- Intangible asset are…
- Categories – types of intangible assets…
- Conducting intangible asset assessments and pre-post transaction due diligence…
Intangible assets are…
- unique blends of know how-based assets that variously intersect to support specific (often proprietary) methodologies, processes, best practices, and information sharing infrastructures. (Adapted by Michael D. Moberly from the experienced work of Weston Anson, CONSOR)
- interwoven – embedded processes, relationships, and operating culture in synchronized to market demands-conditions to differentiate businesses (in their market spaces-sectors) to create-deliver value, generate revenue, and build-sustain competitive advantages. (Adapted by Michael D. Moberly from the fine work of Michael Porter, Harvard Business School)
- economic benefits anchored in company processes, personnel, efficiencies, and/or programs that set a company apart from its competitors to create new and sustainable sources revenue and value. (Michael D. Moberly)
- at the center of all business innovation; they come at the beginning as ideas, at the middle as processes, and at the end as commercialization and distribution channels. (Adapted by Michael D. Moberly from the many years of excellent work of Dr. Baruch Lev, NYU, Stearns School of Economics)
- generally, naturally – organically occurring (not necessarily purposefully manufactured) elements, which become embedded in organizational behavior, practices, and management, frequently, as variants of intellectual, structural, and/or relationship capital, where they often await recognition, identification, assessment, and development by business management teams, when, effectively safeguarded and exploited, for which there is ample evidence and track record, and, achieve lucrative and competitive outcomes. (Michael D. Moberly)
Categories and types of intangible assets…
Readers may find it useful to examine the categories-types of intangible asset listed below in the context deemed most relevant, i.e., (a.) you or your company are the rightful originator, developer, user, and owner, (b.) the various business circumstances and/or transactions an asset can be in play, (c.) how an asset could be leveraged-applied as a source of revenue, add value, and/or competitive advantage, etc., (d.) how, why, when, and circumstances an asset can be at risk to economic – competitive advantage adversaries, devaluation, infringement, materiality change, etc., and thus warrant risk mitigation and/or application of safeguards.
- trademarks-service marks; trade name, trade dress; brand names; logotypes; colors; mastheads; internet domain names; non-compete agreements, distribution rights and networks, production backlogs, subscription lists, favorable financing arrangements
- design and business process/method patents; patent applications; patented technology; technical ‘know how’ documentation (lab notebooks, manuals), computer software; trade secrets, secret formulas, processes, recipes…
- product shapes; food or chemical formulas; plant construction; FDA approvals, technology share agreements
3. Artistic – creative
- literary works, musical compositions, song lyrics; advertising jingles; photography, pictures, and video; AV materials; TV programs; maps and engravings; plays, operas, and ballets; books, magazines, and newspapers; reprints; performance rights, unpublished manuscripts, literary works-musical compositions, specialized know-how…
4. Data processing
- platform software; software copyrights; automated databases; integrated circuit masks and masters; mailing lists and customer data retrieval systems
- industrial designs; trade secrets; engineering drawings, schematics, and blueprints; technical knowhow…
6. Customers – clients
- customer lists and relationships and contracts; open purchase orders; order or product back log; non-contractual customer relationships, etc…
7. Brand – company identity
- logo design; character devices; jingles and music; advertising concepts; copyrights; sub-brands; trade dress; logo devices, corporate name; corporate colors, logo; core marketing campaign; umbrella brands, trade names
- domain names; website design; 1-800 numbers; web links; retail systems; embedded customer bases; URL’s…
9. Patent assets
- prior art search; competitor research; flanker patents; patent applications; foreign patents…
10. Contract related assets (A definable life, and with some of exclusivity.)
- supply, media, performance, pricing agreements, license and/or royalty agreements, advertising, construction, management, and/or service contracts; lease agreements; construction permits; operating and broadcast rights and licenses; usage rights; drilling, water, air, minerals, timber cutting agreements; route utilization; franchise agreements; subscription rights; futures contracts; open purchase orders, buy-sell agreements, agreement to collaborate, contracts with suppliers, customer client contracts, lists, relationships, franchise agreements.
