March ABI Journal Article Explains How to Maximize Critical Intellectual Property Value in Bankruptcy Cases
Alexandria, Va. — Bankruptcy practices involving the sales of intellectual property (IP) portfolios have become increasingly common and aggressive, according to an article in the March ABI Journal. “Many bankrupt tech companies have intellectual property portfolios that offer greater value in a sale than as part of a distressed entity’s going-concern value,” write Martin D. Pichinson of Sherwood Partners LLC (Mountain View, Calif.), Scott Francis of agency IP (Mountain View, Calif.) and G. Larry Engel of Morrison & Foerster LLP (San Francisco) in their article “Monetizing IP: Variables Impacting the Value of IP Assets.” Though the Bankruptcy Code narrowly defines intellectual property, the authors define IP as encompassing a broad spectrum that includes patents, copyrights, brand names, trademarks, logos, trade dress, rights of personality or characters, trade secrets and know-how to get “things done,” and domain names. “Each type of IP has its own unique strengths, weaknesses, specialized practices, remedies and forms of documentation, as well as offensive and defensive legal characteristics, which often cause confusion among nonspecialists and courts, who tend to overgeneralize about IP as if it were one common type of asset class with common rules (e.g., like securities),” according to the article. The IP sale price in a bankruptcy sale might far exceed the present value of a revenue stream from conventional IP licensing revenue. As claims traders insisting on maximum recoveries from purchased claims, Pichinson, Francis and Engel write that distressed tech debtors are often forced into total or substantial asset sales centered around IP. For example, the authors point to the patent sale in the Nortel bankruptcy case as a total asset sale of IP, while the Kodak patent sale represented a substantial asset sale focused on IP. “Intellectual property of nearly every sort is an intangible asset often valued at zero for financial reporting, reflecting marginal value costs or the acquisition price for purchased assets,” the authors write. “As with any other asset, IP has a range of returns, as well as variability in those returns (investment risk).” “IP is a critical asset class for many companies, especially those that rely on technology (e.g., patent) or brand (e.g., trademark), as well as many other powers, both from a value and strategic perspective,” write Pichinson, Francis and Engel. “Therefore such companies should develop IP strategies, both offensive and defensive, including how best to ‘mine’ for IP and then to monetize it, especially in the bankruptcy context.” To obtain a copy of “Monetizing IP: Variables Impacting the Value of IP Assets,” published in the March edition of the ABI Journal, please contact John Hartgen at 703-894-5935 or via email at [email protected] ### ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 13,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.
Wednesday, March 6, 2013