Boards must realise the value of intellectual property

Sound IP management has become critical to corporate governance, a valuation expert claimed this week. According to Kelvin King, founding partner of Valuation Consulting, firms with dysfunctional IP portfolios are missing prime opportunities to strengthen their fiscal positions. The value of IP, he said, depends on the structure of how it is managed, controlled and effectively exploited. The power of IP is in its ability to earn income for the future.'

King stressed that responsible corporations should be aware of how different types of IP can work together to add value. Brands are driven by patents, copyright, registered and unregistered design rights, as well as know-how and trade secrets,' he said. Furthermore, the huge cost burden of R&D certainly doesn't mean it is of insignificant or little value.'

Speaking to an audience of IP professionals at How to Realise Better Returns on Your IP Investments, held at the London offices of Latham & Watkins by leading IP services company CPA Global, King welcomed the institutional changes that are helping business to be more proactive about IP value. Accountancy methods were cited as the greatest change. As a result of international financial reporting standards, he told the audience, institutions, stakeholders, IP professionals and company boards are all beginning to recognise the values of intangible assets in corporate reporting.' This encourages board members to take a personal interest in intangibles and realise that it is no longer sensible, or even proper, to delegate responsibility for them.'

Also speaking at the event, John Pryor CPA Global's Vice President of Patent Portfolio Optimisation said that even the world's most profitable organisations are continually evolving in their efforts to reassess intangible assets. Following King's theme of portfolio dysfunction, Pryor cited the example of Thomson Electronics: a corporation that recently undertook a complete audit and review of its IP strategy. Instigated by IP and licensing chief Beatrix de Russé against initial resistance from 200 IP professionals who thought an audit was unnecessary the review spent six months cleaning out irrelevant or duplicate patents and putting relevant ones into one database. It then took another six months to value-segment the portfolio, which showed that a large number of patents were no longer useful. The intensive nature of the project, Pryor said, illustrates how intangible assets have moved over the last 15 to 20 years from around 20% of the value of an organisation to about 70% as it is today.'

Conference delegates also heard from two speakers from Latham & Watkins: IP Litigator Larry Cohen, and International Tax Group Partner Sean Finn. Both gave encouraging advice to companies on how they could leverage IP tax conditions to help them through the recession. At some point,' Cohen advised, you've got to think how you're going to set up your business to maximise your tax-efficiency. If you do it right at the beginning at the very first stage of the ideas of products and services it costs you next to nothing and may be more profitable than you think.'

IP Rights have properties which from a tax perspective can be almost magical,' added Finn. They can be moved across borders with great ease, which opens up opportunities for effective tax planning. Where you choose to locate whether it's in the UK, Ireland, Luxembourg, Jersey or Cayman Islands will dictate where gains and losses on sales and transfers through sublicensing will arise.'