- graphics; packaging; colors; designs; warranties
- insurance in force and expiration
12. Intellectual property contract assets
- in-licenses and out-licenses; co-branding agreements; endorsement deals; spokesperson contracts; venue name rights, royalty agreements…
- IP, trade secrets, copyrights, patent processes – application
- source code; enterprise solutions and custom applications; software products, databases, and digital data designated as proprietary…
- product research studies; focus group results; psychographic research; bench research; process and assembly data; manufacturing data bases, research libraries, designs, drawings, schematics, diagrams designated as propriety, lab notes – research documentation, historical documents of import, proposals outstanding…
15. Real estate
- zoning rights and permits; rights-of-way and easements; building-development rights and air-water rights, lease agreements, (location), mineral/natural resource exploration and exploitation rights…
- broadcast licenses, cable rights and/or transmission rights; FCC license to operate and/or certifications; bandwidth…
17. Human resources
- work for hire and temporary help contracts; specialty business skill systems; customer relations; non-compete clauses; trained and assembled workforce, and wage rates; union contracts; employment contracts, training/procedure manuals, solicitation rights, non-compete agreements… (Michael D. Moberly – Copyright 2017 – All Rights Reserved)
Why Conducting Intangible Asset Assessments – Due Diligence Are Essential
The primary reason for conducting intangible asset assessments and due diligence emanates from the economic fact that today, 80+% of most company’s – organization’s value, sources of revenue, competitiveness, and future wealth creation (potential) lie in – emerge directly from intangible (not tangible-physical) assets.
Thorough intangible asset assessments and pre-post (transaction) due diligence are important to routine company-business operations under consideration and/or undertaken because they (an assessment, due diligence action) serve as means to identify under-utilized intangible assets, strategies to build – sustain asset value, sources of revenue, competitive advantages, and mitigate asset risks.
It’s important for boards, c-suites, and management teams to recognize that assessments and due diligence (of their intangible assets) are not exercises applicable-useful only after they suspect or experience a (business) problem, e.g., infringement, misappropriation, disappointing transaction, insider theft, an unprofitable venture, or cited in a civil action.
Similarly, it’s essential (intangible asset) assessments – due diligence not be construed as mere confirmatory reviews and thus executed using generic (one-size-fits-all) checklists. Instead, intangible asset assessments and due diligence should be company – transaction specific with an obligation to provide the relevant parties with…
• an objective sense of the assets’ fragility, stability, defensibility, contributory role, value, and current state.
• actionable recommendations (strategies) for making sound – prudent business decisions which encompass safeguarding, preserving, managing, and extracting value from the assets individually, collectively, and/or collaboratively.
A first responsibility, when conducting intangible asset assessments and due diligence, is to understand the distinctive functionalities – cultures within a client’s company-organization. This occurs by securing operational familiarity with its intangibles, especially intellectual, structural, and relationship capital and their (company-client specific) variants.
What circumstances should companies conduct intangible asset assessments and due diligence? At minimum, assessments – due diligence should be considered a prelude to or coincide with any significant transaction or new initiative in which intangible assets are – will be in play and potentially at risk to value erosion, competitive advantage undermining, and/or infringement.
How will an intangible asset assessment – due diligence benefit a company? In the case of business transactions in which intangible assets are in play – at risk, an assessment and due diligence can enable and facilitate (contribute to) a more secure and profitable transaction (not impede it) by providing management teams with economic, operational, and contributory role and value clarity to each of the relevant intangible assets by identifying…
• embedded – under-the-radar risks, vulnerabilities, and operational complexities that may contribute to impairing or entangling knowledge-based assets and thus serve as preludes to costly and time-consuming disputes and challenges.
• and unraveling centers – chains – clusters (internally) of assets and competitive advantages and assess the adequacy of safeguards and contributions to company value, sources of revenue, sustainability, and competitiveness.
• efficient – effective safeguards and value preservation measures that are specifically aligned with a transactions’ objectives and the organizations’ strategic business plan, i.e., projected returns, exit strategy, and life – value – functionality cycle of the assets in play.