REVOLUTIONARY CHANGES IN THINKING ABOUT INTELLECTUAL PROPERTY AND VALUE.pptVIP

MAKING INTANGIBLES A VALUABLE TANGIBLE ASSET GENERATING VALUE BY RELYING ON INTELLECTUAL CAPITAL John D. Swaim swaim@ +41 78 808 78 50 REVOLUTIONARY CHANGES IN THINKING ABOUT INTELLECTUAL PROPERTY AND VALUE Economic Paradigm Shift Relative importance of Intangible Assets/ IP In the U.S., since 1980, the average ratio of market capitalization to book value has risen from slightly over one to a multiple higher than five. In 1970, intangible assets represented less than 20% of the market value of the majority of U.S. public corporations. Now they represent 90%. Communication/IT Revolution Mergers Acquisitions TANGIBLE AND INTANGIBLE ASSETS HAVE VASTLY DIFFERENT CHARACTERISTICS… Value from Tangible Nature v. Value from Property Rights and Intangible Factors One Place at One Time v. Multiple Uses for Multiple Returns Intellectual Property as a “bundle of rights” Depreciation v. Cumulative Property of Knowledge Knowledge is cumulative, with each idea building on the last, whereas machines deteriorate and must be replaced. - Baruch Lev …LIKE THE ECONOMICS OF THINGS VERSUS THE ECONOMICS OF INFORMATION Costly Replication v. Zero Cost Replication Diminishing Returns v. Perfectly Increasing Returns Efficient Markets v. Requirement of Imperfect Markets/Tendancy towards Concentration RELATIONSHIPS AMONG THE DIFFERENT TYPES OF ASSETS Highest and Best Use Analysis Generally achieved within the context of a business enterprise Business Enterprise as a Portfolio of Assets Monetary Assets Tangible Assets Intangible Assets Intellectual Property Complementary Assets ROLES OF IP IN VALUE CREATION Creating Economic Value Creating Strategic Value ROLES OF INTANGIBLE ASSETS IP IN CREATING ECONOMIC VALUE Excess Earnings concept Intangible assets Intellectual Property create value when their exploitation enables an enterprise to produce earnings in excess of the returns required by markets on the assets (tangib