Showing posts with label finance. Show all posts
Showing posts with label finance. Show all posts

Friday, 26 August 2022

CNIPA Touts Patent Commercialization and Finance Activity at Universities

On August 3, 2022, the China National Intellectual Property Administration (CNIPA) published a press release (in English also) titled, “Patent Commercialization Activities at Universities Sky Rocket in Past Decade.”  The press release points to a significant increase in grant rate of patents to Chinese universities as well as licensing activity.  Notably, the press release states that the monetary value went up from 820 million Yuan to over 8.8 billion Yuan.  The press release discusses a patent licensing program amongst Chinese universities and with SMEs that appears to mandate publishing licensing agreements.  Professor Mark Allen Cohen, a distinguished fellow, lecturer and director of the Asia IP Project at UC Berkeley Law, has an excellent post on interpreting China's patent data, here.  The press release states:

Under the circular, to promote stable implementation and efficient operation, CNIPA has convened special sessions to deploy implementation of patent open licensing and has allocated two detailed schemes to its own departments and local IP authorities respectively, with an aim to mobilize over 100 colleges to participate a pilot program and eventually involve over 1,000 patents as of the end of 2022, and endeavour to improve the efficiency of patent commercialization. Currently, 13 provinces have issued accompanying plans for the pilot program, six of which have looped in 77 universities to cull and publish open licenses for 3,375 patents that were pushed to 19,000 micro, small and medium-sized enterprises (SMEs) with matching need, leading to conclusion of 587 licensing agreements.

"Next, CNIPA will publish the recorded information of the concluded patent license agreements and formulate a suggested national standard on patent evaluation, giving instructions on pricing of open licensing and stimulate both the suppliers-universities and research institutes and the buyers -SMEs for a better chance of materializing the innovation findings," added the same principal.

The press release also discusses its commercialization program:

This commercialization program was launched jointly by the Ministry of Finance and CNIPA in March 2021, which inspires commercialization of college-developed patents, educates universities to polish their mechanisms in allocation of IP-generated profits; with support from University IP and technology transfer centers, Industrial IP operation centers intensively announces supplying information of patent related technologies; makes patent/technology connection between universities and state-owned enterprises and SMEs to improves their practical ability in patent commercialization. Furthermore, the Ministry of Finance and CNIPA would aid in building a green channel in the provinces that have implemented this program, about processing related patent transfer, licensing and pledging for SMEs. Patent transfer/licensing involving universities/research institutes happened 27,000 times in 2021, up 33% year-on-year, twice faster than the growth rate of all patent transfer/licensing activities while 24,000 times or 89% out of the 27,000 times were transactions made with SMEs.

Friday, 15 April 2022

Google: Investing in Education . . .

Google recently released some interesting information concerning its economic impact in the United States.  It is very impressive.  Google released its Economic Impact Report for 2021 and announced its investment of over $9.5 billion in U.S. Offices and data centers.  Notably, Google states in a blog post:

Google’s offices and data centers provide vital anchors to our local communities and help us contribute to their economies. In the U.S., over the past five years, we’ve invested more than $37 billion in our offices and data centers in 26 states, creating over 40,000 full-time jobs. That’s in addition to the more than $40 billion in research and development we invested in the U.S. in 2020 and 2021.

Google also notes that:

Today we are also releasing our 2021 Economic Impact Report, which reflects Google’s wider contribution to the economy. The report shows we helped provide $617 billion in economic activity for millions of American businesses, nonprofits, creators, developers and publishers last year. In addition, the Android app economy helped create nearly two million jobs last year, and YouTube’s creative ecosystem supported 394,000 jobs in 2020.

We also continue to help people get the skills they need to succeed in today’s economy, from our role as a founding member of the Michigan Central innovation district in Detroit to our $100 million Google Career Certificates Fund — a new financial model for helping people access education and digital skills.

The Google Career Certificates programs and Fund is an ambitious project:

The goal is to enable Social Finance to reach more than 20,000 American workers. This investment in America’s future has the potential to drive $1 billion in wage gains.

