Intro to IP Law – Part I

This multi-part series is adapoted from the ideas2money lecture I have been giving for several years, and will in theory serve as the basis of a forthcoming book on the subject.

In our capitalist economy, company owners generally expect management to seize every lawful opportunity to increase company valuation.  Intellectual Property (IP) law provides many such opportunities.  The wise entrepreneur should obtain a grounding in IP law to ascertain how best to capitalize on it.

Dubious?  Here are just a few things that effective use of IP can do for your company:  forestall competition, reduce many different kinds of risks, generate cash, and, perhaps most importantly, create new assets where none had existed before.  IP is thus the ROI on R&D – it’s how you turn innovative ideas into assets, which can then be monetized.  Effective use of IP can create substantial value.

Any enterprise that creates, innovates, or advances the state of the art in any area should protect its creations, innovations, and advancements by obtaining all available IP rights.  Aggressive attention to IP constitutes a conservative business practice.  It may or may not turn out to be an intelligent business decision to assert those IP rights against others once obtained, but you lose the right to make that decision if you neglect to obtain IP rights in the first place.

IP rights, especially patents, have become a thriving form of currency among a large and growing number of market participants.  An entire subculture of IP-focused  investment banks, speculators, traders, “trolls,” auction houses, and the like, has arisen to make a market in IP.  Underlying the dynamism of this market is a shared understanding of the fundamental reality that IP lawsuits are crushingly expensive.  Those accused of IP infringement often agree to cave and pay royalties as a much cheaper and more predictable alternative to the exorbitant expense of IP litigation.  When litigation doesn’t settle, it can ultimately result in large damage awards and injunctions prohibiting the infringing behavior.

This power attracts IP holders.  Its availability means that more applications to secure IP rights are being filed every year as more companies attempt to establish exclusionary beachheads in what they imagine to be the important technologies of the future.  It also leads directly to more IP being asserted more aggressively than ever against potential infringers, who require their own IP portfolios to undergird defensive counterclaims.  Thus, practically all market participants of all stripes realize a necessity to obtain IP protection for both offensive and defensive purposes.   It is not hyperbolic, then, to suggest that viable participation in modern commerce requires careful attention to IP.

And make no mistake: IP is not just for technology companies.  Items as prosaic as a brand name or a customer list can be protected by IP; even if these are all you’ve got, you can use IP to fatten your company’s valuation and thin its risk profile.

The above reflects the status quo, without purposeful normative comment.  Reasonable minds can (and most definitely do) differ on whether our IP laws should give rise to the above dynamic.  While many, many companies rely heavily on existing IP laws to build assets and forestall competition, an increasingly vocal faction insists that some of our IP laws might have lost touch with modern technology and business practices. 

To be continued.

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