Intangible Assets In Early Stage Companies: Protection

Michael D. Moberly    August 3, 2009

When early stage company’s intangible assets (IP, proprietary know how, etc.) become entangled or ensnared in time consuming, momentum stifling, and costly (legal) disputes, experience suggests it’s frequently a consequence or combination of…

  –  misplaced trust in and/or the unethical/illegal conduct of business partners, research collaborators, employees, investors, etc.

  – not attaching sufficient managerial priority to protecting and sustaining control, use, ownership, and value of the assets.

  – the actions of competitor/business intelligence or data mining operations, or even industrial (economic) espionage, either of which can rapidly undermine competitive advantage or result in the irreversible loss and erosion of asset value. 

  – naivete’ regarding the predatorial, winner-take-all aspects of engaging a global business environment. 

Each of the above are very real and persistent risks and when left unchecked or dismissing any as merely constituting an additional risk of doing business today borders on a breach of fiduciary – managerial responsibility. 

Understandably, early stage company management teams focus much of their time and attention to matters that appear more immediate, i.e., raising capital, furtherance of R&D, operations, etc.  Regardless, ground level stewardship, oversight, and management of intangibles and IP should not be relegated to optional ‘I’ll do it when time permits’ because its an economic fact, particularly for early stage firms, that 75+% of their value, prospective revenue streams, sustainability, and foundations for future growth are directly linked to their intangible assets.  

There are three factors that frequently influence early stage company management teams in this regard, i.e., they… 

1. do not have fully developed/articulated intangible asset or IP positions beyond what’s verbalized for prospective investors

2. mistakenly conceive the stewardship, oversight, and management of intangibles as non-returnable costs rather than investments that add assurances that their launch will be successful and profitable, and

3. mistakenly assume that patent applications, provisionals, and/or issuances are sufficient (stand alone) asset protections that either offset or deter the risks/threats cited above from materializing.  

The assumption that any company, especially early stage firms, can ‘patent and walk away’ is not a sustainable business practice, that is, following patenting, risks/threats to intangible assets should not be assumed to solely be legal (IP) counsel problems, rather they continue to be management team and board decisions!  The probability than an early stage firm with particularly innovative and commercializable intangibles and IP will experience at least one of these threats, risks, entanglements and/or ensnarements has elevated considerably.




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