This fund is a new kind of financing model. We’ll invest Google capital and Google.org grants and provide our Career Certificate program. Social Finance will provide funding to nonprofit partners like Merit America and Year Up, who in turn will provide services like career coaching, living stipends and job placement support. And we’ll connect students to an employer consortium of more than 150 companies who are looking to hire workers with these skills.

It’s all designed around student success. They will receive all of this at no upfront cost. And will only pay it back once they find a job earning at least $40,000 a year. Social Finance will then redistribute those repayments to future learners, making this model more sustainable.


Saturday, 3 July 2021

NFTs and Financing the Future of Potential Stars

NFTs are getting a lot of press.  For sure, NFTs have made a big splash in the art world.  I had an interesting conversation with a friend today about financing young athletes through the monetization of their right of publicity since the NCAA (and states) have begun allowing collegiate athletes to profit from their image etc.  One interesting issue concerns aspiring professional tennis players.  Often those players must make a decision between attempting to finance a shot at a professional career—a very expensive prospect, or go to college and see what develops.  Notably, as a friend mentioned to me, there are numerous excellent young tennis players who cannot finance the expenses to start a pro-career—expenses such as travel, coaching and trainer fees, hotel etc.  Many have to give up on a promising career because of a lack of funding.  Interestingly, this is a sport where economic class plays a big role—kids with less resources are unable to be developed and never get a legitimate shot at the pro-tour.  Allowing young players to monetize their right of publicity without damaging college prospects may be an interesting way for them to gather resources to support a professional career in the future and develop (maybe crowd-funding works).  Local businesses, family, friends and others could invest in young players early.  But, what if we could sweeten the deal?  What if we could use NFTs to create a market for, as an example, electronic playing cards for young athletes?  Can you imagine what the NFT “playing card” for an athlete such as a young Andre Agassi, Messi, Ronaldo, or Michael Jordan may be worth after they develop in the future?  There are a lot of details to sort out, but you can see how a market can develop creating an enormous amount of value and good (and yes, a potential for bad).  See here for Topps entry into the NFT market for trading cards: Topps Digital Launching Baseball Card NFTs (beckett.com).  What if we could expand the concept further?  There's no doubt that we are at a place where maximizing the potential of human resources is our greatest challenge.  This could be a way to help.  Extend it to brilliant children to finance their education?  IP and NFTs at their best?  It's an interesting thought experiment. 

Friday, 10 July 2020

New US $1 Billion Fund to Finance Development of Antibiotics


The Biotechnology Innovation Organization has issued a press release announcing the creation of essentially a US $1 billion fund to finance the development (particularly late stage) of antibiotics.  The press release states: 


Today more than 20 leading biopharmaceutical companies announced the creation of an estimated $1 billion fund to help support the pipeline for new antibiotic treatments. The AMR Action Fund was launched as the threat of antimicrobial resistance, or AMR, continues to grow and claim more lives. In response to today’s launch of the fund, BIO issued the following statements celebrating the news:

“Antimicrobial resistance is one of the largest and looming public health threats we face today,” said BIO President and CEO Dr. Michelle McMurry-Heath. “Even as the world’s scientists work tirelessly to fight COVID-19, we must not ease up on our battle against antimicrobial resistance. Just as we’ve seen our industry step up during the pandemic, I applaud these biopharmaceutical leaders and partners for committing to the development of new antibiotics. The AMR Action Fund will provide critical support for the development of new medicines, but it is up to policymakers to enact the long-term changes needed to support healthy, sustainable markets for the future development of new and effective antibiotics.”

“For years, we’ve watched antimicrobial-resistance infections rapidly rise around the world, while the market has slowly shrunk for new medicines to fight them,” said Greg Frank, Director of Infectious Disease Policy at BIO & Director of the Working to Fight AMR campaign. “Today’s new AMR Action Fund will have a tremendous impact on the development of new antimicrobials, but we still need government to implement new policies and incentives so companies can successfully develop, test, and launch new antimicrobial products.”

