What are intangible assets?

In the first of two articles on the topic, Jackie Maguire discusses the importance of training employees on the role of the ‘intangible assets’ of a business. 

An understanding of Intangible Assets (IA) is often not the first requirement a business owner or senior manager believes to be essential to the development and growth of their enterprise. Yet a general understanding of how IA underpin a company across its business is very important, whether or not the organisation also has specialists in the discipline of IA or Intellectual Property (IP).

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It is still not generally recognised by company directors, including start-ups, that some 80 per cent of the value of a business can reside in its intangible assets.

What are Intangible Assets?

Most people are aware that patents, trademarks, designs and copyright form part of an organisation’s IP. However, it often comes as a surprise, particularly to more junior staff, that a company’s value is also contained in its wider intangible assets, including know-how, branding, reputation, skills, policies and business processes.

Identifying intangible assets, allocating a monetary value to them, protecting them from unauthorised use, and commercialisation are important steps in any business.

Hard to Create

How to recognise exactly what these assets are, which ones are most valuable to the business going forward, what new ideas for products and services might fit with the existing portfolio and which would not be so relevant is vital to the future strategic development of the business it cannot simply be left to a particular responsible department, if there is one. It is important that these assets are understood by a critical mass of employees.

Why?  Because one of the largest monetary outlays in many businesses is the people costs, and the investment in the creation of knowledge, skill and know-how goes well beyond the costs of salaries; for longer- serving employees this amounts to a significant investment. The assets created by this knowledge base are therefore something that requires protection and retention – and asset protection needs to be understood by all concerned.

Easy to Lose

It can only take one unguarded conversation or an unexpected external visitor to a desk to reveal some important aspect of company technology or business, for a valuable asset to be lost.  Thus, along with the development of the IA there needs to be a parallel focus on retention and protection of IA. This includes company policy on matters such as  confidentiality, visitors and third party meetings.

All staff, including those involved in R&D, need to be fully aware of the implications of disclosing their inventions in advance of a patent application. Simply by disclosing their contributions in external discussions or by publishing in journals or conference papers, employees are potentially making their company’s technology available to the public.

From that point onwards, if no patent application has already been filed, the invention may no longer be considered to be novel or inventive, and it will become difficult to obtain a commercially valuable patent to protect it.

It is recommended that prior to any external disclosure whatsoever, organisations take professional advice on precisely when they should patent their inventions and how they should go about it. This includes discussions with potential partners and collaborators. Otherwise, there is a serious risk of giving away ideas or inventions for free.

Without this focus, the IA will leak away and result in loss of competitive position and commercial advantage. Training programmes that communicate this are therefore a vital part of any IP strategy and therefore business strategy.

Valuing What you Have

One of the most important steps is for a company to fully value its IA. A safe practice is to assume that all key assets have a value and should be treated with due respect the risks associated with under valuing them are much higher.

The phrase ‘familiarity breeds contempt’ is one that can often apply when people have been working in an area for some time. They begin to focus on only the items significant to their immediate area of influence. Often, important intangible assets are overlooked and undervalued.

So how does a company director, or even a start-up entrepreneur, go about ensuring that IA are captured and valued?  Well, there are publicly available courses and online tools that can help. However, achieving the right culture towards appreciating the innovative and valuable assets across the organisation is key. An outside IP specialist who will take an independent look at a business and focus their advice and training programme around that business can bring about this cultural change and renewed understanding.

A full IA audit is a starting point, where the full range of IA can be captured and recorded, giving a complete picture of the company assets. The specialist will also give advice to management on protecting,  these  ‘crown jewels’ of the business, through a variety of best practice methods, and will advise which are most suitable for the particular organisation.  

The best employee coaching or training programmes are carefully tailored to the individual business requirements and carried out on site by intellectual property (IP) professionals who have themselves experienced the challenges of running a business, to individuals or small groups. It can initially seem a complex area, so this approach allows for detailed questioning and explanation and putting it in the context of the particular business.

In small companies with a technical focus, all employees need a good understanding of IA, while in larger companies training should be provided at first line manager and above. And all those that attend customer or supplier meetings, have contract negotiations, technical discussions or those engaged in visits to customers, suppliers or other potential partners for example, require a good grasp of which IA are important to the business.

In the next article on this topic, we look in more detail at how we can train employees to understand IA, including who in an organisation needs such education, and how to ensure they understand that they have a major role in protecting these important company assets.

About the author 

Jackie Maguire is the CEO of Coller IP

Training Journal

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