Pros/Cons of Intellectual Property

Pros/Cons of Intellectual Property

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Effectively balancing and mixing one or more elements of intellectual property (including copyright, patent, trademark, and trade secret) is essential to maintaining a strategy for any company.^[1]See, e.g.,  Mazzoleni et al., The benefits and costs of strong patent protection: a contribution to the current debate, Research Policy 27:273-284 (1998); Elhanan Helpman, Innovation, Imitation, … Continue reading

Intellectual property adds significant benefits to a company.  First, intellectual property adds to a company’s valuation.  For example, intellectual property may increase investor confidence (e.g. venture capitalists, angel investors, the public with an IPO, etc.).  Additionally, intellectual property increases a degree of customer confidence which may translate into more faithful customers (i.e. customers assign a high value to the company).

Second, intellectual property adds significant protection to a company.  On one hand, the protection may extend from a core product (e.g. the “secret sauce,” the golden nugget, etc.) to any business related activity or information.  The name, the text, and the product all need to and should be protected.  The protection also extends to defending the company’s research and development efforts.

Third, an intellectual property portfolio can be a source of profit.  For example, an IP portfolio can generate revenue (e.g. cross licensing, settlement agreements, etc.).  Additionally, in some situations, a portfolio may be outsourced to a licensing company to generate revenue for a company.  As a last resort, the IP portfolio can be sold.^[2]As an example, Kodak sold its digital imaging portfolio for $525 million.  See, e.g., Natash Lomas, “Kodak Agrees to Sell Digital Imaging Patent Portfolio for $525M To Consortium of 12 … Continue reading   

Fourth, intellectual property gives a positive public image.  Such a public image may bolster a company’s market position.  Additionally, the public image may be some proof of the company’s novelty and ingenuity.

Fifth, last but not least, intellectual property comes down to leveraging your company or product.  IP increases your power of leverage during negotiation, during potential litigation (e.g. if you don’t sue me, I won’t sue you, etc.), and/or for business exit options (e.g. do we liquidate our IP, assert our IP, etc.). 

Of course, the above examples are just some of the reasons that intellectual property can benefit a company.  That being said, lest I be accused of only indicating the ‘benefits’ of intellectual property, recognize as well that asserting rights to IP is not always an easy process.  It can be expensive,^[3]Particularly patent litigation. take years to resolve, be unpredictable,^[4]Your case may be transferred to another venue, the jury selected may not be what you expected, etc. and may be at the mercy of the then-current state of legal affairs^[5]Compare, for example, the patent licensing market prior to and after the passage of the American Invents Act. The laws directly influence ownership rights – including the right to assert.. In short, it is not an all-rosy field without issues.

That being said, it is my experience that notwithstanding the potential negative considerations, the positive benefits consistently and historically far outweigh the negative.