IP C ONSULTING FOR THE S TRATEGIC U SE OF IP A SSETS IN B USINESS Delivered By Yahaya Maikori Principal Partner- Law Allianz

I NTRODUCTION At no other time in History has Intellectual Property been as valuable as it is now. Ideas, innovations and other intellectual based assets are rapidly replacing land, energy, raw materials and labor as the engines of growth for many companies around the world. According to former Federal Reserve Chairman Alan Greenspan, as much as 75 percent of the value of publicity traded companies in the United States can be attributed to intangible assets up from 40 percent in the early 1980s. However, the value of intellectual property is usually underappreciated especially in developing countries such as ours. The challenge is for companies to understand the value of their intangible assets for the purposes of maximizing business growth opportunities. This is where Intellectual Property Consulting becomes important.

W HAT IS I NTELLECTUAL P ROPERTY ? Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. IP is divided into two categories: 1. Industrial property, which includes inventions (patents), trademarks, as well as industrial designs, and 1. Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs.

T YPES OF INTELLECTUAL PROPERTY In general, there are five basic types of intellectual property work that attorneys do. While this list could certainly be toyed with after some debate, for all intents and purposes, these areas are: 1. Trademark 2. Copyright 3. Trade Secret 4. Patent 5. Licensing

T RADEMARK Trademark law protects words, phrases, logos, or symbols used to distinguish one product from another. In circumstances where a competitor uses a protected trademark, the holder of the trademark can go to court and obtain an injunction to stop the use.

C OPYRIGHT Copyright Law. Copyright law protects the creators of expressive works, such as artists, photographers, writers, and musicians and gives them the exclusive right to protect how their works are used. It is important to note that unlike trademark law, copyright law does not protect names or titles, for example. One way that copyright law can be distinguished from trademark law is in the advertising context. Trademark law would commonly protect the name of the product being advertised, while copyright law would protect the expression. For example, the statement in an advertisement: "If you drive this X car, you will undoubtedly realize it is among the best in the market for what it does," is an example of something that would have elements of copyright and trademark within it.

P ATENTS Patent law protects inventions. By filing and obtaining a patent from the United States Patent and Trademark Office, the inventor of a product receives a monopoly on the commercial exploitation and use of a product for up to 20 years. Patents can protect the functional features of a process, machine, manufactured item, asexually reproduced plant, or composition of matter, for example. In general, the United States Patent and Trademark Office will not issue a patent for anything unless it is: 1. Non-obvious - Surprising to a person with ordinary skills in the relevant subject matter of the invention. 2. Novel - New and unique in one or more elements when it is compared to previous technology. The United States Patent and Trademark Office generally issues three types of patents: Plant Patents - Patents to protect certain types of plants. Design Patents - Patents to protect the ornamental characteristics of a given device. Utility Patents - Patents to protect inventions that have some type of usefulness.

T RADE SECRETS A trade secret is "a secret formula, method, or device that gives one an advantage over competitors." (The American Heritage ® Dictionary of the English Language, Fourth Edition Copyright © 2000 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved.) In order to be a trade secret, the information must be such that it is not generally known to others in the business community. If the owner of the trade secret takes reasonable steps to keep the trade secret under wraps, courts will protect the trade secret owner from unauthorized disclosure by: (1) industrial spies, (2) competitors who wrongfully acquire the trade secret, (3) employees of the owner of the trade secret, and (4) anyone with any type of duty not to disclose the information.

LICENSING While licensing law may make use of all the areas of law above, it is a popular enough type of work that it merits some discussion. A license is a grant of permission to do something with an otherwise protected work or product. A copyright holder, for example, can give permission to other individuals to copy their work. In general, licenses grant rights to do one or more of the following things: To reproduce a work that is otherwise protected. To distribute copies of the work to others by rental, sale, or lease, for example. To display the work. To prepare derivative works from the original work using protected expression from the original work.

