Intangible Asset Blog’ is researched and written by Michael D. Moberly, president and founder of Knowledge Protection Strategies –  The intent of Mr. Moberly’s blog is to provide insights and perspective to aid in a cross-disciplinary approach for identifying, assessing, valuing, protecting, utilizing, and extracting value from intangible assets.  Your comments regarding my blog posts are welcome at

While visiting my blog, you are encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry about consulting, conducting an assessment, training program, or speaking engagement to your company or professional association at 314-440-3593.