Passing down patents

Intellectual property and other intangible assets are often the most valuable pieces of a business.

Surprisingly, many business owners haven’t put a lot of thought into ways they can properly protect and preserve the value of those assets.

Recently, I was engaged to evaluate a privately held manufacturer. In talking with the company’s accountant, it became clear the firm’s trademarks and patents held significant value, so I asked for a summary of those holdings.

Read: Apple: Samsung cashed in on iPhone success

My request for these details was passed from the CFO, to the company’s owner, to the corporate lawyer, and then back to the CFO. Clearly no one had easy access to what intangibles were protected and which company within the corporation actually owned these assets.

If you plan to leave trademarks and patents to future generations, or to purchasers of your business, you need to make sure the legal ownership is protected to ensure the company retains the asset’s value. Consider the following:

• Is the patent registered in all of the appropriate markets? You may need to obtain legal guidance if you’re seeking to obtain exclusive worldwide commercialization rights to a particular technology or process.
• Do you need to restructure ownership of your intangible assets between operating and holding companies?
• Have you registered your domain name?
• Should you review any third party royalty or licensing agreements?

Read: Alberta firm seeks patent for new insurance product

Maximize intangible asset value

Set the next generation up for success by having an understanding of what makes each asset valuable, and what’s required to ensure its ongoing worth. To faciliate this:

• Determine the economic life of the asset. How long can it be profitably exploited? Can you negotiate agreements to extend its life?
• Figure out if licensing the asset to a third party will maximize the cash flow in the longterm.
• Introduce your successor to business associates, suppliers, and customers that are important to the value of your trademark.
• Are specific machines or other hard assets necessary for the use of patented technology you own? If so, upgrades may be necessary.
• Ensure your company’s logos and labelling include trademarks.
• Monitor the industry to assess how best to exploit each asset’s value. Prepare contingency plans to prolong the value of the intangible assets.
• Aggressively defend your patents and trademarks from infringers. Above all, make sure the next generation understands the specifics of the trademarks and patents held by the business.

Successors need to have a good understanding of all of the agreements in place, the underlying business relationships, and the future prospects for extending agreements.

Read: Ensure business owners plan ahead

Patricia Harris is a senior manager of Fuller Landau Valuations Inc.