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Private Equity: History, Governance, and Operations, Second Edition by ADAM A. WADECKI, JAMES P. MARTIN, LOUIS W. PETRO, HARRY CENDROWSKI

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Chapter 8

Intellectual Property and Private Equity

Stephen Olson

David McClaughry

Introduction

Historically, tangible assets such as factories, buildings, equipment, inventory, accounts, and the like represented the value of a company. When faced with the task of increasing the company's value, the conventional thinking was to investigate increasing sales, developing new products or adding assets through mergers and acquisitions. After all, such endeavors had a proven track record for adding to the bottom line.

Intellectual property (IP) and the intangible assets it represents were once considered ancillary matters best left for the legal staff or the company's outside patent counsel. Over the past decade, strategic corporate planning has broadened its focus to include intangible assets as a viable means for improving the financial performance of a company. Successful evaluation and management of a company's IP is critically important in today's climate wherein the rights to new ideas and innovations can drive the company's ultimate value.

This chapter will further explain the rights and remedies associated with these types of IP, as well as address assessment of the value of IP rights prior to a private equity (PE) investment. This chapter will also address how these intangible assets may be used to both protect and create value related to a PE investment.

Intellectual Property Rights and Remedies

“Intellectual property” is the general term used to refer to intangible assets ...

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