The Importance of Business Structures to the Exploitation of IP

• Author: Christoph Regierer
• Pages: 143-150

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The Importance of Business Structures to the Exploitation of IP

Christoph Regierer

The authors of this book have emphasised that patents should be considered not

simply from their technical aspects, but also within a comprehensive economic

context. For example, the chapters on licensing and start-up structures make it

clear that technical, legal and economic aspects of IP need to be considered in a

coordinated manner. This chapter will contribute to this integrated approach by

outlining the business structures and accounting principles that support the cap-

ture of value from intellectual property.

As a consequence of their nature, patents and other IP are treated differently

under corporate and tax law. The law makes a general distinction between tangi-

ble and intangible assets. Tangible assets are, as the name suggests, objects such

as real property, buildings, machines, motor vehicles and office equipment. As a

general rule, tangible assets can be consumed, damaged or reduced by use.

By contrast, intangible assets, lack physical characteristics. Rights such as

patents, know-how and technical processes are intangible assets that remain

unchanged by use and retain this characteristic even when electronically stored or

bound in chemical substances. Although this physical form is tangible, the under-

lying asset remains intangible. This separation of the physical form and the intan-

gible content defines this asset class.

The lack of physical characteristics allows intangible assets, such as patents, to

be detached from their operational context and to be separately valued, sold, and

licensed. Indeed, the recognition that intangible assets can be separated from the

operational process and used as independent assets greatly expands the economic

potential and value of an enterprise. Companies are adopting evermore sophisti-

cated structures to better exploit the dichotomy between operational functions

and intangible assets, and this is reflected in the way in which enterprises are leg-

ally structured, present their accounts, and report their financial results. Conse-

quently, the regulatory framework of these financial activities also continues to

evolve. This chapter addresses several of the issues that arise from the intangible

nature of patents as business assets.