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IP Procurement Is Not An Expense

January 4

Procurement of your patents, trademarks and copyrights is an investment in growing your company’s assets.

Thinking about intellectual property procurement including patents, trademarks and copyrights as an expense leads to bad decisions with irreversible negative consequences. Good CFOs and CEOs often look for ways to trim expenses without harming the company. When buying janitorial services, materials or office supplies, for example, it may make sense to go with a cheaper vendor, particularly if what you’re buying is not critical to the reputation or productivity of your company. That’s how most of us treat expenses when we see them on our P&Ls.But this kind of “minimizing expenses” approach can have dire consequences if applied to your intellectual property assets.

Intellectual Property is an Asset of Your Company

In order to make better decisions for your company regarding its intellectual property, think of your patents, trademarks and copyrights as real estate, similar to a building to house your company.

When looking for a building to house your headquarters or factory, what factors would you consider in choosing a property? Would “lowest price” or an arbitrary price limit be your sole criterion? Or would you consider other factors such as:

How much is it worth compared to other similar buildings?
How appropriate and useful is it for what we need?
Is it safe?
Has it been inspected and found to be free of vulnerabilities?
If it has vulnerabilities, have they been explained to you so you can make an educated decision about whether it’s right for you?
How long will it continue to work for you?
Will you outgrow it in 5 years?
Is its useful life worth the total cost?
Besides the purchase price, how much will it cost you to own it and run your business from it? Will utilities be more expensive than in another building?
Does it come with a risk of getting sued?
How clear is the title?
Does it have a dangerous parking lot or other features that expose you to ongoing risk? If so, what’s the cost to insure against that?
Will it need a major improvement next year?
Does it send the right message to your employees, customers, vendors and colleagues?
Is it a building you’ll want to brag about, or one you’re ashamed to have anyone visit?

When looking for real estate, most of us consider a list of factors other than price – we then make a choice based on all of these factors, meaning sometimes we will buy a property that costs a little more – because it’s worth it. And we don’t worry about the extra cost, because we know we are gaining an asset that is worth more to us than we paid for it – an asset that we expect to hold its value and even appreciate.

It’s the same with your patents, trademarks and copyrights. Yet many CEOs, CFOs and CTOs don’t approach decisions about intellectual property the same way they approach decisions about other kinds of property, such as real estate or equipment.

It’s not because they aren’t smart or dedicated or excellent leaders of their companies. It’s simply because no one ever explained to them the difference between “lowest price” intellectual property and “investment grade” intellectual property. Some of them learn the hard way, when they need to enforce their patents and trademarks and discover they don’t work, or when a potential buyer does due diligence and identifies problems with the company’s intellectual property portfolio.

This does not need to apply to you or your company. Remember to think of your intellectual property the same way you think of your other property and you will make better decisions with more confidence, decisions that will create valuable assets for your company.

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