Biopharmaceutical companies and foundations supporting the fund are:

Almirall, Amgen, Bayer, Boehringer Ingelheim, Chugai, Daiichi Sankyo, Eisai, Eli Lilly and Company, GlaxoSmithKline, Johnson & Johnson, LEO Pharma, Lundbeck, Menarini, Merck, MSD, Novartis, Novo Nordisk, Novo Nordisk Foundation, Pfizer, Roche, Shionogi, Takeda, Teva, and UCB

For more details on the AMR Action Fund, visit www.AMRActionFund.com.

Friday, 24 January 2020

Kerrigan on The Financing of Intangible Assets


In an ambitious and relatively short book (290 pages) titled, "The Financing of Intangible Assets: TMT Finance and Emerging Technologies" (LexisNexis), editor and author Charles Kerrigan of CMS law provides a treatment of financing of intangible assets in the technology, media and telecom sectors.  The book has wide breadth and selective depth in its coverage of the subject matter.  Moreover, it is a practical book which discusses mitigating risk and anticipating potential issues, including focusing on potential problems that may arise with new and emerging technology.  The book first opens with five chapters that provide an overview of various relevant agreements and the role of players in the field.  The second part covers security and regulation, such as “Taking Security over Intellectual Property Rights,” and “Restrictions on Assignment, Floating Charges.”  The next ten chapters cover financing in various industries, including Software, Telecoms, Gambling, Music, Biotech and Healthtech, Publishing, Advertising and Adtech, Technology, TV Broadcast Media and Media Technology, and Film.  The next ten chapters ambitiously highlight specific countries’ law concerning the subject matter, which are each authored by practitioners from those respective countries, or Mr. Kerrigan in collaboration with law firms in the geographic area.  Finally, the book ends with ten chapters generally dedicated to an area of new technology involving finance, such as Digital Money, Blockchain and Artificial Intelligence.  This book is helpful as a resource for those who desire an overview of the field and those who need a relatively detailed treatment of a specific area.  It is a welcome addition to the resources concerning the topic.

Tuesday, 14 May 2019

Guest Post by Dr. Janice Denoncourt: Enriching Reporting on Intangibles: UK Financial Reporting Council's Consultation

Dr. Janice Denoncourt, a Senior Lecturer at Nottingham Law School, has
authored the following guest post concerning updating accounting standards for intangibles.  Notably, her comments tie together contributions from her recently published book [Intellectual Property, Finance and Corporate Governance (2018)  is available from Routledge as part of the Research in IP Series here], which was discussed in her previous IP Finance post, here, and the recent UK Financial Reporting Council's consultation on Business Reporting of Intangibles: Realistic proposals.  


         ‘The difficulty lies not so much in developing new ideas as in escaping from old ones.’

                                                             John Maynard Keynes (1883-1946)

Accounting sanctions particular distributions of wealth and legitimises commercial relationships.  How the accounting international financial reporting standards (IFRS) and international accounting standards (IAS) treat intangibles, a wide category which includes IP rights, is an important corporate governance concern, especially for large and listed IP-centric companies.   Accounting and financial statements, such as the balance sheet and profit and loss account, act as a kind of internal control for investors, shareholders, financiers, suppliers and other stakeholders who engage with the company.  While the evolution of the credit and debit matching system has been indispensable to the efficiency and material prosperity of the modern economy, accounting for intangibles needs to be updated and advanced – particularly for internally generated corporate IP assets.  The problem is that IP is largely invisible in traditional financial accounts as they are ‘off balance’ sheet when IAS 38 Intangibles is applied.   Many knowledge-based intangibles do not meet the accounting definition of an ‘asset, nor the recognition criteria set out in the prevailing accounting standards.  The UK FRC recognise that this important corporate governance challenge – namely, the inadequacy of traditional accounting methodology to deal with the future value creation potential of intangibles and monopolistic IP rights.  However, an understanding of the deeply ingrained accounting principles is needed to better understand the accounting and reporting issues at the heart of the consultation.

