What’s your biggest asset? What’s your competitive advantage? Is it your buildings or real estate? Equipment and machinery? Or, is it the idea behind your product? Your reputation in the marketplace? Your process for efficiency and quality? You have achieved success because your competitive advantage is unique, different, the un-common approach. These designs and inventions, your marks and slogans, your intellectual capital, serve as the foundation upon which your business is built. Your intellectual capital is the most important asset you possess. You are not alone. Many theorists define the difference between a company’s market value and book value as its intellectual capital – an estimated 2/3’rds of the market value of all publicly traded companies. As business executives, we know and insure against risk associated with most of our assets. Property/casualty, errors and omissions, general and professional liability, to name a few. Do you know what risk is associated with your intellectual capital? There are essentially two issues to be concerned with:

• The chance that someone will take your ideas – your competitive advantage – leaving you with less market share and less leverage;
• The chance that someone will accuse you of taking their ideas or intellectual capital.

Often the resolution for either of these issues is an expensive legal confrontation. According to the USCourts.gov, there were over 11,500 total IP suits commenced in 2006, including patent, trademark and copyright suits. That’s up from 8200 in 2002. The expense of such a suit is substantial, up to $5.5 million dollars in legal fees alone. View typical litigation costs from the AIPLA 2009 survey here. The concern of a competitor taking your ideas can be mitigated by first codifying your intellectual capital into intellectual property; in other words, attaining the constitutional right to exclude others from making, using or selling a product that infringes by obtaining a patent or protecting your trademark or rights of authorship. Once you have begun this process you can attempt to stop, or abate, another’s alleged infringement, through the court system. On the other hand, if you are making, using or selling a product, or have words or marks in the marketplace, there is a chance that you could be accused of infringing another’s intellectual property, even if the suit is frivolous. Again, an expensive legal battle. Consider these additional risks:

• “IP holding companies” – some characterized as “trolls,” are increasingly viable corporate tools for growth of market share and licensing revenue.
• Opinions of non-infringement are just that – opinions – that must be proven in court against other opinions.
• No matter how strong the argument, one fact always remains: a battle or disagreement of any size will consume precious time and effort from executives – a distraction of focus and operating capital
• The Uniform Commercial Code, 2-312(3), includes an implied warranty against infringement by any seller of goods to their buyers. If you are selling a product, you are taking on the responsibility to indemnify should accusations of infringement arise.

IPISC has developed products to provide funds and expertise to reduce financial exposure and help manage IP litigation. You can concentrate on your core competency – your business.