Creating Value From Intellectual Property Rights

IPRs not only enhance the brand value of any organization but also help in increasing market capitalization

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By Rohit Gajbhiye • Nov 11, 2021 Originally published Nov 11, 2021

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Intellectual property rights (IPR) are a prized possession of any organization. They are the reward for constant hard work and investment in new research and innovation. IPRs not only enhance the brand value of any organization but also help in increasing market capitalization. It would not be an overstatement to say that IPRs have the capability to change the fortune of any organization. Copyright, trademark, patent and trade secrets are the prevailing forms of IPRs. Obtaining IPR is a complex legal procedure, however, it is beyond the scope of this article. In the subsequent paragraph, we will discuss how can an organization take full advantage of its IPR and create value for itself.

Owing IPR can be great; however, in order to achieve full value from the IPR, organizations need to be very careful while filing for the rights. Carefully choosing the location for filing for intellectual property is very important. Often the value of the IP is determined by the place where it is obtained from. The next step would be carefully defining the terms of your IPR. Organizations should try to make their claims as broad and continuous as possible. Another important factor is the timing of the declaration. Too early or too late declaration of the intellectual property could hamper the claim of the patentee.

There are several ways an organization can create value for itself through its IPRs. Every method has its own advantages and shortcomings.

Self-usage or exclusivity
Using your own IPRs to produce the goods or provide the services is perhaps the simplest way of creating value through your IPR. This way the organization can have a monopoly in the market. However, not every organization has the capability of producing the product by itself. Often, organizations do have the capability to use their intellectual property, they have certain limits in terms of scalability. To overcome these issues, other ways of using intellectual property for monetary gains have been devised.

Selling
Like any other valuable asset, intellectual property can also be sold. In case a company lacks the capability of using or managing its IPR, it can exercise this option. Once the intellectual property is sold, the original owner would permanently lose all the claims on the asset and the new owner is free to utilize it. However, there might be clauses that prohibit the buyer from any modification to the asset. Google sold some of its intellectual property (Motorola mobility) to Lenovo for 3 million USD in 2012.

Licensing
Licensing is perhaps the most common form of creating value from IPRs. In this method, the owner of the intellectual property provides temporary rights to another individual or organization to use the asset and the user pays a royalty to the owner. The licensing agreements strictly prohibit the user from any alteration to the original asset. The owner of the intellectual property can have more than one licensee for their intellectual property.

Intellectual property as collateral
As discussed above, some organizations might not have the financial capability to use their own intellectual property, however, they might not be interested in selling or licensing their IPRs. In such cases, these organizations can use their IPR as collateral to raise funds. Many investors, banks and non-banking financial institutions are now accepting intellectual property as collateral against making investments or disbursing loans. This type of arrangement is particularly popular among start-ups. However, it is some companies use intellectual properties for other reasons as well. Kodak used its patents in digital photography as collateral to raise funds during its bankruptcy period.

Intellectual Property Rights can take any organization to great heights both in terms of brand value and market capitalization, however, they need to be handled with utmost care. Whether it's filing for the patent/ trademark, the decision of the location of filing or decision on how to utilize them to generate value for the organization, proper planning can be the difference between success or failure.

Rohit Gajbhiye

Chief Executive Officer, Financepeer

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