A lesson from the Merchants of Venice on the history of accounting

In Chapter Four of my research monograph Intellectual Property, Finance and Corporate Governance (2018) I examined the deeper reasons rooted in the history of double entry book keeping why accounting for intangibles and IP is so difficult.  Briefly, the ideas that revolutionised the way Europeans counted and accounted for their assets were introduced by the Italian Renaissance mathematician, Leonardo of Fibonacci in his ground breaking book Liber Abaci, ‘The Book of Calculations’ published in 1202.  

Fibonacci introduced the concept of present value (the discounted value today of a future revenue stream). Historically, the double-entry book keeping system, which forms the basis for modern accounting principles and is globally accepted, was simply a tool to track and document the exchange of tangible items and prevent embezzlement.  In other words, it is an ‘error detection tool’ making it a record of historical transactions.  In the case of error, each debit and credit can be traced back to a journal and transaction source document, thus preserving the audit trail.  The double entry book keeping system was originally designed to prevent fraud and misappropriation by employees of the Renaissance merchants of Venice.  The root of the problem with the modern accounting for IP rights developed by a company internally (rather than acquired from someone else) is that these assets do not fit the socio-historic evolution of accounting as there is no historical transaction to record.  For example, when a patent is applied for it becomes a property asset of the company and thus a form of currency.  At this point, there will be no historical market transaction to record in the accounts if the patent was developed internally, as opposed to acquired from a third party at arm’s length (no purchase price of the asset to record).  However, the expenditure to internally develop the innovation to the patent filing stage IS usually recorded.  Thus from an accounting point of view, part of the equation is missing in the balance sheet.  Arguably, there is also a basic question as to the integrity of the accounts.  The entry is a debit expense, with no equivalent asset (credit) recognised due to the uncertain future value of the patented invention.   

Modern accrual accounting and the GAAP

The next significant step in the history of accounting was the ‘accrual’ method which essentially relies on six key principles: (1) revenue principle; expense principle; matching principle; cost principle, objectivity principle and the prudence principle.  The ‘matching principle’ correlates the revenue and the expense principles. The nature of R&D, innovation, filing patent applications (which may be granted several years later) does not map well onto the accrual method of recording historical transactions at arm’s length either.  These assumptions and principles have become known as the Generally Accepted Accounting Practice (GAAP).  The GAAP shape a perception of the quantitative value of intangibles and monopolistic IP rights.  Arguably, the GAAP accounting principles shackle the fullest use of corporate IP assets as their value is simply not captured and reported publicly. In summary, the internationally harmonised accounting principles have traditionally relied on two inherent assumptions. First that tangibles rather than intangibles contribute to business performance and second, that business depends largely on an arm’s length transaction between a willing buyer and a seller (in contrast to in-house development). 

Calls for reform to business reporting of intangibles

Fortunately, over the past decades, there have been frequent calls to reform the accounting (quantitative) and narrative reporting (qualitative) of intangible assets.  This has been largely in response to the move to a knowledge-based economy and the greater store of corporate value which resides in intangibles.  Accounting, narrative reports (annual reports, directors strategic reports) and actual events support ‘triangulation’, a powerful technique that facilitates validation of data through cross verification from three or more sources applying several methodologies to the same phenomenon. 

The UK FRC’s Consultation

On 6 February 2019, the UK Financial Reporting Council took the bold step of launching a consultation on Business Reporting of Intangibles: Realistic proposals.  Possible improvements to the reporting of factors important to a business’ generation of value are set out in the Discussion Paper prepared by FRC staff.  The FRC’s paper considers the case for radical change to the accounting for intangible assets and the likelihood of such change being made in the near future. It suggests that:

(1)   relevant and useful information could be provided without the need to recognise more intangible assets in companies’ balance sheets;

(2)   such information could cover a range of factors, broader than the definition of intangible assets in accounting standards, that are relevant to the generation of value;

(3)    improvements could be made on a voluntary basis within current reporting frameworks (such as the strategic report); and

(4)   participants in the reporting supply chain could collaborate to bring about improvements.



