A-Bundling We Will Go: When It Comes to Intangible Assets, the Sum is Often Greater Than Its Parts By David Drews* – IPmetrics LLCThe proper allocation of scarce resources is vital to meeting -- or exceeding – your financialgoals. To be successful in this endeavor requires that you have a thorough understanding ofthe resources available to you as well as how these assets can be most effectively utilizedin whatever situation you face. A major component of this involves understanding the valueof your assets when viewed in various contexts.Increasingly, the assets that seem to be having the greatest impact on the decision-makingprocess of top managers everywhere are the intangibles: patents, trademarks, copyrights,and the like. Each month, I will explore the full scope of issues surrounding the valuation ofthese assets, ranging from general topics such as valuation techniques to specific areassuch as the impact that a bankruptcy filing can have on the value of an intangible asset. Inthis article, I will discuss the various forms of intangible assets and the proper way to viewthem from a valuation perspective.I already mentioned the more obvious intangibles. Patents, trademarks, and copyrights areregistered with the government and are used to inform the world as to the rightful owner ofthe property indicated by the registration. While there are other aspects associated with theregistration of these “top line” intangibles, such as the teaching requirement associated withpatents and the source-of-goods issue associated with trademarks, from a valuationperspective, the most important feature of registration is to provide the asset owner with theability to exclusively use the asset and exploit its value as the company sees fit. As you willsee throughout this series, it is this aspect that provides the foundation for determiningvalue in any context, whether from current operations or proposed activities.While top-line intangibles are undoubtedly the most important intangibles in most situations,there are dozens of other intangibles that can also have a very real impact on your firm’ssuccess. Among these are slogans, characters, packaging designs (trade dress), domainnames, web page designs, non-compete clauses, proprietary sales methods, a well-trainedstaff (human capital), product warranties, customer lists, training programs, trade secrets,formulae, and targeted survey data. The list goes on.It is imperative that your management team possesses a comprehensive view of yourintangible asset portfolio in order to properly protect and most effectively utilize it. Forexample, suppose your products enjoy a leading position in their respective markets andthis position is primarily due their superior quality which, in turn, is primarily due to the * David Drews is president of IPmetrics LLC, an intellectual property consulting firm. You can reach him at 858-538-1533, or email@example.com.
A-Bundling We Will Go retention of a well-trained workforce. In this situation, it would be potentially harmful for you to terminate your training program in an effort to cut costs. From a valuation perspective, some of your assets can be viewed independently; i.e., their value can be isolated from the value of the other assets in your portfolio of intangibles. In many cases, however, it makes more sense to view your assets in terms of their relation to one another. For example, all of the intangible assets utilized in the marketing process may be more effectively valued as a “bundle” rather than as stand-alone assets. This is an important concept since very few intangibles travel in a vacuum. They rely, to some extent, on the other assets that make up the bundle. A marketing bundle may consist of brand name, logo, and worldwide trademark registrations, secondary trademarks or logos, your marketing strategy, packaging concepts, trade dress, web sites, and any other assets that contribute to the promotion of your company as a whole, or any of your individual brands or products. Bundling can apply to all forms of intellectual property, from technology such as patents, trade secrets, and formulae, to knowledge-and-skills assets such as proprietary training manuals, to operating procedures, to customer lists. The bundle may include all of these or consist only of a subset of the components included in any one of them. Whatever bundle you deem to be the most appropriate for the immediate context, the simple act of identifying related intangibles will provide you with a solid foundation for a focused valuation exercise. The following provides a look at some potential bundles of intangible assets: Marketing Corporate name and logo Marketing umbrella and brand name Sub-brand names and trade dress Worldwide trademark registrations Copyrights Secondary trademarks Consumer advertising Package design and copyrights Marketing strategy Product warranties Graphics Promotion concepts Worldwide public relations effort Ad and graphics review Labeling design and copyrights Knowledge/Skills Non-compete clauses Mailing lists IPmetrics.net Page 2
A-Bundling We Will Go Sales knowledge Proprietary MIS Databases Customer lists Sales leads Customer relations Office management Manuals, instructions, codes Purchasing systems Employee education On-site training Processing methods Exchange of technical ideas Quality control standards Marketing/training Trade relationship International Research Clearing Center Pricing policies, fee structures Asset management processes Regulatory agency filings and approvals Security systems and processes Record-keeping systems Business licenses and charters Customer surveys Electronic Domain names Web sites Links to other web sites Retail kiosk Credit systems Traffic controls Banner ads Technical Trade secrets Formulae Packaging technology and sources Shapes and sizes Proprietary processes Key patents IPmetrics.net Page 3