As public health, political leaders and economic experts grapple with the effects of COVID-19, businesses face a wide range of new threats and challenges, including to their intellectual property. In this time of crisis and uncertainty, understanding strengths and weaknesses when it comes to assets and liabilities is more critical now than ever.
Part of the answer lies in understanding a company’s full picture of its assets, what has the greatest amount of value and how that value should be protected. For example, Coca-Cola’s recipe may still be the classic (cheers) example of a formula or process protected as a trade secret. The 125-year old formula was transferred to the World of Coca-Cola site in Atlanta in 2011, finally exiting the bank vault where it had been housed since 1925. And this recipe remains one of its most valuable assets.
Of course, Coke is but the tip of the iceberg for trade secrets in today’s digital world. One study estimates that trade secrets at the five largest S&P 500 companies alone—Apple, Alphabet, Microsoft, Amazon, and Facebook—account for $5 trillion in 2018 market capitalization. As technology disrupts industries with new services and innovation, the value of all intellectual property (IP)—intangible assets—is surging and responsible for upwards of 84% of total valuation at these companies.
When the world emerges from this current crisis, there will be a host of innovations that exist because of it. And there will be some—like ecommerce, online education and learning, and others—that will be perhaps more valuable than ever before.
New research from Manufacturers Alliance and Aon finds that IP is still fundamentally:
- misunderstood,
- undervalued, and,
- underinsured.
The research highlights a path forward with practical guidance to consider a strategic approach to IP protection, advance valuation methods, and elevate risk management. As companies adapt their strategic plans during this time of disruption, applying this guidance can help ensure that companies are protecting their IP beyond patents.
Effective IP protection requires a holistic approach to copyrights, trademarks, and—especially—trade secrets. Unlike patents, trade secrets require no disclosures of how an innovation works, typically involve low/no upfront and maintenance cost, and may protect fast-paced innovation when speed is paramount. However, enforceable trade secrets require a company to take “reasonable measures” to protect secrets from disclosure, making best practices critical to prevailing in any litigation and maintaining a competitive advantage. Best practices outlined include:
- Building internal awareness of confidential information
- Discovery and cataloging
- Protection measures
- Policy and contract reviews
- Incident response planning
Trade secrets cover more than the world of soda and special sauces in food and beverage, or even search engine algorithms. Industrial manufacturing equipment, processes, systems, designs, prototypes, and more all meet key legal criteria as information with commercial value, not easily available through proper means, and subject to reasonable protections to maintain confidentiality and secrecy.
Patents have their place but trade secrets are an important quiver in the arrow of IP protection, particularly as digitalization reshapes processes and products in manufacturing. Chinese patents continue to proliferate and growing risks to intangible assets challenge conventional strategies.
Access the report "Beyond Patents: IP Strategy, Valuation, and Management in Manufacturing" for data-driven insights on the state of IP management in manufacturing and expert perspectives on IP valuation issues and insurance solutions to manage and protect the growth of intangible assets in your business.
