When thinking of the value of a business within the technology, media and communications (TMC) industry, it’s no longer about the bricks and mortar and hard physical assets; the bigger share of a company’s value now resides in their intangible assets, such as intellectual property (IP) — including patents, copyrights and software — and customer goodwill. Although these intangibles now make up 90 percent of the value of the S&P 500, many organizations continue to overlook their protection, with only 17 percent of the value of intangible assets insured against potential loss1 — an oversight that represents a major threat to their operational resilience.
According to Aon’s 2022 Intangible Assets Financial Statement Impact Comparison Report — conducted and produced by Ponemon Institute LLC2 — more than a third (35 percent) of the companies surveyed say they have experienced a material IP event. The majority of these IP events related to trade secrets (41 percent), with copyright issues at 26 percent. From an insurance perspective, only 29 percent say they have a trade secret theft insurance policy, which highlights the protection gap for many businesses if something were to happen to their IP. This vulnerability emphasizes the need for TMC businesses to adopt a three-phase approach to identifying and successfully managing IP risk as a keystone of their operational resilience strategy: assess, quantify and manage.
Assess the IP Risk
The logical place to start with IP risk is in the assessment phase — working out what IP a business has. For TMC companies, the risk for patents are often considered first. What if a patent is invalidated, or the business is sued for infringement and can no longer sell its products? Other areas of IP might include trade secrets, particularly in the technology space, while in media, copyright is key. The types of liability include third party IP disclosure/release, as well as contractual indemnities of IP risk and any breach of IP licensing agreements. IP ownership risks include loss of IP value due to theft or misappropriation, IP enforcement costs and loss of IP due to legal challenge.
Quantify the IP Value
Quantifying, or putting a dollar figure against the IP value of a business, has been historically difficult. However, as the importance of these intangible assets grows, there are now options for organizations to gain a clearer picture of how much their IP is worth. Aon, for example, has developed an AI-driven platform that can help more accurately assess the value of a firm’s IP by using big data sets. Results are then vetted by human expertise to arrive at an accurate value.
Manage and Protect IP
With a clearer picture of the IP and its value in a TMC business, the third phase of the risk management framework relates to IP management and protection. It’s common for employees in the TMC sector to move from business to business, increasing the risk of someone taking trade secrets to a competitor. Businesses therefore need to implement protections within their employment processes to prevent this from happening. Maintaining a trade secret register and documentation system is the key to make it easier to pinpoint and prove the source of the problem.