Managing Intellectual Property




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 intellectual property:

checkbox 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.

checkbox 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 acquired.

checkbox 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 insurance.

checkbox Have basic agreements in place and ensure they’re used. 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 the employer.

checkbox Have a secure IT network and computer systems. 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.

checkbox Have robust data retention policies and procedures. Consider encrypting proprietary information. Penetration testing (or simulated attacks) may also be appropriate depending on the company’s risk assessment.

checkbox 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.

checkbox 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 copies similarly.

checkbox Establish systems and additional safeguards. 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 regularly.

checkbox Ensure the training and education of all employees on all aspects of IP and protection thereof. 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 procedures.

—By Robert Frank , CPA, of the Santa Clara, Calif., office of Accretive Solutions. His e-mail address is



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