Smart Intangible Asset Management

Intangible Assets Constitute 84% of S&P 500 Assets

Intangible Assets Constitute 84% of S&P 500 Assets

Intangible Assets Constitute 84% of S&P 500 Assets, but No One Knows How to Manage Them

According to an AON study from 20191, 84% of the value of the S&P 500’s assets is found in intangible assets, such as patents, brand value, and customer data. Patents are among the strongest types of intellectual property (IP) among intangibles. However, most business leaders still lack patent management skills due to a lack of existing IP analysis resources that are understandable for non-IP savvy executives. Such resources could bring answers to business leaders’ complex IP questions and would enable standardized financial metrics surrounding IP portfolios.

Using emerging technologies to conduct intellectual property analysis, opens a new horizon for the implementation of portfolio management strategies. These fundamental limitations and lack of verified and data driven answers resulted in unused patent assets, missed opportunities, and resources wasted.


Recent Development: Patent Analysis Software for Business Leaders

Thanks to recent developments in patent analysis software, deploying a comprehensive IP management strategy is achievable for financial executives. This development allows business leaders of all IP skill levels to finally fully maximize their company’s patent value. Business leaders can promote technology adoption, and pursue patent commercialization and monetization, or other financial metrics traditionally associated with asset management.

As mentioned, it is estimated that intangible assets represent around 84% of the value of the S&P 500’s assets. For most startups and technological SMEs, this percentage might be higher – representing almost the entirety of the company’s value. Because of the type of protection and rights they grant, patents are the strongest type of IP among those intangibles. In a crowded and fierce technological market, patents protect inventions, provide solutions to technical problems, and allow for the quantification, evaluation, and use of innovation as a competitive and cooperative tool.

Now, IP analysis resources are enabling modern day business leaders without an IP background to become increasingly involved in independently implementing data driven patent management strategies.

Graph showing intangible assets value for S&P 500 companies

Patent Management is No Longer Just for Lawyers

In the early 2000s, patent management was almost exclusively the provenance of lawyers. At the time, the finance world had no understanding or interest in intellectual property because IP was seen as something for defensive purposes. The key IP management metric over the last century has been largely ‘how many’. How many patents companies have and how many they are filing for in the next year.

The first significant shift in intellectual property management took place in 2009 when IP Exchange International (IPXI), with backing from major companies like Ford, JP Morgan Chase, and Sony, attempted to improve effectiveness and price transparency in the patent licensing market3,4. That initial shift in intangible asset management caused many in finance – funds, banks, and finance groups – to see the value in the intellectual property. Whether it was on their balance sheets or applying financial management metrics to IP management.


Business Leaders Are Unaware That Bad Patent Management is Hurting Businesses’ Bottom Line

A well executed patent management strategy can turn a company’s intellectual property into a self sustaining revenue stream for business leaders. However, a lack of understanding and early on strategy can prevent a company from ever recovering its portfolio’s ROI. This can even cause business leaders to lose substantial resources on maintaining patents needed to cover their product offering.


Overlooking Crown Jewels 

The consequences of business leaders overlooking the value of their companies’ IP are serious. For example, Amazon has 24,355 patents globally. But Amazon’s single patent, US 5,960,411, represented a significant chunk of their portfolio’s value. This crown jewel patent allowed Amazon to monopolize the ‘1-click checkout’ feature5 and pushed Amazon to success, while generating millions in IP revenue from competitors like Apple.

Many business leaders’ lack of intellectual property management skills puts them at risk of overlooking their portfolio’s own crown jewels. But even worse, the lack of IP management skills can make business leaders susceptible to litigation.

Implementing Patent Management Too Late in the Game

A bad patent management strategy lacks an understanding of where risk or value is in their portfolio. But a bad patent management strategy can also surface in the initial filing stages of a company. Many technology companies file massive amounts of patents with sole aim of protecting technical features and products developed in house. Often this means that no attention is dedicated to the patent’s future value or exploitation.

Another common problem is when a comapny suddenly revisits neglected patents, as a last resort to generate revenue. Unfortunately, at that point, only a few portfolios produce any kind of ROI because no strategy was initially implemented.

Not Being Able to Communicate Value to Buyers and Licensees

But a well executed patent management strategy and a valuable portfolio are not always enough. Because not being able to provide buyers and licensees with in depth insight into their company’s portfolio will prevent patents from being sold or licensed. This lack of in depth insight prevents companies from tapping into the full range of available transaction opportunities. These available transactions can be the most suitable path to successful technology adoption, and patent commercialization or transaction.


Business Leaders Can Utilize AI Based IP Analysis Software for Better Patent Management

Now, AI based IP analysis software can enable a much deeper and faster assessment of both individual patents and portfolios. Such intellectual property analysis software can enable business, financial, and technical leaders to quickly access and analyze data on the quality of an entire patent portfolio, technology segments, or a single patent as well as valuations of how much their patents are worth today and over its remaining life.

Maximizing the value of a patent portfolio is not only about monetizing patents. Patents are complex assets that are difficult for even patent experts to comprehend.

A good patent management strategy must first ensure that the patent’s value is effectively communicated. Once the value becomes communicable, potential buyers and licensees can understand its significance, and that is when the portfolio starts to generate value. Communicable reports can significantly impact a company’s ability to attract investment since the market and investors can more accurately assess the value of the company’s innovation.

The ability to recognize and implement IP management strategies is crucial. These strategies include improved technology adoption, patent commercialization and monetization, filing and acquisition strategies, and the assessment of patent-related risk mitigation by spotting potential threats or actively seeking out business opportunities.

IPwe’s Smart Intangible Asset Management (SIAM) Platform

SIAM enables business leaders to effectively report the performance of their IP portfolio and strategy to non-IP-savvy colleagues, investors, and even licensees. IPwe’s technology translates technical IP jargon into business and financial KPIs, and benchmarks these KPIs against competitors using visually intuitive dashboards.

These visually intuitive dashboards not only aid in reporting but also in IP strategy. SIAM provides:

1.  Financial valuations on a patent, industry, and portfolio basis

2.  Objective ratings of your portfolio and patents

3.  Benchmarks of your portfolio against competitors and peers

4.  The crown jewels, qualitatively superior assets, in your portfolio

Would you like to gain a better financial understanding of your portfolio by generating real time, unbiased financial IP valuations? Request a SIAM demo today!

2019 Intangible Assets Financial Statement Impact Comparison Report

2 2019 Intangible Assets Financial Statement Impact Comparison Report

3 The Great Failure of the IPXI Experiment: Why Commoditization of Intellectual Property Failed by Merritt L. Steele

4 Intellectual Property Exchange International, Inc.

5 Why Amazon’s ‘1-Click’ Ordering Was a Game Changer

Mia Mixan
VP - Marketing and Communications