Intellectual Property in End-Game

The firm retains (indirect) control over the Intellectual Property developed using its funding (unless otherwise negotiated up-front). This Intellectual Property is worthless for the pursuit of blockbuster+ products: it cannot be applied without the implicit knowledge+ retained by employees of the research unit. But it’s an insurance policy against research unit management thinking they can go off alone without first reaching agreement with the firm. The firm needs assurances the Intellectual Property was not deliberately undervalued during end-game+ negotiations.

Recall the Intellectual Property is owned by a separate legal entity: the Intellectual Property Repository+. This entity ensures all relevant intellectual property developed using the firm’s funds is captured and protected. This entity examines future products by ex-research unit employees for firm-owned Intellectual Property content. If the firm owned 70% of the research unit at time of dissolution, then the firm will seek upward to 70% from the sale of any products developed using its Intellectual Property.

IP protection guards against regrets+ on the part of the funding agent+ (e.g., the firm). We want the funding agent to fearlessly make end-game decisions based on today’s assessment of research unit and not based on an imagined ‘phoenix rising’ scenario. We do not protect Intellectual Property with the intent of extracting reprisals from ex-employees. We do it so funding agents do not fear being held the dupes during end-game negotiations.

For this scheme to work the firm must not shirk from exercising its rights in cases of infractions. Infractions are prosecuted vigorously and in full public scrutiny. It may cost more in legal costs than can be recovered, but the intent is to make sure end-game is negotiated in good faith (by both parties). Recall from an earlier article ownership of Intellectual Property reverts to the research unit in case of corporate bad faith.

If Mother Nature didn’t cooperate do we try to sell the IP to salvage some value? Probably not. The effort to sell the Intellectual Property often costs more than the value recovered. Again, protection of Intellectual Property is not done for the sake of the value inherent in this asset. It’s done to do end-game well.

Home Page October 2010