Three characteristics determine the value of IP assets
- publish258
- Mar 6, 2024
- 2 min read
Updated: Apr 3
Better a few diamonds than tons of coal, so focus on three characteristics that determine the value of IP assets, says Oliver Baldus: clear identity, long life and market potential
Oliver Baldus
As with any business asset, the value of IP can vary from zero to almost plus infinity. Consequently, the question arises: what are the criteria for IP becoming a worthwhile asset? Three characteristics determine the value of conventional assets: clear identity, long life and market potential. These easily translate into the world of IP assets. Identifiable Asset identifiability means that it is possible to discriminate one asset from the other. Only when the claimed invention is clear, can the asset be identified, assessed and rated. Undefined claims automatically lead to undefined assets. Good IP assets have legal quality. Durable Durability is a common and essential feature of positive assets. Assets that suddenly disappear cannot be termed effective and reliable. For IP, it is a question of whether an invention might previously have been disclosed. The longer IP exists and the more it is challenged, the higher its durability is rated. So, as an asset, its quality depends on mastering the prior art and fending off attacks. Potential The more an asset contributes to a venture’s performance and the more it makes an impact, the higher its rating. By contrast, even when well-defined and durable, its value turns negative when it causes expenditure without generating any benefit to its owner. How can we translate this established principle into the world of IP? Without someone else willing to buy it, IP has next to no value. It is this market potential that creates a positive asset. Without it, there is little point in seeking to prohibit IP’s use by anyone else. It just becomes a drain on resources, turning into a negative asset. So is not the amount of IP that matters, but its quality. A few diamonds are more precious than tons of coal. It is a principle that tech leaders, such as IBM, now widely recognise. It is the same For start-ups without large reserves who must deploy funds as efficiently as they can: the size of their portfolio has less relevance than its impact. • The full version of ‘Determining the value of IP assets’ by Oliver Baldus appears in ‘Winning with IP: Managing intellectual property today’, fourth edition, Novaro Publishing, November 2023. See here for details.
