By: Renuka Sena, Director of Mindvault Sdn Bhd.
Date: Saturday, 29th September 2007
The arrival of globalisation has brought change in traditional rules and perspective on economy. Old economy defined assets as something tangible such as inventory and property. But the new economy had re-define asset as something intangible. In fact, tangible asset only make up a small percentage of the company’s net value. Most of their net worth resides in their intangible assets like the intellectual property (IP).
But what exactly is IP? The law protects IP in separate and distinct categories namely patents, trademarks, copyright, industrial design and confidential information. Although it is hard to recognise these values within an organisation, we must make an effort to learn how to identify intangible assets in the organisation to survive the k-economy.
To identify an IP, it is important to know where to start. An IP audit is the most cost effective solution in identifying IPs. It is a legal exercise execute due to diligence purposes. It will commence occasionally for periodic review which requires expertise from business, technical and legal fields. The end result is, it illustrates a catalogue of the organisation’s IP. Then, the management can make a timely decision to use and protect their assets.
Strategies to protect and use these intangible assets vary. Some assets are unique which may have multiple avenues of protection. That is why, before determining which protection strategy to use, a few factors must be considered. In the case of chemical compound such as compound used in face cream or recipe, it must be distinguished first whether it could be ascertained from lab testing or reverse engineering.
If it can, patenting it is the best way to protect the R&D investment. Patenting gives the company a monopoly over the compound for 20 years and the company can license the compound to other companies to make additional revenue. However, company must also assess the commercial potential of the use of the compound versus the cost of maintaining the patent. Once this is done, the company can decide if patenting is a good commercial strategy or not.
However, if the compound could not be ascertained from lab testing or reverse engineering, the most appropriate strategy is to keep the compound as a trade secret, just like the recipe for KFC and Coca Cola. Trade secret is low in cost and last longer than 20 years if compare to patenting. Yet, company should only utilise this if they are confident that its competitions will not discover the formula as trade secrets are vulnerable. Once the secrets are leak, the value is lost forever.
Each method of protection will depend on the potential value of the asset when seen in the context of the business as a whole.
Summarised by: Farhana Zahani Zainal Abidin