Intangible Assets Beat The Odds Of Theft

Michael D. Moberly   March 18, 2013    ‘A blog where attention span matters’.

It’s in every company’s interest, if not responsibility, to have practices – procedures in place now that are geared toward ‘beating the odds’ that their valuable, revenue and competitive advantage producing intangible assets will be vulnerable – fall prey to adverse acts/events, i.e., infringement, misappropriation, and counterfeiting.

Unlike other forms of intangible assets, i.e., intellectual property (patents, trademarks, copyrights) there is no certificate issued by the government to a company and/or asset holder that says…

  • these are your intangible assets, i.e., proprietary competitive advantage driving intellectual, structural, and relationship capital as well as other forms of unique and/or specialized know how
  • sustaining control, use, ownership, and monitoring (asset) contributory value, materiality, and risk falls exclusively to company/organization management teams in the form of a fiduciary responsibility.

Too, conventional forms of IP (intangible asset) enforcement, i.e., patents, trademarks, copyrights, and trade secrets are certainly less relevant today insofar as constituting markers of value or long term profitability.  True, patents, trademarks, and copyrights remain requisites for conveying ownership and standing to address disputes and challenges, these enforcement mechanisms do little in the way of representing a deterrent favorably changing the vulnerability, probability, and criticality risk equation relative to today’s increasingly competitive, predatorial, and ‘winner take all’ global business transaction environment.  Intangible asset and IP misappropriation, infringement, and/or counterfeiting is now culturally and economically embedded in many countries’ GDP.

Once a company’s assets are gone, they’re probably gone forever.  In large part that’s because core asset value and competitive advantages can be quickly identified and extracted from assets that have been compromised and instantaneously disseminated to a global labyrinth of information brokers, infringers, and counterfeiters, which may include economic-competitive adversaries.  Compromised assets, and their value, are often, worst case irreplaceable and irretrievable.

With respect to the valuation of a company’s IP, intangible assets, and (proprietary) competitive advantages, etc., it is unwise, in my judgment to consider value to be static or not susceptible to countless risk and market influenced fluctuations.  In my view, management teams should exercise respectful skepticism and caution about accepting (asset) valuations which are framed – produced in ‘snap-shot-in-time’ contexts.  It’s important to recognize assets’ (contributory) value can fluctuate and seldom, in my view, remains static for indeterminate periods.  Aspects that we certainly know for sure are that once an asset has been compromised, economic and competitive advantage hemorrhaging can (a.) commence immediately, (b.) it will be global, and (c.) very costly and time consuming to stop or reverse.

Of course, management teams, c-suites, and boards are obliged to recognize these economic – competitive advantage realities through the lens that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets they produce internally or acquire externally.

The key takeaway here for management teams is to avoid treating intangible assets as being readily or easily renewed.  To bring clarity to this view, let’s very respectfully review some basics!

An idea, by definition, exists solely in one’s mind, where it remains relative secure, but not terribly useful unless and until it is effectively articulated in a business (commercialization, monetization, and marketing) context.   An obvious requisite to monetizing and commercializing an idea is that it must, at some point, usually in its earliest stage of development, be expressed, presumably to trusted others, and therein lies the starting point for experiencing vulnerabilities, risks, and challenges (to the idea as a potentially valuable intangible asset) to the originators, holders, and/or owners.

Fundamentally, the protection of ownership rights to ‘products of the mind’ represents a basic social contract between society, its government, and the individual(s) who created the idea. (Choate, p.218)

Today, the risks to intangible, particularly intellectual, structural, relationship capital, and reputation assets are globally asymmetric, change rapidly, and, when they occur, can instantaneously stifle, undermine, and/or substantially erode…

  • competitive  advantage – economic momentum
  • specific transactions or strategic business plans
  • an assets’ value and projected (future) profitability.

Of course, this is particularly relevant to the rapidly rising numbers of companies globally which are increasingly reliant on and would be quite correctly considered ‘intangible asset intensive’ companies.

In the pre-Internet era, when intangible asset compromises occurred, usually template-based business continuity – contingency plans were executed with emphasis on containing the damages and/or extent of the loss.  Today, however, while containment may be admirable, it does not reflect the speed in which (intangible, non-physical) assets can be surreptitiously acquired and disseminated.  And, once an asset has been compromised, a strategy based on containment, in the conventional sense, is seldom a viable option.  That’s largely because dissemination – distribution of illicitly acquired assets is now measured in seconds and minutes, not days, weeks, or months.  In other words, intellectual, structural, and relationship capital, explicit know how and competitive advantages can be acquired and manifest as products and/or services and infect, i.e., appear in heretofore legitimate global supply lines in extraordinarily abbreviated periods of times.

Today, the contributory value and competitive advantages embedded in those intangible assets researched and targeted by global cadres of economic and competitive advantage adversaries can be quickly discerned and extracted, whole, or in part and instantaneously distributed to a global labyrinth of extraordinarily skilled and organized information brokers, counterfeiters, and/or economic-competitive adversaries, including state and non-state actors.

So, again, while conventional intellectual property enforcement mechanisms, i.e., patents, trademarks, and copyrights remain the mainstay for distinguishing ownership and standing for responding to (legal) disputes, challenges, and array of other risks, the fact is, they’re reactive and require self-policing.  In addition, the deterrent features those mechanisms are presumed to bring to their holder, remain, are, in my experience, misunderstood and worse, utterly ignored and circumvented by global cadres of infringers and misappropriators.

There are few credible (strategic) indicators – evidence that the current trends of global (intangible) asset infringement, product counterfeiting, and misappropriation subside.   With this perspective, I suggest that prudent and forward looking – thinking management teams should duly reflect on the potential obsolescence of conventional intangible asset enforcement mechanisms as representing the primary instruments to effectively safeguard intangible assets.  After all, intangible assets will be – are in play and integral to most every business transaction!

Let’s be clear though, I am not suggesting that conventional intangible asset enforcements should be eliminated.  However, the reality is that the once respected rights and protections afforded to innovators and entrepreneurs (through patents, trademarks, and copyrights, Article I, Section 8, U.S. Constitution) are now being routinely outpaced, circumvented and disregarded globally.  Any assumption today, and for the foreseeable future that the issuance of a patent, will serve as a standalone deterrent (i.e. inhibit infringement or misappropriation) and otherwise be sufficient for the rightful holder to sustain full control, use, and (asset) ownership rights, is unfortunately, a not-so-credible business reality.

Each blog post is researched and written by me with the genuine intent they serve 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 information piggy-backed to other sources, or unsubstantiated commentary.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of any 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 [email protected]

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