Michael D. Moberly, Principal, Founder kpstrat and ‘Business Intangible Asset Blog – Business Intangible Asset Strategies and Risk Mitigator
Some legal counsel (litigation side) argue understandably, (as described in CFO Magazine several years ago) that there may be potential ‘perils’ if-when a business (a.) assigns a specific dollar valuation to their IP, (or other specific intangible assets) and (b.) report same on their business’s balance sheet, e.g.,
- a company holds a patent, but no longer directly applies – relies on the patent, i.e., its materiality – functionality has largely abated earlier than initially projected.
- the patent holder favors continuing to report a $1m valuation (of the patent) on their business’s balance sheet.
- subsequently learns the patent may be ‘infringed’, i.e., another business is applying particular and perhaps still ‘protected features’ to produce a different product, assessed to be generating $100 million in sales revenue.
One potential dilemma, should infringement action be taken, is that a patent holder may find it challenging to frame – present a credible (sympathetic) argument that their patent pre-post infringement, is worthy of its $1m valuation if safeguards – risk mitigation are convincingly shown to fall less than best practice, irrespective of its contribution to revenue generation by an alleged infringer.
Some argue, this (or a similar) circumstance, could present opposite (potential) dilemmas for patent holders to consider, e.g.,
- should business leadership elect to pursue an infringement action, there may be an obligation, to do, as a prelude to (publicly) declaring + legal actions intended to retain – regain the rights + economic benefits to patent ownership.
Experientially, a holder could consider ‘allowing’ a patent to (durationally) expire as a possible strategy to avoid any expense (time, resources, reputation risk, etc.) associated with a public acknowledgement + defense, via litigation which exposes a loss to infringement…
- by waying the probability of receiving a favorable ‘damage award’ levied against an infringer.
Damage awards are generally based on public substantiation -+ disclosure of ($) losses (sometimes embarrassingly) attributed to acts of infringement, which suggest ‘something’ about how patents – proprietary information is being overseen, managed, and stewarded.
To be sure, lots of factors and variables in play.
To advise on such matters is not the ‘mission’ of this Blog. Rather, I, through this Blog, endeavor to describe issues, considerations, and questions that probably should be asked + taken into consideration.
IP holders who may elect not to pursue suspected infringement, are obliged to consider how such a decision – strategy (irrespective of the rationale) may translate
- translate to the globally aggressive, predatorial, and ‘winner take all’ business development, operation, and transaction environments, relative to.
- affect valuation + sustainability of other patents and/or proprietarily developed intangible assets a business may hold + apply.
Experientially, when there is a sense of passivity – dismissiveness to safeguard – mitigate risk to intangible assets (IP), either could be interpreted, particularly by would-be infringers, as effectively ‘granting permission’ (globally) to ‘steal’ (use-apply) the foundational intellectual + structural capital (intangible assets described in each patent applications) as they deem relevant – free for the taking, ala,
- there may be no, or little consequence – risk to anyone (internally or externally) to ‘help themselves’, while incurring no asset R&D capital or paying a ‘buy or licensing fee’, etc.
- too, patent holders may anticipate challenges should they ‘cherry pick’ how-when they apply safeguards, risk mitigation, and/or differentiate infringers – circumstances in which to defend – pursue alleged infringement.
Neither may ‘wash’ as a particularly lucrative, sustainable, or prudent strategy that bodes well for reputation, standing, operating culture, or for attracting (future) private investment.
Readers of Mr. Moberly’s – kpstrat’s ‘Business Intangible Asset Blog’ are encouraged to review and comment on other posts wherein arrays of issues related to business things intangible are experientially researched and authentically and practically expressed.