In today’s knowledge economy, intellectual property (IP) truly fuels economic growth. IP includes assets such as copyrights, patents, trademarks, licenses, proprietary technology, contracts, software, databases, R&D, and more. Today, in the United States, IP is worth over $5.8 trillion each year and now consists of over 35 percent of the total economy. IP also accounts for over 74 percent of all US exports, amounting to nearly $1 trillion. Now, more than ever before, business success is driven by ideas and innovation, rather than labor or raw materials.
It is no surprise that corporate valuations have changed to reflect this shift. While it is true that at one time tangible assets like real estate, raw materials, and equipment made up 80 percent of the market value of a corporation, that ratio has completely reversed. Now, it is intangible corporate assets that account for 80 percent of the value of most US companies. This is especially true for companies operating in knowledge-intensive or innovation-heavy sectors, or companies with well-known brand names.
This phenomenon is not exclusive to the United States either. Global businesses have caused innovation to become more collaborative and unfold across borders. In fact, R&D efforts increasingly include emerging economies, and three Asian countries—Japan, China, and the Republic of Korea—are among the top five patent-filing countries.
Intellectual property is more valuable than ever, and your organization’s IP likely comprises your most valuable assets. This can be attributed to the fact that, on average, patented products and services produce 50 percent more return than unpatented ones. That is why patent disputes, sales, and acquisitions have become so prevalent—it is where the money is. Globalization and technology advancements like artificial intelligence and the Internet of Things (IoT) have added layers of complexity to the issues of IP management and enforcement, raising key questions about creation, invention, and ownership, but IP, when managed and wielded properly, also enables global collaboration in the digital world.
Furthermore, when IP is properly protected and promoted, it helps consumers make better purchasing decisions, ensuring that they better understand the safety, reliability, and effectiveness of their purchases. Not to mention the fact that IP helps generate groundbreaking solutions to global problems like health, hunger, and climate change.
While most large, public companies have recognized the importance of regularly protecting and valuing IP, many small or medium-sized enterprises (SMEs) wait too long to get serious about the process, putting them at risk for losing the assets that make up the lion’s share of their business value. Unfortunately, a simple mistake or oversight in this arena can wipe out the viability of a business overnight. Yes, getting proactive about IP in the early stages of your business can feel like an unwarranted expense and time-consuming initiative that is better saved for a later date. But the alternative is much more costly. Ask yourself this question: could your business sustain losing 80 percent of its market value tomorrow? If the answer is no, it is time to take action.
This is why it is so important for companies to seek professional assistance to properly protect and value their trade secrets and confidential business information. IP has long been used by businesses to increase their competitive advantage in the marketplace. It has always been an enabler for successfully bringing products and services to market. Now, however, in our data-driven economy, its value has crossed into a new realm of importance, as it’s widely recognized that IP drives revenue, improves balance sheets, increases stock values, and drives a company’s future success.