Burke Files assesses the growing importance of intellectual property and critical information in global commerce.
In the Intangible Economy1, there are four factors of production that are the key resources from which economic activity and competitive advantage are primarily derived and delivered:
IPCI (Intellectual Property and Critical Information) is at the heart of any modern company. In actuality it represents the most valuable assets a company has. Yet, according to modern accounting principles, most IPCI either has no book value (such as IP developed in-house), or is carried on the books as a de minimis asset hidden in goodwill.
For example, under current rules, if you developed the trade name Oreo™ inhouse, you can only place it on your books at the cost of prosecution of the application; around US$35. Clearly the value is much higher. This missing higher value is, in part, reflected in the goodwill and the history of retained earnings.
It is also true that the value of IPCI is constantly changing. The value of a particular “nugget of wisdom or folly”, as a rule, decreases over time, but also may have greatly differing values in different commercial applications and environments. Further, if the IPCI is not actively protected from loss and infringement, it loses value. The time, effort, and expense used to create its value are considered essentially wasted.
If you will, this ‘currency of the mind’ is very valuable. Many international structures now are IPCI banks or holding companies, whereby a person or a company lodges a portion or all of their IPCI and then licenses that IPCI out to the world. Ideal candidates for this structure are those who are the drivers of the digital age, such as authors, publishers, musicians, and record labels. Famous persons can migrate their portraiture rights to such a structure. Software and Broad Application Patents are also good choices, as are widely known trade names and trade marks.
However, the choice of jurisdiction is of paramount importance, as is the protection of the IPCI from infringement or piracy. It appears, for now at least, that the jurisdiction of choice is the Netherlands. The Netherlands offers excellent movement of IPCI, since it has been aggressively structured as a hub for IPCI. Furthermore, since the Netherlands has tax treaties with most major nations, remittances can be harvested from many countries without domestic withholdings. The Netherlands also has an IPCI-friendly court system, where most cases can be heard by the courts in as little as eight weeks; try that in the US!
The internationalisation of IPCI, while very desirable in terms of portability, profitability, and flexibility, does, however, carry some pitfalls that must be addressed.
The last area of concern is that the IPCI must remain exclusive to the owner and the authorised licensees. As long as the IPCI is exclusive, it has value, but once it becomes diffuse, it is of little use.
It is incumbent upon the managers of these international IPCI structures, not only to monitor the licensing of these assets, but also to monitor potential infringement of the IPCI assets. The only proven way to do this is a process called OPSEC; a developed process for identifying, valuing, and protecting information that would give adversaries, those who want your IPCI, an advantage.
IPCI is the currency of the future. It is more fluid than cash and often more intangible and powerful than the djinn of the deserts. It is imperative that we in the international finance community become more literate about and familiar with IPCI, so that, in time, our knowledge and skills can provide value and support to this intangible currency.
1 The Industrial Age began in Britain in the 18th and 19th Centuries. The Information
Age is roughly from the 1980s to 1992. Knowledge Economy started in 1992, and continued to 2002. The Intangible Economy started in 2002.
L. Burke Files Burke Files has been involved in finance since 1982 and in international finance since 1986. He has also served as the Director of Corporate Finance for an investment banking company; President of a business and venture capital consulting firm; and a commodities specialist trading gold, silver, and foreign currencies 24 hours a day. In the past, Mr Files has served as a member of the Governor's Board on Solid Waste Management; as an advisor to the Governor's Board on Economic Planning and Development; and as a former Commissioner of the City of Tempe Transportation Commission. Mr Files has also received a Commission and a Medal of Merit from the President of the United States. He has written extensively and been quoted in many publications. He is a frequently quoted source for articles regarding financial investigation and due diligence. Among the publications in which he has been quoted are: Chief Executive Officer, The American Southwest Quarterly, Offshore Journal, Cayman Today, Aegis e-Journal, John Cooke Fraud Report, El Cosario, European Business, NPR Market Watch, Bloomberg, USA Today and Associated Press. In addition to numerous published articles, Mr. Files is the author of many articles and several books including Due Diligence for the Financial Professional and Money and Budgets