Thursday, April 26, 2012

An Opportunity to Lead on Intangibles

Today’s guest blogger is Bruce Berman, a principal in Brody Berman Associates, and is responsible for four books on IP and business, including From Ideas to Assets. His weekly posts can be found at IPCloseUp.

The recent sale by AOL of 800 patents to Microsoft for $1.1 billion, and patent purchases by Facebook and Google and Apple, are graphic reminders that intellectual property rights, otherwise hidden assets, are keys to unlocking value.

Intangible assets like patents that are not reflected on balance sheets today deserve the same oversight as a business’ other financial assets. They rarely get it.

PwC and other sources attribute 80% or more of the market value of S&P 500 companies to intangible assets, primarily intellectual property rights. Despite this, many companies do not discuss their patents publicly because they fear they are too intricate and that no one is listening. That is no longer the case.

CXOs and board of directors should not be intimidated by the learning curve or financial reporting challenge. Explaining their innovation rights should not be seen as a burden but as an opportunity to provide stakeholders transparency and turn hidden value into market capitalization.

Patents are the product of costly R&D. They can permit innovative companies more market share and higher profit margins, licensing revenues and freedom from disputes.

Businesses that fail to explain the role their IP rights play in financial performance are short-changing themselves and possibly shareholders. The clever ones will disclose more before investors and regulators require them to.

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