The FRC’s Executive Director for Corporate Governance and Reporting, Paul George states:


“It is unrealistic to expect the value of a business to be fully represented in its balance sheet; there is always likely to be a gap between the balance sheet total and the market capitalisation of a company. The paper suggests several ideas for expanding the information provided, both quantitative and qualitative, to improve users’ assessment of corporate value.”



The research in my book and derived from my PhD thesis (2015) underpins the detailed response I made to the FRC consultation, which closed on 30 April 2019, and is published, here.    

In summary, everyone essentially agrees that existing accounting standards should be advanced, updated and modernised to take greater account of intangibles and IP assets.  The question is how and to what extent.  To this end, I made several practical suggestions that could be implemented with relative ease including the greater use of notes to the accounts as well as the use of the well-established technology readiness level (TRL) system to facilitate investment in technologies.

Technology Readiness Levels

The TRL system, for those not familiar with it, is a well-established method of estimating the maturity of critical technology elements on a scale of one to nine, with nine being the most mature technology.  The TRL system was originally developed by the US National Aeronautics and Space Agency (NASA) in the 1980s to assist with the allocation of public funding and is now widely used in public finance.  



The use of TRLs enables consistent uniform discussions of technical maturity across different types of technology.  It is also an entrenched measurement tool to support the assessment of investment and funding risks in publicly finance technology, but in my view could be more widely used in private finance and corporate reporting.  The TRL system facilitates cross-sector communication regarding technology and could help to improve transparency and disclosure of intangibles in business reporting. 

My further recommendations include the need to keep accessible accounting records for intangibles and IP assets, even if they are consider  ‘off-balance sheet items’ under accounting standards to ensure the integrity and traceability of the accounts in the future e.g. when the business and/or IP is sold. 

I also firmly hold the view that there is a need for a minimum level of intangibles and IP business reporting by large of listed companies who own substantial IP portfolios.  An annual IP audit and formally reporting who is responsible for managing and control of corporate intangibles and IP assets would be good practice and may give rise to a greater role for IP professionals in corporate reporting and governance.  In my view, adopting the above would expressly increase the level of transparency and disclosure of corporate intangibles in the public interest.  

However, there are a variety of views on the subject and some areas of disagreement.  The FRC Discussion Paper and all 18 responses (CPA Ireland, UKSA Office, CPA Australia, Grant Thornton UK LLP, Ernst &Young, SEAG, The 100 Group, WCI, Wellcome Trust, Christopher de Nahlik, ACC, EAA, RICS, QCA, IR Society, Mazars and ICAS) are published, here.     



No doubt the range of submissions, reflections and ideas submitted will influence the international debate and the International Accounting Standards Board (IASB) on the matter.  However, the discussion paper does not cover the reporting of goodwill and its subsequent impairment which may be a future project.




Friday, 4 January 2019

Banking Issues for the Marijuana Industry in California: Unlikely to be Solved Any Time Soon


The state legalization of marijuana in many states, including California, has spurred the development of a relatively new multi-billion dollar business sector.  One of the issues arguably holding back the speed of development of the market is the illegality of marijuana sale, distribution and possession at the federal level.  And, one of the problems arising from that illegality is the lack of the availability of banking services for many marijuana businesses.  Because many banks will not deal with marijuana businesses, it remains a mostly cash business.  Former California Treasurer John Chiang created a working group to analyze and propose potential solutions to the banking issue and also commissioned an external expert report.  The expert report was recently released and basically recommends that California not adopt a state-backed bank for marijuana businesses.  The risk of either federal prosecution or the federal government making marijuana sale, distribution and possession (including aiding and abetting) legal and regulatory issues, in part, makes it unlikely to be successful and financially feasible.  The expert report states:

