Intellectual property first entered the lexicon of the general U.S. population in 1993. Lateânight talkâshow host David Letterman did not get the nod from NBC to replace retiring Johnny Carson at The Tonight Show with Johnny Carson. David Letterman's rival, Jay Leno, got the job. Letterman went to CBS to host a new late show to compete with The Tonight Show. NBC threatened to sue Letterman if he used any of his regular running gags such as âThe Top Ten List,â âStupid Pet Tricks,â and âViewer Mail,â developed while Letterman was at NBC. The Los Angeles Times reported, âNBC's position is that, under âintellectual propertyâ laws, it owns the rights to Late Night with David Letterman and elements in the show.âŠâ1
The general public was aware of the elements of intellectual property such as patents and trademarks but not the collective term intellectual property, which was largely limited to professionals specifically operating in the field of intellectual property.
This book is about intellectual property: patented technology, trademarks, copyrights, and trade secrets. It describes the methods for valuing intellectual property and the practices of monetizing intellectual property, including licensing and royalty rates. It also spends considerable space on the determination of patent infringement damages.
This book also is about intangible assets that in conjunction with intellectual property create value in a business enterprise. Intangibles are categorized as rights and relationships. Examples of rights include licenses, contracts, and leasehold interest. Examples of relationships include an assembled workforce and distribution network. Their value can be substantial and will be discussed.
The reason for this book is that intellectual property is the central resource for creating wealth in almost all industries.
Patents convey exclusive rights to inventors for their innovations. The government allows a patent owner to exclude all others from using a protected invention for 20 years after filing for a patent. During the life of a patent, its owner can commercially exploit the patent invention, license it to others, sell it, or âparkâ itânot use it and keep all others from using it, too.
Patents encourage and protect the billions of dollars invested in the development of new products. Consider breakthrough medical therapies. It costs $2.5 billion to get a new drug from the laboratory, through development, and through FDA approval.2 This massive investment would never be spent without patent protection. No company would invest this kind of money in developing a new drug if, after successfully entering the market, any other company could market a copy of the new drug. Patents protect investors by providing them with an exclusive period of time during which the investor can recover its huge investment and make a profit. In return for the limited exclusivity provided by a patent, at the end of a patent's life, the invention enters the public domain, free for all others to use.
Trademarks convey the messages of value, quality, and safety for coveted products and services to trusting consumers. These assets are often nurtured over decades of exposure to the public and enormous support from advertising. By the end of 2017, over $200 billion in annual media ad spending will support the recognition of trademarks.3 Forbes reports the value of the Google trademark at over $44 billion.4
Think about the single aspect of safety conveyed by a trademark. A thirsty consumer is interested in buying an amberâcolored, sugary carbonated drink. He faces two options. One is in a dirty glass bottle with an unknown brand name scrawled across the bottle with a grease pen. The other drink is presented in a gleaming bottle with Pepsi expertly printed on the bottle. Even though the Pepsi option is more expensive, the decision is obvious for those desiring a thirstâquenching experience without the risk of poisoning.
Trademarks also provide a consumer with cachet. Cars are a great example. Most cars produced today can get anyone from point A to point B reliably and safely. BMW and Mercedes, however, propel their owners with widespread respect and admiration. Enormous premiums are paid for such attributes.
Copyrights for the entertainment industry protect the creativity that goes into music, movies, art, and literature. Congress protects copyright owners as reward for their creativity. Like patents, time and money are required to create art, and the intangible benefits for society for entertainment and amusement are considered worthy of exclusive rights. Consider comic books. Disney purchased the rights to comic book characters like Iron Man, the Hulk, the Fantastic Four, the XâMen, and SpiderâMan when it purchased Marvel for $4 billion. Movies, theme parks, and merchandising of the superheroes have earned Disney billions of dollars annually.
Trade secret laws protect sensitive manufacturing, services, and marketing activities vital to many companies; think of the formula for Coke. Like patents, the development of trade secrets can be costly. Unlike patents, trade secrets rights do not expire. If the trade secret can be maintained as a secret, the initial investment can be enjoyed into perpetuity. The value of all the trade secrets in the world can never be known, but this book will teach how specific trade secrets can be valued.