The Economist, London based business magazine, found that up to 75% of the value of publicly traded companies in the United States is based solely on its intellectual property. Intellectual property, which is defined as products of the mind, is composed of trademarks, patents, copyrights, and trade secrets.
The power of intellectual property is not only in the rights granted to the owner of the property but more significantly in the right of the owner to exclude others from using the property for a significant amount of time. This grant of exclusion allows the owner of the trademarks, copyrights, and or patents the ability to profit from their creativity without the fear of imitators. In creating and enforcing these rights the government encourages innovation by allowing the creators to profit from developing new inventions, methods and processes.
For start-ups, especially those in the technology field, up to 100% of their value may be found in their intellectual property. Investors recognize that the product, program or process created by these companies, when added with the right of exclusion, can be translated into actually profits.
The right to exclude others is a valuable asset. Robert Kiyosaki, of Rich Dad Poor Dad, tells the story of how his first business failed to make it past its first year, despite having an innovative product. Why, you ask? Robert, who was the first to bless the market with nylon and Velcro wallets, failed to protect his product with the proper intellectual property registration. He believed that doing so was too expensive. His company, which easily generated millions of dollars from product sales, failed after the market was flooded with imitators. Kiyosaki admits that his business failed because he didn’t know enough about patents and trademarks to protect his business.
Other companies, such as publicly traded Facebook, make efforts on their onset to protect its intellectual property. Facebook owns several trademarks for its name and logos, multiple copyrights for the layout of their site, and a considerable amount of patents for their methods and processes. They registered their property early before they went public and continue to protect new property as it is created. The company, understanding the value of intellectual property, submitted multiple applications to register their intellectual property and purchased hundreds of patents just prior to going public.
Identifying and protecting their intellectual property is just one of the steps that sets successful businesses apart from failing businesses. You can learn more about the value of intellectual property in my book, 30 Days ‘Till Launch.
~LaConya “Connie” Murray, Esq.
The Small Business Attorney