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Growing Intangible Assets in an Economic Downturn May Pave the Way Toward Future Profits

July 26, 2022

It is no secret that the US economy has suffered greatly in the past two years. During the height of the pandemic and in the aftermath, local economies missed the usual boost in revenue from restaurants, retailers, and live events. Supply chains are still struggling due to the shutdown, global production problems, and continued workforce issues. This, in turn, has caused high demand and inflation rates.

The next few months, or even years, could be a push-and-pull between inflation and interest rates, as the Federal Reserve seeks to implement new monetary policies that will bring the US economy back to pre-pandemic prosperity. While consumers are reconsidering their spending and corporations are evaluating their investments and hiring, there are steps that businesses can take to stay afloat and launch new business as the market returns. In today’s blog, we discuss how the growth of intangible assets through the licensing of intellectual property (“IP”) can be key to future profits.

Intellectual Property as a Driver of Innovation

Creativity and inventiveness help advance our society, solve socio-economic problems, and overall make life better for the population. Over the past 20 years, there’s been a shift towards enhancing access to our innovation ecosystem and protecting ownership rights to the creations and inventions that benefit our society. Patents, trademarks, and copyrights provide a means for establishing ownership rights to those innovations. IP rights encourage us to take risks, embrace new ideas, and drive change.

IP rights and protection are also critical for developing our domestic output and enjoying the benefits of an innovative economy. According to the USPTO, US industries that greatly utilize intellectual property account for 41% of US economic activity and 44% of employment. IP- intensive industries such as manufacturing, retail, and professional services accounted for $7.8 trillion in US gross domestic product.

If you own intellectual property, you can potentially monetize that intellectual property. IP can be sold, mortgaged, or even licensed. In the current state of the economy, licensing your IP can generate a reliable income stream and help set you and your business up for future success.

How Intellectual Property Licensing Can Drive Profits

IP owners can take advantage of alternative financing strategies such as licensing their existing and any newly-acquired intellectual property. How does it work? With IP licensing, the property owner sells the rights to use that intellectual property to an entrepreneur-licensee. (They are not transferring ownership of the IP itself). The owner assigns subordinate rights to assets such as patents, brand names, or trademarks for a licensing fee. Through a licensing agreement, the owner establishes the terms and appropriate permissions – in other words, guidelines about what the licensee can and cannot do with the property. The licensee pays a licensing fee to the owner of the intellectual property.

As long as you carefully draft a licensing agreement and monitor the licensee’s use of your intellectual property, your IP should continue to increase in value and marketability. You’ll receive profits while the economy works to right itself. Increased profits mean that you can further develop your IP portfolio, whether it’s your own work or investing in and acquiring additional IP.

Invest in Innovation Now, Create Business Opportunities in the Future

Leveraging intangible assets to drive profits is not a new concept. In the 1800s, Thomas Edison helped finance his company by using the electric lightbulb patent as collateral. In more recent years, celebrity branding has become a popular licensing tactic for marketing everything from beverages and nutrition supplements to household goods and beauty products.

If you own intellectual property, whether it is a patent, trademark, copyright, or trade secret, licensing that IP may not be something you’ve considered before. However, investing in creative works, product development, and branding now can pave the way for licensing opportunities in the future.

History informs us that the businesses that innovate and think outside the box are more likely to survive a recession. Set yourself up for success and gain a competitive edge by realizing the value of your intangible assets and growing your IP portfolio.

For more information concerning IP and IP licensing, please do not hesitate to contact us.

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