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Harnessing IP in Today’s Digital Economy

By Ong Pei Wen

28 September 2018

Ong Pei Wen

Ong Pei Wen, Head of Enterprise Engagement | IP ValueLab
Pei Wen leads the enterprise engagement and strategic partnership initiatives at IP ValueLab.
Reach her at peiwen.ong@ipvaluelab.com.sg

Can and should we place a dollar value on IP?

The need to rethink how everyone from auditors to M&A consultants value businesses has been thrown into sharper focus of late.

In yesterday’s economy, successful businesses relied on the efficient allocation of scarce, tangible resources, such as labour, capital and materials to create value and generate revenue. In today's digital economy, however, business success will increasingly depend on the ability to harness a new, intangible type of resource to scale: intellectual property (IP).

Take Grab, for example. The Singapore-based technology company started initially as a ride-hailing transport service provider and, within a matter of years, has now expanded into payment and food delivery services.

Not many people realise this but Grab’s proprietary technologies, or digital IP, was what underpinned the tech giant’s meteoric rise as a disruptor and enabler in established industries from transportation to financial services—industries that, in contrast, spent decades investing in physical assets (e.g. purchasing taxis, setting up credit processing facilities) to build trusted and proven business models.

Valuating IP

But should and can we place a book value on IP? How valuable ‘intangible assets’ may be, can appear nebulous.

David Post, who is the Director of Research at the San Francisco-headquartered Sustainability Accounting Standards Board, articulated in a Forbes interview that “intangible values have a direct correlation with intangible assets, and can be significantly impaired by their mismanagement.”

Because conventional accounting treatments have not evolved sufficiently to account for intangible value as they do with tangible assets, unaccounted intangible assets may inadvertently lead to unrealised opportunities.

Already, a third of all products purchased draw their value from intangibles, such as technology and branding, and that share of value is only poised to grow in the near future. The World Intellectual Property Report 2017 has also revealed that IP, together with other intangibles (e.g. design, brand value, workers’ skills, managerial know-how), adds twice as much value to products as tangible capital (e.g. machines, buildings, warehouses, transport vehicles) does.

In fact, IP swings the odds in favour of nimbler SMEs. In the case of Grab, the start-up broke into the sector with their proprietary technologies and gave incumbent taxi operators a run for their money, and with significantly less capital outlay—no need to purchase expansive fleets of taxis.

For startups like Grab, IP assets significantly raise a firm’s value and, in the absence of revenue or profits, often function as the primary or true assets of value during the valuation process for a sale or a funding round.

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Security Concerns

Still, few can deny that there is a clear danger associated with IP breaches, as IP constitutes more than 80 percent of a single company’s value today.

A study conducted by Deloitte found that a single cyber theft incident could theoretically cost a US$40 billion IT company more than US$3.2 billion, or 8 percent the company’s annual turnover, resulting from lawyer fees and litigation to the cost of lost customer relationships and contracts, among other contributing factors.

Unlike MNCs, few SMEs can afford to lose 8 percent annual revenue from a single, devastating IP event and expect to recover, let alone bear the brunt of more than one occurrence.

So, can local SMEs safeguard their future interests against bigger players that attempt to infringe their IP? Yes, they can, but they need help. The good news is help is readily available via the Intellectual Property Office of Singapore whether in the form helping to align business strategy with intangible assets or an audit of fit-for-purpose IP protection. All they need to do is seek it.

 


 

Fight For Your Intangible Assets

By Ye Thu Aung

28 September 2018

YeThu_3-C-BB

Ye Thu Aung, Intellectual Property Strategist | IP ValueLab
Reach Ye Thu at yethu.aung@ipvaluelab.com.sg 


What are intangible assets?

More and more companies are increasingly talking about intangible assets, but even many C-level executives do not understand how to connect value creation to them. International Accounting Standard (IAS) 38 defines intangible assets as identifiable (either being separable or arising from contractual or other legal rights), non-monetary assets without physical substance. Intangible assets largely comprise intellectual property (IP) – patents, trademarks, and copyrights to name a few – and other assets that grant potential economic benefits to the owner (e.g. know-how, data, relationships, etc). Still, there exists very limited ways for enterprises to show their intangible assets on the accounting balance sheet due to the way in which these intangible assets are handled.

A true value to your business

Interestingly, the contribution of intangible assets to the companies’ value are dramatically increased over the past few decades. Intangible assets are also ready resources that can seamlessly be brought to overseas when a company wants to enter into different markets. Companies are also using their intangibles as a marketing tool to differentiate their products and services from their competitors’ ones (e.g. mention of IP rights on the products/services such as “patent pending” mark or “®” logo on the brand name). This article will mainly focus on discussions related to IP.

Challenges and Considerations

Business owners are often concerned about complexity and high cost in relation to IP. This may be true for certain reasons because IP rights are territorial and different countries have different IP regimes. For example, countries in ASEAN have several differences in terms of languages, laws, court systems, and so forth. Therefore, business owners often overlook the importance of IP due to such challenges. It is also worthwhile to take note that some types of IP (e.g. patent) is a double-edged sword that can give you the monopoly rights, but makes your invention known to the public at the same time. In other aspect, IP protection does give you the rights to stop others copying your invention, but no guarantee for your business success.

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Choose the right ones

Firstly, you must identify the markets to enter into and form of IP protection (e.g. patents or industry designs) relevant to your intangible asset. You may also need to consider available IP enforcement options and the level of commitment to be invested for each enforcement option to help you prioritise which markets to enter. In general, there are four main avenues for IPR enforcement namely, civil, criminal, administrative and custom seizures. The availability and effectiveness of these enforcement options may be varied depending on the jurisdiction. For example, administrative actions involving different governmental bodies which can issue severe penalties such as monetary fines or cease and desist orders of infringing goods would be the most common route for IPR enforcement in Vietnam. In case of court proceedings, countries such as Malaysia and Thailand have specialised IP courts to ensure that judges hearing cases related to IP infringements are well-equipped with industry knowledge and experiences. In terms of border enforcement, Thai Customs is the most proactive authority among ASEAN countries.

What do you need to know to fight?

Act immediately if someone is copying your IP because unnecessary delays may hinder your rights to pursue. However, you may need to know the following clearly before you fight for your intangible assets.

  • You must have recognised IP rights in place in the country you wish to enforce.
  • Consult with a local professional who is familiar with local systems to assist you along the enforcement journey.
  • Justify the commercial impact from the enforcement action (e.g. brand value retention, compensated damages).
  • Consider mediation as one of the settlement options instead of costly court litigations.

In summary, business owners must be aware of different factors that need to be considered before making any strategic decision related to pursuance of IP protection or enforcement. Conversant with local IP landscape will also better position you in the fights over your intangible assets.