I understand the reluctance of investors, bankers, and others when they squirm and shuffle their feet at the notion of valuing intellectual property. However, the reality is that that intellectual property is valuable. Perform a search using the Google search engine and you will find out that the value of the Coke brand is estimated to be 67 billion USD. Yes, that is correct, 67 billion. Disney clocks in at 21 billion. The CEO of Coke once said that all of the company’s physical assets could be destroyed and that this would not present a problem as long as the brand survived. (Taken from the Canadian Intellectual Property Office’s website).
All of which is to hammer home the point that intellectual property is becoming more important than “bricks and mortar” ie. buildings, equipment and the like.
Need more proof? Today I read an article in the January 8, 2007 issue of BusinessWeek called “Follow the Patents”. The article discusses the notion of valuing a company’s prospects based in part on its patent portfolio and the number of times the patent portfolio is mentioned by other patents.
A company called “1790 Analytics” generated a list for BusinessWeek in 2005 of its top 15 prospects based on the “Pipeline Quality Measure” and, a year later, 11 of the picks were up substantially. This year, companies such as Polaris are among the top choices – I am not sure on that one in part because the market for consumer discretionary goods is probably not going to be all that robust, But then again, I am not an investment analyst.
The point however is clear (at least to me) - intellectual property is valuable.
If you are a business, learn to protect it and leverage it. You could lose it if you do not. If you are a banker, learn how to value it and take security in it. We will all be better for it.
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