The Intellectual Property Audit - Finding What You Have (Part I of V)

By Nancy Delain

With the advent of easy and ever-less-expensive computer access throughout the industrialized world, we live more and more in an economy based not on agrarian activities or industrial strength but on knowledge and the management of knowledge. Managing this new economy requires different tools than did agrarian or industrial economies. The agrarian economy demanded farming skill from the workers, and transportation and storage for crops. The industrial economy demanded manufacturing skills from the workers, transportation and a consumer market for manufactured items. Our new knowledge economy demands that organizations have in place the tools to manage the knowledge contained within them: some examples of this knowledge are contracts with employees, contractors, strategic partners, and consumers to protect the organization's knowledge base, patents to protect inventions, trademarks and service marks to protect organizational goodwill, copyright to protect publications, and a well-designed licensing program to allow the organization to commercialize and capitalize on its intellectual property.

This knowledge, the collective intellectual understanding of everyone who works for the organization, contained within an organization is the organization's intellectual capital. Intellectual capital makes up approximately 80% of the value of the S&P Fortune 500 companies. Probably the best-known example of an organization's intellectual capital is the Coca-Cola logo, which is valued at approximately U.S. $10 billion. However, the books of these organizations do not reflect these assets; they are hidden resources. Book values of publicly traded companies mainly reflect the value of tangible and capital assets of the organization.... This is hardly an accurate reflection of the intangible assets as [good will] is created to balance the books following an acquisition. The market value of a organization reflects the value of a hidden resource that is recognized and valued by the market....

Clearly, if an organization fails to account for 80% of its assets on its ledger books, that organization cannot provide an accurate valuation figure for investors, partners or consumers. Therefore, an organization must account for those intangible assets that do not appear on the ledger books but which make up so much of the organization's market worth. It does so through an intellectual property audit.

Nancy Baum Delain, a registered patent attorney, is the managing member of Delain Law Office, PLLC, an intellectual property and business law firm located in Clifton Park, NY. Nancy's expertise lies in patent, trademark and copyright prosecution, contract, licensing, and general business matters. Find out more at


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