There exists an increasingly important IP information gap in financial disclosures in South Africa that is severely hampering business growth, cultural preservation and opportunity. The IP information gap exists across the business spectrum; large, medium and small businesses are affected. Whilst this is a global challenge, it is particularly acute in South Africa especially in the area of patents. South Africa's patent economy is woeful and stands in stark contrast to its capacity to innovate. It is extremely important to address this gap which starts with a concerted drive on IP education, self audits and the cultivation of an economy that understands the benefit of investing in IP to stimulate growth and further innovation, and also how to draft, use and interrogate an IP narrative in financial accounts effectively.

1. THE INTELLECTUAL PROPERTY
INFORMATION GAP
A DISCUSSION
Darren Olivier
Adv. Annamarie van der Merwe
Moderatered by Ronelle Kleyn

2. 2

3. 3

4. 4

5. COMPONENTS OF
MARKET VALUE
S&P 500
5
Integrated Reporting concepts under
King IV® require transparent and
open reporting on intangibles.
2009
2005
1995
1985
1975
PHYSICAL & FINANCIAL ASSETS (TANGIBLE)
19
%
20
%
32
%
68
%
83
%
68
%
32
%
17
%
81
%
80
%
OTHER ASSETS (INTANGIBLE)
2

6. Sowhatiscorporategovernance?
“Corporate governance, for the purposes of King IV, is defined as
the exercise of ethical and effective leadership by the
governing body that results in the achievement of the following
governance outcomes:
 an ethical culture;
 performance and value creation;
 effective control; and
 legitimacy.”
6

7. Intellectualpropertyandcorporategovernance
There are a number of touch points, such as:
The role of the board (governing body)
Process of developing the strategy
Risks and opportunities
Reporting and disclosures
7

8. TheroleoftheboardasperKingIV……..
 Steering the organisation and setting its strategic direction
 Approving policy and planning that give effect to the direction
provided
 Overseeing and monitoring of implementation and execution by
management
 Ensuring accountability for organisational performance by
means of, amongst others, reporting and disclosure
8

9. 9
King IV, Principle 4: The governing body should
appreciate that the organisation’s core purpose, its
risks and opportunities, strategy, business model,
performance and sustainable development are all
inseparable elements of the value creation process.

10. SowheredoesIPGovernancefitintoallofthis…..
 Questions the board should be asking as the “custodians” of good
governance:
 Do we know what the intellectual property of the organisation is?
 What is the value of our intellectual property?
 What is our strategy around intellectual property as part of the broader
business strategy?
 Is our intellectual property adequately protected?
 What are the risks in respect of intellectual property – ownership, protection,
reputational, etc?
 What are the opportunities in respect of intellectual property?
 How do we report on and disclose information relating to our intellectual
property?
 Acquisitions: Does the due diligence process include intellectual property?
10

11. Exampleofacompanythatunderstandstheimportanceofits
intellectualproperty……
As one of the most recognized products in the world, “Coca-Cola"
has been a part of the national and global culture for well over a
century. The success of the Coca-Cola brand is largely dependant
on an intricate integration of legal protections including patents,
copyrights and trade secrets. However, nothing the company
owns is more zealously protected than the Coca-Cola trademark
itself, which is estimated to have a value of over seventy billion
dollars. As a result, Coke trademark history is extensive as the
company aggressively guards this critical asset.
11

12. Andaboardmemberthatunderstandsaswell……
12
“I define my role as president of the Coca-Cola
Company very simply:
It is to protect and enhance the trademarks
of the company.”
Don Keough
Past President, Coca-Cola

13. INTANGIBLE
ASSETS• Social and Relationship Capital
• Human Capital
• Intellectual Capital
• Natural Capital
Intellectual property preserves
intangible assets across the 6
capitals of integrated reporting
TANGIBLE ASSETS
 Machinery
 Buildings
 Capital Assets
 Infrastructure
3

14. 14
TRADE MARKS
FLIPPING THE ‘BERG
INTELLECTUAL PROPERTY
INCLUDES:
DESIGNS
Internally generated IP is not disclosed on company balance sheets,
significantly undervaluing companies or providing a very limited
scope on potential value.
PATENTS
KNOWHOW
COPYRIGHT

15. COMPONENTS OF
MARKET VALUE
S&P 500
15
KING SAID
“The relevant value of intangible
assets over tangibles has increased
signifianctly over the last 40 years.”
WHAT THE
2009
2005
1995
1985
1975
PHYSICAL & FINANCIAL ASSETS (TANGIBLE)
19
%
20
%
32
%
68
%
83
%
68
%
32
%
17
%
81
%
80
%
OTHER ASSETS (INTANGIBLE)
2

16. 16
“IP assets have a thorny impact on diverse disciplines such as corporate
finance, accounting and company law and corporate governance.”
Intellectual Property, Finance and
Corporate Governance by Janice
Denoncourt (Routledge)
2018
“The difficulty lies not so much in developing new ideas as in escaping
from old ones”
John Maynard Keynes (Economist)
many years ago

17. SouthAfrica’s
DROP
OUT
17

18. PATENT FILINGS source: WIPO

19. PATENT FILINGS source: WIPO

20. PATENT FILINGS source: WIPO

21. PATENT FILINGS source: WIPO

22. TRADE MARK FILINGS source: WIPO

23. TRADE MARK FILINGS source: WIPO

24. TRADE MARK FILINGS source: WIPO

25. TRADE MARK FILINGS source: WIPO

26. ADDRESSING THE IP INFORMATION GAP
26
”The best time to plant a tree was twenty years
ago. The second best time is now.“
Chinese Proverb, apparently
many years ago

27. Education
27
Knowing what is IP
Understanding your intellectual property mix

28. 28
• Identify and record IP assets from the date of incorporation where possible:
• This involves an IP audit (IP HealthCheck™)
• Create an IP register
• Distinguish between IP owned and licensed to the organisation
• Distinguish between background and foreground IP
• Create an IP gap analysis following alignment with business strategy
• Make someone important the champion with the organisation to execute on the
gap analysis, monitor and report
• Develop an IP narrative and continually educate internally
• Consider making voluntary annual disclosures of IP asset and strategy
information in annual returns to enhance access to finance
• Annually leads to reliability and trust
• Explain how IP assets deliver value beyond the balance sheet
ADDRESSING THE IP INFORMATION
GAP

29. 29
• The IP Value Story – the business model as the context for the disclosure
• The IP Portfolio – the IP register documenting existing relevant IP
• The IP Strategy – addressing the gap analysis
• IPR management – governance, stewardship and leadership
• IP licensing agreements – within the context of the business
• Cost to commercialise – finance requirements and objectives
• IP life of key IP – duration of monopoly advantage
• Risks and uncertainties associated with key IP – financier and investor info
• Financial status of IP asset – e.g. any debt security
• Annual comparison of key IP asset performance indicators – track performance
over time
(adapted from the Essential, Desirable and Optional
Patent Information and Strategy Disclosure Model
for UK innovating SMEs)
Example of IP Disclosures

30. Thank you:
Darren Olivier (0716065544)
Adv. Annamarie van der Merwe (0832640328)
“Intellectual Property is the unicorn
of corporate governance” Ronelle
Kleyn, 2019