For each of the three options the state can expect to spend $35 million on start-up costs incurred over a six year start-up period.  There is a high probability that federal regulators will not issue a master account to the bank, which is necessary for the bank to open and conduct basic banking functions such as wiring funds. In that eventuality any start-up funds expended to that point and during the subsequent wind-down would be wasted. If approved to open, the bank will then require just under $1 billion in capital, will lose money for 12 years before the bank is able to pay dividends sufficient to fully provide a return on the invested capital and begin repaying that capital, and the state of California will not begin receiving net dividends until 25 to 30 years after the bank opens, or sometime between 2050 and 2055.  If federal regulations change during this time and cannabis banking becomes legal, the bank would most likely be closed at that point due to a decreased business demand for the bank and thereby incur a significant loss. If federal regulators begin to aggressively enforce federal laws the bank would be closed and deposits subject to confiscation. Under this scenario the losses would be substantial and liabilities impossible to determine. Even if federal regulators maintain the current ambiguous situation, commercial banks will offer competing services to the industry by the time a public bank could open. Our conclusion is that no option for a public bank focused on the cannabis industry is feasible.

Other solutions examined include a public credit union, the state purchase of an existing private bank, and various FinTech (financial technology) solutions that attempt to solve the problem using payment technology such as cryptocurrency. Each of these options is ultimately dependent on access to national banking and payment processing networks, so each encounters the same difficulties overcoming the federal laws that are holding back access to banking now. We conclude that none of these alternate solutions is feasible. 

The expert report does propose that a state agency take up continued work on a strategy to address the issues related to marijuana banking.  BNA has a nice overview of problems with IP and marijuana business in the United States, here.  
Happy New Year!  

Thursday, 26 April 2018

Guest Post: Intellectual Property, Finance and Corporate Governance

We are pleased to publish this guest post by former IP Finance contributor and Senior Lecturer in Law, Dr. Janice Denoncourt, at the Nottingham Law School at the Nottingham Trent University. 

The emergence of IP rich companies is the new corporate governance challenge. This is because IP is largely invisible, not only in the financial accounts, but also more generally in corporate law theory and the legal framework.  The research in my new book Intellectual Property, Finance and Corporate Governance demonstrates why companies need to communicate more about how they manage corporate intellectual property (IP) rights portfolios and their strategy for delivering shareholder value. Depending on their business model and corporate objectives, companies add value via their corporate IP assets in different ways to achieve their goals.   In the modern era, all companies, large and small, have intellectual property (IP) rights, sometimes across multiple jurisdictions.  They are corporate IP owners.  At the same time, the shift to intangibles and IP assets as the major driver of value in business is clear and unstoppable.  Since the Global Financial Crisis ten years ago there has been a renewed interest in our current understanding of capitalism.  As a result, shareholders, business people, stakeholders and the public, seek more relevant, accurate information about IP-dependent business models and their impact on commercial value.    

Dr. Janice Denoncourt
In the aftermath of the Theranos 'misleading investors' scandal, this is an increasingly important modern corporate governance issue.  Theranos, Inc. is an American consumer healthcare technology company based in Palo Alto, California founded in 2003 by inventor and Managing Director Elizabeth Holmes. In 2018 Holmes was subject to civil charges by the United States Securities and Exchange Commission (SEC) for massive fraud in excess of $700 million USD for having repeatedly yet inaccurately assured shareholders and regulators that the company’s patented blood testing technology was revolutionary (see https://www.sec.gov/litigation/complaints/2018/comp-pr2018-41-theranos-holmes.pdf).  Theranos’ 200 plus US patent portfolio is public information via the United States Patent and Trademark Office (USPTO) portal and a significant corporate investment in IP. Holmes co-invented more than 270 of the company’s patented innovations. While patents do not equate to innovation or commercial success, they do act as business indicators of inventive activity as well as a commitment to protect the results of innovation.  Holmes, of all people, was well placed (if not best placed) to understand the capability of the blood testing technology. The alleged misconduct, namely misleading investors and government officials, has generated a new global regulatory discourse about what companies need to tell us about their IP.  Arguing that it needed 'to protect its IP' to excuse material omissions and misleading disclosures is not acceptable according to the SEC.  In the SEC’s press release on 14 March this year, Steven Peikin, Co-Director of the SEC’s Enforcement Division stated:

            Investors are entitled to nothing less than complete truth and candor from companies and their executives... The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.

