White Paper: Monetizing Intellectual Property To Improve Financial Performance

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EXECUTIVE SUMMARY

Companies can improve their financial performance by monetizing patents and other intellectual property (IP). The goal is to increase the assets and revenues that derive from technology and innovation, while decreasing liabilities and expenses. A good beginning is to prepare an IP financial report, adapted from conventional financial statements. Such a report includes:

(a) an IP balance sheet listing IP assets such as patents and trademarks, and liabilities such as infringement liability, and

(b) an IP income statement quantifying the amount of income from IP, and its cost.

Managers can use an IP financial report to track return on IP investments and to improve performance over time. They can find practical strategies for increasing assets and income and reducing liability and costs by placing a value on each asset. For operational purposes, IP assets should be valued along two axes:

(1) internal value, i.e. relevance to the company's core mission and

(2) market value.

Core assets with high market value merit the most intense level of IP protection, through acquisition and in-licensing. Core assets with low market value should be maintained at moderate cost. Non-core assets with high market value should be sold or licensed out, and non-core assets with low market value should be abandoned to reduce costs. Managers who know the value of their assets can do a better job. Dealmakers can negotiate harder for core assets, and be more flexible with non-core assets. It may be worth fighting over core assets, while quitting or settling may be the best approach for non-core assets. These general guidelines hold true in most situations, but will lead to very different results depending on the business goals of a company and the value of its various assets.

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