Valuing IP and Litigation, a perspective worthy of recognizing…

Michael D. Moberly, Principal, Founder, kpstrat

Some IP (intellectual property) litigators are, understandably, obliged to bring to clients’ attention,

  • potential dilemmas and/or challenges which conceivably could arise for a company’s leadership, i.e., holder of IP, if – when they wish to project a dollar value to their IP and/or other (mission essential) intangible assets,
    • and report same on a balance sheet.

To illustrate the relevance of this circumstance, let us suppose, for example…

  • a patent has been issued and rightfully held by a company, 
  • however, for various reasons, the patent content, i.e., its presumed innovation and competitive advantage, etc., were yet to be effectively developed, commercialized, or exploited to benefit the holder, and
    • valuation of the patents, i.e., content + contributory role is $3.5m and reported as such to the company’s balance sheet.

Then, (post patent valuation) the company learnstheir patent, ala the intellectual, structural, and/or relationship capital, has been misappropriated – is being infringed, allegedly by a

  • sector competitive advantage adversary (somewhere, somehow, someway) who, in turn,
  • has aggressively applied same to develop, produce, and sell (sector competing) products and/or services (all buttressed – fortified with the infringed intangibles) @ a reported $500 million annually.    

Some IP litigators may be inclined to argue, these circumstances could present potentially costly dilemmas for the rightful patent holder,

  • should they elect to pursue the alleged infringer(s) and seek damages and/or reparations,
    • which, not-so-arguably, the company’s leadership may have a fiduciary, if not legal obligation to do, if they wish to retain – sustain the rights to their patent.  

That said, patent holders are obliged to avoid the notion (appearance) of ‘cherry picking’ if, when, or which infringement circumstance (risk) they pursue (prosecute legally).

In today’s aggressively predatorial business innovation, trade, and transaction environments, it is now prudent for IP holders and business leadership to assume…

  • the risks of misappropriation and infringement of proprietary intangible assets and/or IP has surpassed probability guesstimates and is now an objective inevitability.

The potential dilemma, this circumstance presents, should the matter proceed to actual litigation, is…

  • the patent holder and their counsel may find it challenging to frame – present a credible (sympathetic) argument that their patent is now (suddenly, post infringement) worth much more than its initial $3.5m valuation, 
    • relative to the $500m annual sales the misappropriator – infringer has developed by exploiting the infringed IP.

Any extrapolation this example should serve as rationale for company leadership to push back from presumed (fiduciary) obligations to (a.) fully utilize their contributing intangible assets, and/or  (b.) execute best practices to preserve and sustain control, use, ownership, and monitor the value of those (IP) assets, would surely be shortsighted. 

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