Business Enterprise

• Author: Russell L. Parr
• Profession: President of Intellectual Property Research Associates
• Pages: 54-64

CHAPTER 4

BUSINESS ENTERPRISE

Intellectual property and intangible assets produce economic benets when integrated

within a business enterprise. While the purpose of this book is to focus on the valuation of

intangible assets and intellectual property, these assets can be fully understood only within

the context of the business enterprise. This is because it is typically within the context of a

business enterprise that intellectual property and intangible assets attain their highest and

best use and therefore their highest value.

THE BUSINESS ENTERPRISE

Converting intellectual property into revenues, prots, and value requires a framework of

integrated complementary business assets. Complementary assets are required to convert

intellectual property into a product. These assets are also needed to produce the product,

package it, sell it, distribute it, collect payments, and implement the many other business

functions that are required for running a business. Companies that create intellectual prop-

erty and then license it to others are still not free of the fundamental need for complementary

assets. While the creators of intellectual property that license it to others may not need

to acquire and use complementary assets, successful commercialization of the licensed

intellectual property is still dependent on organizing such assets by the licensee. Royalty

payments to the creator are still dependent on the licensee organizing the needed comple-

mentary assets for exploitation of the licensed property.

Think of a business enterprise as comprised of the most basic operational components

as illustrated in Exhibit 4.1.

The R&D and manufacturing segments include intellectual property (patents and trade

secrets), xed assets, and intangible assets. The selling and marketing segment includes

trademarks, intangible assets, and xed assets. Administration and overhead has monetary,

xed, and intangible assets but most likely not intellectual property.

The process of inventing and designing products occurs in the Research & Design box.

Here, engineers and scientists create new and use existing technology to create products.

The intellectual property and intangible assets in this segment of the business include

patented technology, licensed technology, an assembled workforce of knowledgeable

employees, and of course tangible assets such as ofces and laboratory buildings.

The Manufacturing box includes the tangible assets and personnel needed to make the

products created by the R&D box. The assets include manufacturing equipment, build-

ings, warehouses, and an assembled workforce of knowledgeable employees. Trade secrets

involving the most efcient methods for manufacturing can be included in this box.

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