OxFirst Ltd.
Investing wisely in IP
More than ever
before, there is a need to invest wisely in technology. No matter which technology
one looks at, the adequate management of the underlying IP is crucial so to
commercially succeed.
An IP valuation looks at business legal dynamics from a quantitative
perspective. In doing so, it allows to put substantive legal aspects in a
business context and establish a bridge between law and economics. The IP department
by consequence has a chance to stop being perceived as an esoteric cost centre
and has the chance to become drivers of business success.
For this to happen
a sort of ‘translation exercise’ needs to happen, whereby a patent right can become
a patent asset. Even if it does not make the leap to be an asset and it becomes
visible that it really is a patent liability, then this still has a massive business
proposition. IP which bears no business proposition can be eliminated, which
helps save costs.
Elements of
an IP Valuation
An IP valuation
is structured into three parts. An IP due diligence, a business assessment of
the IP and an in-depth analysis of the role of the IP within the larger
competitive environment.
The IP valuation
consists of an initial due diligence followed by a strategic assessment of the
various opportunities provided by the IP to maximize profits. It also helps
manage costs, which many companies may find important in the current situation.
Recognizing
Forces at Work in an IP Valuation
Using Professor
Porter’s framework of ‘forces at work’ is a very helpful step to grasp IP from
a business perspective. Translated to the peculiar features of IP law, such
forces at work can consist of regulatory challenges, technology challenges, potential
new market entrants, as well as competitive dynamics in the market.
Technology
challenges may pertain to the actual tech solution itself. Is this novel
technology even be doable by nature? For example, is it even possible to offer
a vaccine for a virus or does a virus not even respond to a vaccine?
Potential new
market entrant may be in a position to offer a better market solution. They may
be able to offer a faster, cheaper or more effective solution. At times, there
may also be novel tech solutions, which make existing ones entirely obsolete.
Competitive dynamics
in the market may pertain to issues such as vertical or horizontal integration.
Does one single company operate in the same market that it also sells its tech
solutions to? If so, can this have an effect on the value of its IP and that of
other market participants?
The assessment
of these forces at work helps determine a potential net value for the IP at
stake. In doing so, it allows to establish a relationship between the IP and
the business environment it is situated in. However, such analysis is not just
narrative in character. The valuation of the IP allows to quantify such forces
at work. This is an amazing value proposition as it helps understand potential
returns and sets them in relation to risk.Unsurprisingly,
this allows a firm to reorient its strategy and sets the baseline for the entire
business strategy, not just the narrow circle of the IP strategy itself. A firm
can be in a position to maximize revenues, while at the same time minimize its costs.