Creating Value During Consulting Engagements: IP Questions That Increase Market Value and Improve the Bottom Line

Suppose you could increase the value of your services and distinguish yourself from your competitors without added cost. Would you be interested?

If you are a business consultant (financial, legal or otherwise) the answer is obvious.

This article suggests some ideas that may allow you to bring added value to your consulting engagements by exploring intellectual asset management issues with your clients.

Failure to consider these issues yields adverse business consequences, including unrealized value, unnecessary expense and legal risk.

Routine attention to intellectual asset management can avoid these consequences, yet many businesses miss this opportunity simply for lack of knowledge and attention. Consultants can add value to their client services by bringing these issues to their attention.

Intellectual Assets

What are intellectual assets? Essentially these encompass all of the intangible assets of an enterprise. 

From the business point of view, we're talking about brands, logos, packaging, corporate identity, ideas, business methods, marketing information, published content, secrets and inventions.

From the legal point of view, they are trademarks, copyrights, trade secrets and patents.

Five Key Questions

Here are five simple, but important, questions to ask clients. Many more IP issues could be addressed, of course: this is but a sample. The point is to start a dialog about protection, enforcement and defense of these important business assets.

1. Maximize IP Assets.

"Have you established a clear claim to your IP rights through registration?"

Brands, packaging, ideas, inventions and content have greater value to investors and purchasers if they are secured by registrations.  Companies with strong portfolios of registered rights are worth more. For example, the S&P 500 traded at a market-to-book ratio of 4.7 in 2003. At that rate, tangible assets amount to less than 24% of market value, with intangible assets such as brand and goodwill accounting for more than 75% of market value. This fact presents an significant opportunity for companies with low valuations to create market value.

2. Domain Name Registrations.

"Do you have domain names properly registered to avoid inadvertent expiration or improper transfer by former employees or ISPs?"

In our practice, we routinely deal with companies that have lost domain names becuase they failed to maintain registrations in their own names or lacked a sound system for managing renewals. It can happen to anyone, large and small, as illustrated by Microsoft's well-publicized loss of the domain name hotmail.co.uk. The cost of prevention is small, while the expense of recovering lost domain names can be high.

3. Content Protection.

"Is the content of your website, manuals, publications and other materials adequately protected?"

Copyright registration and notice is not a prerequisite to protection, but early registration is required to benefit fully from the remedies provided under copyright law. The failure to register copyrights before infringement occurs results in the loss of the right to recover statutory damages and attorneys fees. Many small clients find that enforcement is an unrealistic expense without the benefit of those rememdies, yet registration of copyrights is simple and inexpensive.

4. Enforcement.

"Have you allowed third parties to steal or erode your intellectual assets?"

The failure to take action against infringers results in loss of revenue and rights. Haphazard enforcement efforts can be expensive and ineffective. Companies that practice effective intellectual asset management will work with counsel to create a strategic enforcement plan that reduces overall legal expense while maximizing IP rights and avoiding the loss of rights through inaction.

5. Insurance coverage.

"Do you have insurance coverage for IP claims against the company?"

Many companies have coverage for IP claims and don't realize.  Many companies do not, and should.  Coverage is often hidden away in an "advertising injury" clause. Courts have often read these clauses more broadly than they appear on their face. As a result, coverage can easily be overlooked. When a prominent New York law firm famously failed to advise its client about coverage and tender a timely claim, defense coverage was later denied, costing the company millions in legal fees.

Added Value

Clients are always looking for extra value. Questioning clients about intellectual assets management can add value to consulting engagements and create a point of difference with consulting competitors.

A few of the questions one might ask are discussed above. Perhaps you have others in mind. Further comments are invited.