It would be inexcusable for a company to have no
idea of the value of its inventory or plant and
equipment. But, in fact, many companies know neither
the full extent of intellectual (intangible)
properties they own nor what they are worth. Many
specific responsibilities for managing intellectual
property fall to the human resources, legal and IT
functions. But the finance function should coordinate
and verify these efforts as it does with payroll,
employee benefits and inventory. Ultimately,
protecting IP is everyone’s responsibility. Consider
these top action items for protecting your company’s
Inventory all intellectual property.
At a minimum, inventory all IP assets and
identify those intangible assets that are most
critical to your business. Ideally, companies should
perform periodic audits of IP. They are a must when
significant events occur such as public/private
offerings, mergers and acquisitions, or pending
lawsuits. As part of an IP audit, quantify the value
of the intangible assets as well as examine and
evaluate strengths and weaknesses in the procedures
to protect each intangible asset.
Prioritize an action plan for correcting
deficiencies and reducing risk
identified in inventorying/auditing IP. Form a
plan to capture future IP rights developed and
Consider insurance strategies.
First, consider potential claims. Speak to
commercial insurance brokers and discuss various
policies that might be appropriate. These could
include IP defensive insurance, IP value insurance,
patent enforcement insurance, and technical transfer
Have basic agreements in place and ensure
These include nondisclosure agreements (NDAs),
proprietary information agreements and independent
contractor agreements. Have vendors and customers
sign NDAs. Don’t forget to have interview candidates
sign an applicant nondisclosure agreement and have
future employees read and sign an employee
representation letter that assigns all IP rights to
Have a secure IT network and computer
In addition to having passwords and firewalls,
consider an intrusion-prevention system and data
loss/leak-prevention software. For certain
industries, digital rights management software tools
might be appropriate to automate the workflow and
tracking of legally protected IP.
Have robust data retention policies and
Consider encrypting proprietary information.
Penetration testing (or simulated attacks) may also
be appropriate depending on the company’s risk
Ensure employee handbook and personnel
policies provide guidelines for protecting IP.
Stress the employee’s obligation to protect IP.
Provide e-mail guidelines such as not using e-mail
to send proprietary information. Consider having an
electronic resources policy within your employee
handbook that deals in depth with voice mail, data
use and appropriate Internet use, as well as access
and storage protocols.
Establish physical procedures.
Have basic safeguards in place such as limiting
exposure to visitors and restricting access to IP on
a need-to-know basis. Do background checks. Shred
all discarded documents that contain proprietary
information. Embed all electronic documents with
“confidential & proprietary” and stamp all hard
Establish systems and additional
Companies should send out periodic reminders of
everyone’s responsibility to protect all proprietary
information and have a culture of zero tolerance for
trade secret misappropriation. Inspect work areas
Ensure the training and education of all
employees on all aspects of IP and protection
Train hiring managers to protect trade secrets
during the interview process. Hold regular
seminars to educate employees on the various types
of IP, publication rules and security measures;
and refresh them on the company’s policies and
—By Robert Frank , CPA, of the
Santa Clara, Calif., office of Accretive Solutions.
His e-mail address is