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Your intangible assets

Jackie Maguire, CEO, Coller IP, pictured, and Michael D Moberly, President, Founder Knowledge Protection Strategies, KPSTRAT write about protection of intangible assets.

Physical security of buildings and equipment as well as threats to computer networks are high on the agenda of most security professionals. An aspect of security protection that is perhaps not considered in as much depth as it should be is that of protecting the intellectual assets of a business. But with over 65 per cent of the value of today’s companies typically drawn directly from intangible assets (including intellectual property) – most organisations should be paying more attention to it than they do.

Probably the majority of organisations today are aware that intellectual property is important. But perhaps not just how important. And many are still somewhat unsure about how exactly to identify these intellectual assets – the so-called ‘crown jewels of a company – and less sure still about how to measure their value. And without understanding their value, it is difficult to evaluate the risk of losing these assets, or to take steps to ensure they are fully protected.

Chief Security Officers and Chief Risk Officers are typically responsible for identifying viable strategies (solutions) for protecting what matters most to their company and mitigating relevant risks.

With the shift to the knowledge based economy in the early to mid-1990s, intangible (non-physical) assets began to overtake tangible (physical) assets as dominant sources of most company’s value and sources of revenue.

While some of a company’s value and revenue of course still flows from physical assets such as equipment, inventory, manufacturing facilities, property and so on, the focus of security and risk management professionals should be increasingly on the value and revenue derived from a range of intangible assets that often evolve internally, but that can also be acquired externally, such as intellectual, relationship, and structural capital, reputation, brand, and intellectual property.

The good and bad news for CSOs and CROs, depending on their point of view, is that they are assuming greater, and more distinctive roles in mitigating risk and safeguarding the intangible assets that now underpin the value, competitive advantage, and sources of revenue they generate.

This additional responsibility includes reducing the probability the growing array of intangible assets will be misappropriated, undermined or eroded by new threats resulting from an increasingly aggressive, competitive, global economic environment. When security challenges and risks materialise, the contributory value of the intangible assets can quickly be wiped out. That is especially true if safeguards, asset monitoring, and risk management practices are either non-existent or ineffective relative to mitigating the speed and devastating effects of which most risks-threats are now capable.

Today, almost any asset vulnerability, risk, or threat unacknowledged or left unchecked, will materialise. CSOs and CROs need to think in terms of risks to intangible assets today not just as probabilities, but rather as inevitabilities!

This makes it all-the-more (professionally) obligatory for CSOs and CROs to acquire operational familiarity with their company’s intangible assets, which, among other things, include recognising …

– What they are, what they aren’t, how they develop/evolve to create contributory value, sources of revenue, and competitive advantages, etc.
– The increasingly sophisticated and subtle risks-threats to intangible assets.
– various ways those risks-threats can materialize to adversely affect intangibles, and
– Effective tools to protect the intangible assets.

It is essential that security and risk management practitioners fully recognise the business reality that 65-plus per cent of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability reside exclusively in intangible assets.

Ensuring that they are not at risk needs to be an on-going task, not least because their management and protection are now fiduciary responsibilities – ie, it is no longer optional. Not only is this essential but it is also urgent, because of the short life, value, and/or functionality cycles of intangible assets, the lower market entry barriers by aggressive global competitors and vast and easy profits generated from (intangible) asset theft, infringement, piracy, counterfeiting and business/competitor intelligence operations and economic espionage.

The development and/or acquisition and use of intangible assets must become closely aligned with core business, security, and risk management strategies and not just regarded as intellectual property based (rooted) legal processes. To achieve this, it is important to put in place relevant, effective, and flexible practices, processes, and strategies. At the same time, a ‘risk intelligent company culture’ is required that recognises and enables intangible assets and can contribute to sustaining their control, use, ownership, and monitor the assets’ value and materiality.

Unfortunately for the future of many businesses, it is not just CSOs and CROs who are unaware of the vital importance of intangible assets but many senior managers as well do not understand their importance or the value of the assets they have. Many have never had any training on intangible assets which means they have little, if any, operational interest or familiarity with this aspect of their business.

Assuming, however, that an organisation is taking an enlighten approach to intangible assets, there will, in some larger companies, be an intellectual property officer who will be responsible for these assets. The relatively new function of CIPO (Chief Intellectual Property Officer) currently comes under a number of different guises and titles, including Chief Innovation Officer, Head of Research, Legal Director and even Head of Market Planning. CIPOs come from many different backgrounds, but typically they have had legal training. Many smaller companies combine the role with that of FD, company secretary, or IT director and with no single individual who is responsible for this role and they may turn, (as indeed do many of the larger organisations when they need additional help), to consultancies who specialise in intellectual property matters.

Howsoever the company is structured, it is important that those responsible for risk or security in an organisation work with IP professionals and senior management to understand the value of the intellectual assets and the risk that the loss of them would pose, and then to work together to protect those assets in the best possible way. This requires technical, legal and commercial understanding.

Uunderstanding the value of the IP and other intellectual assets in a company is the first step to protecting them. So how should companies go about it? Identification of all the valuable intangible assets in a company involves undertaking an audit to identify them and assessing which of these may be of significant value. This includes assessing strengths and weaknesses of the IP relative to that of existing or potential competitors, while at the same time identifying possible opportunities for exploiting IP further.

The process should also include checking any weaknesses in patents and other IP from both a legal and commercial position so as to identify risks and avoid potential pitfalls. One of the areas that it is important to look at is how well differentiated the technology and patent applications are from the ‘prior art’ – that is, previously published third-party patent documents in the same technology space. This involves searching international patent databases to analyse prior publications and to establish whether third-party patents are still live.

The question is often asked as to whether, given the intangible nature of IP, can it be valued? The answer is ‘definitely’ .

The various approaches that are used are not dramatically different to those used to value many tangible assets and where an in-house function is not equipped to perform this role, external expertise can be brought in. It is the assessment of risk that requires specialist skillsets.

Security and risk management practitioners must engage and lend their expertise to ensuring that a company’s intangible assets are consistently and effectively safeguarded and positioned to realize the economic and competitive advantage benefits which they are capable of delivering. Threats to intangible assets can materialize instantaneously, and permeate throughout an enterprise to produce permanent adverse economic affects to a company’s competitive advantages, R&D, reputation and relationship capital. The role of the CSO and CRO in protecting these has never been more important.

Coller IP is a specialist in commercial IP management, valuation and commercialisation. Web: www.collerip.com

Reader contact: Dr Jackie Maguire, CEO, Coller IP
Fugro House, Hithercroft Road, Wallingford
Oxon OX10 9RB

Tel +44 (0)870 402 1616
Email: jackie.maguire@collerip.com


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