Managed Properly, IP Can Drive an Organization's Value

Let’s treat this hypothesis as true, globally:  IP within an organization can have tremendous value, value that can grow significantly if managed properly.  Australian law firm Page Seager accepts this as fact, but then writes about what they call “the elephant in the room,” the fact that GAAP underreports the value of an organization’s IP.  Why is this significant?  Well, if IP is the WHAT, as a value driver for an organization, who is the WHO? IP certainly won’t reach its value potential by itself.  It needs to be managed. If GAAP affects financial reporting, and the value (and potential value) of IP is not truly reflected in the financial statements, is it fair to expect the CFO to be the WHO? The answer is probably, and perhaps unfortunately, “No.”  Was it the CFO who extracted the $1.8B in securitized value from the Kenmore, Craftsman and DieHard trademarks after the KMART takeover of Sears?  No.  It takes keen, uncommon strategic vision, vested generally in an organization’s CEO.

Financial Statements have a compliance burden attached to them, and they reflect the past.  As Page Seager opines, they are nothing more than a scorecard, marginally useful  for future decision-making and strategic planning, most especially as it relates to realizing and creating value from IP assets.

Concomitant with the WHO question is one of getting corporate commitment and resources to exploit IP ownership.  For example, IP managers in organizations worldwide are being asked to value and manage their IP … easy to say, not so easy to do … but uniformly require CFO buy-in for their plans to receive adequate funding.  "If it’s not in the financials, it’s not going to attract the investment dollars we require, so why should any investment of time and money be spent on something outside financial scrutiny?"

At IPVALUE-Site.com, we contend the IP manager must have the ear of the CEO or the chief strategy officer in order to effectively and properly exploit IP assets.  An investment in locating, unbundling, and valuing the IP assets at hand has to be the initial step.  (There are other stakeholders from whom the IP manager needs buy-in and assistance.  For example, the company’s IP counsel would be an obvious partner, and the company’s tax department or tax advisors can also be significant contributors to the IP value growth strategy through tax-saving transfer pricing ideas.)  We will continue to write about the valuation needs of IP Managers, searching for insight and tools to help them perform these critical tasks.