SELECTED IDEAS FROM FROM IDEAS TO ASSETS

(CHAPTER 5 AND 15)

BY JONAS HELLER

Managing IP Financial Assets and Analyzing

Financial Growth

Introduction

Factors that determine the success of a company’s portfolio: Timing Demand for the inventions covered The quality of the proprietary rights

and how they are managed

Introduction

Companies don’t know how to manage their intangible assets. There are abundant unused intellectual property rights

Wrong view: Managers view IP rights as financial assets, only to be used during litigation

Correct view: IP’s behave almost identically to call options Call Options are easy to price With Black-Scholes formula, options contracts are priced easily Sellers and buyers to easily make trades based off of demand

Solution: IP’s can be priced just as easily as call options

Principles from financial assets

Despite GAAP treating them as ZERO value on balance sheet… they are worth monetary value and can produce money like any other tangible

asset. There are changes happening to the way people treat IP assets: 1. More attention is given to IP’s what was previously only

afforded to tangible assets 1970’s – 50% intangibles, 1990’s – 80% intangibles 2. Acquiring and disposing of IP assets (buying selling) is easier

and safer now BEFORE: Transactions were slow and took 3 years, eroding 15%

of potential value Tools were not available to eliminate financial risk, share info

AFTER: The internet has changed this IP transactions to a larger market IP buyer and seller protection is available

Principles from financial assets

Basic principles 1. Maximize the return on the company’s assets by

deploying them in those ways in which they are most valuable.

2. Sell off or otherwise dispose of assets that are generating an annual return below the company’s cost of capital.

Most companies follow these rules for all assets except for IP assets They let unused IP assets sit and pay $200,000 for

over 20 years for worldwide rights per asset

Recommendations for IP as Assets

IP assets have been severely underutilized in the past due to No objective source of value

The problems this caused Inventors with a glut of technologies Manufacturers with a shortage of products

With treating IP assets as the financial instruments they can be Companies have a cash flow from otherwise

nonperforming assets

Predicting income growth through IP

Can patient activity (usually refer to the number of patents that a company filed and accepted) helps to predict income growth and future stability?

Finding the Growth Areas

The relationship between patenting activity and growth of revenue varies depending on the nature of the technology and the products

It is important for companies to keep pace with competitors by maintaining a similar rate of research and patenting activity in a growing industry

Research

Five areas of technology were researched:

Business methodsTelecommunicationsSemiconductor manufactureMolecular biology or biotechDrugs

General Conclusions

A rise in patenting activity does not guarantee a growth of future income, but a continuous decline or flat motion in patenting activity would signals a company's revenue maybe at risk.

IP assets have been severely underutilized in the past but by treating IP assets as the financial instruments they can be, companies have a cash flow from otherwise nonperforming assets