W HAT ARE THE BENEFITS OF IP? Intellectual property or IP can generate income through licensing, sale, commercialization of IP- protected products or services that may significantly improve an enterprise’s market share or raise its profit margins. IP assets can also enhance the value of worth of the enterprise in the eyes of investors or financing institutions and in the event of sale, merger or acquisition, IP assets may significantly raise the value of SME.

W HY DO WE NEED IP S TRATEGY ? Trade Secret Law. A trade secret is "a secret formula, method, or device that gives one an advantage over competitors." (The American Heritage ® Dictionary of the English Language, Fourth Edition Copyright © 2000 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved.) In order to be a trade secret, the information must be such that it is not generally known to others in the business community. If the owner of the trade secret takes reasonable steps to keep the trade secret under wraps, courts will protect the trade secret owner from unauthorized disclosure by 1. industrial spies, 2. competitors who wrongfully acquire the trade secret, 3. employees of the owner of the trade secret, and 4. anyone with any type of duty not to disclose the information.

W HAT IP C ONSULTING CAN DO FOR SME S Licensing, royalty, cost and pricing compliance Valuing IP for acquisitions, sales, joint ventures, merger transactions, cross-licensing, securitization (using IP assets,) and tax-related purposes Calculating damages Testifying on intellectual property damage cases filed in federal and state courts, as well as with the Federal and International Trade Commissions Performing license and royalty compliance testing Helping evaluate, structure and execute intellectual property transactions, such as licensing, cross-licensing, joint venture and start-up company creation Providing competitive market assessments Developing recommendations for value extraction from existing and future intellectual assets within client portfolio Providing focused management of intellectual assets including IP holding companies Litigation support and expert witness services

V ALUING IP- D EFINING THE P ARAMETERS 1. WHAT?: What is the IP to be valued (Patent, Copyright, Trademark, Know-how e.t.c) 2. WHO?: For whom is the valuation being done? 3. WHY? What is the purpose of the valuation? 4. WHEN?: The date of the valuation, (in the context of a dated balance sheet of the company) 5. WHICH?- Which valuation method is most appropriate under the circumstances?

V ALUING IP- M ETHODS There are four main approaches to valuing Intellectual Property namely: 1. Market value of company LESS Net Tangible Assets 2. Cost based (Historical & Replacement costs) 3. Comparable Market Valuations 4. Economic Benefits Method

THE COMPARATIVE METHOD It is devoted to asses IPR market value by reference to comparable market transactions. The method basically consists of assessing prices and/or profits achieved by third parties in comparable market transactions, such as mergers and acquisitions as far as the IPR assets are concerned, IPR sales or the grant of IPR- related licences. An itemisation of such model is the relief-from royalty method that takes into account only previous licensing royalties prices determining the value of related IPR. Such methods imply serious problems mostly when comparable transactions cannot be found with regard to the relevant IPR. b c

T HE COST BASED METHOD This method assumes a direct impact of costs on the IPR value. It is based on the analysis of costs necessary to replace the IPR concerned, as well as on costs that have been invested for the development, application, maintenance and commercialisation of IPR, and on a consideration of costs which may have been avoided by establishing IPR such as royalties for licensing-in a related technology. The disadvantage of this method is that, not considering IPR market indicators, it does not allow to establish a fair relationship between IPR costs and related IPR real market value.

T HE PROFIT BASED METHOD Such method is the most comprehensive one as it aims at determining the IPR potential for market revenue growth, the profit to be expected by the future commercialisation of the IPR concerned. This method analyses the nature of the asset, its legal status, its related marketability as well as market conditions, likely performance and potential, and the time value of money. It is illustrative, demonstrating (or not) the cash flow potential of the property and is highly regarded and widely accepted in the financial community.

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I N C ONCLUSION Intellectual property is increasingly becoming a source of value for businesses big and small. There is a need for companies to be able to identify, value and maximize the potential of their intellectual property. This makes obtaining the help of Intellectual Property Consultants a critical decision for businesses to make.