Stephanie Avakian, Co-Director of the SEC’s Enforcement Division further confirmed:

            As a result of Holmes’ alleged fraudulent conduct, she is being stripped of control of the company she founded, is returning millions of shares to Theranos, and is barred from serving as an officer or director of a public company for 10 years...This package of remedies exemplifies our efforts to impose tailored and meaningful sanctions that directly address the unlawful behaviour charged and best remedies the harm done to shareholders.

Key corporate governance principles of transparency and disclosure are being more rigorously applied to corporate ownership of monopolistic IP rights that protect innovation and creativity.  In the US, SEC disclosure law Regulation S-K requires disclosure of the importance, duration and effect of all patents, trademarks, licences, franchises and concessions that a company holds.  The standard for 'material' corporate IP asset disclosures will continue to evolve in the US and other IP-rich jurisdictions.  The civil legal action brought by the SEC against Holmes is the catalyst highlighting a void in corporate practice.   IP-rich companies like Theranos will continue seeking corporate finance which falls under the corporate governance regulatory umbrella.   IP rich companies need to ensure they reflect on disclosure and transparency rules and take into account the growing magnitude of their corporate intangibles, IP assets and IP business models that potentially generate future wealth for their shareholders and potential investors.  

Closer to home, in 2017 the UK implemented the EU Non-Financial Disclosure Directive which requires large and listed companies to include additional disclosures of non-financial information in their annual reports, similar to the disclosure requirements in the Strategic Report.  The Non-Financial Reporting Regulations insert sections 414CA and 414CB into the Companies Act 2006, supplementing the existing strategic report requirements as set out in section 414C.  These new company law equirements potentially increase the reporting of non-financial information, better business and IP strategy reporting through the mandatory requirement to report the company’s business model.  This EU-wide reform highlights the growing importance of disclosure of non-financial information.

IP rights have evolved from being “a little pool to a big ocean” of corporate value and that corporate governance needs to respond to society’s rising expectations of directors and boards.  The astonishing lack of quantitative and qualitative public information about the growing magnitude of corporate IP assets makes it difficult to assess strategic value (“the IP value story”) and directors’ stewardship of those assets.  More relevant, accurate and 'joined up' corporate IP information (mostly known to internal management) is needed to triangulate intangibles financial data through cross verification with narrative disclosures and actual events.  The SEC stated that Theranos engaged in “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business and financial performance.”  This is a new frontier in corporate governance thinking and practice. 

My research evaluates how corporate boards can ensure an appropriate level of transparency and make voluntary and mandatory ‘true and fair’ disclosures about a company’s corporate IP assets such as patents and trade secrets in traditional formats such as the accounts and the annual report.   The philosophies and principles that underpin debates on disclosure and transparency suggest that more 'open' disclosures about innovation, whilst preserving competitive advantage, are necessary so we have something to read, evaluate, react to and question. Countries including the US and the United Kingdom have mandatory obligations to report on gender balance, climate change and more, but not expressly corporate IP.  Patents, mini-case studies and an original business triage-style model for assessing corporate IP information, strategy and disclosures illustrate the gaps corporate governance theory needs to address.  Companies need to tell us how their corporate investment in R&D and IP rights contributes to the bottom line and regulators need to ensure boards of directors are accountable for IP management and strategy decisions, an important underside of the intangible economy.  

Intellectual Property, Finance and Corporate Governance contributes to the legal and economic literature for readers interested in what lies behind the headlines.  The foreword is written by Professor Nicolas Binctin, Universite of Poitiers. As for the future of the Silicon Valley biotech company Theranos, Inc., the company has since made hundreds of staff redundant to avert becoming insolvent.

Dr J Denoncourt, Nottingham Law School