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Sweet marketing music

Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

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by Tim Matson
June - July 2008

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Get a legal physical for intangible assets

The answer lies in the importance of intellectual property, or IP, in the digital age. In today’s information economy, companies transact more business in the virtual world.

Before the advent of the Internet, 80 percent of the assets of the typical company were tangible, such as buildings and equipment. Today, approximately 80 percent of the value of the companies listed on the S & P Fortune 500 is intellectual capital.

However, intellectual property rights are not reserved solely for companies developing sophisticated new technologies. Intellectual property permeates some core aspect of virtually every business in America today.

What is an IP audit?

‘IP audit’ is somewhat misleading. It implies an accounting and valuation of intangible assets for the corporate balance sheet. This is only part of the story. Perhaps a more appropriate term is ‘IP legal physical,’ because an IP audit is really a legal undertaking conducted by IP attorneys and other IP experts to exhaustively investigate, identify, review, analyze and catalog the legal status and value of intellectual property assets owned or used by a company. Just like a yearly visit to the family doctor, an intellectual property audit should be regular and systematic.

Step one: Investigate

The first step of an IP audit is to investigate all things created, developed or used by your company. Cast the net broadly to include all commercially useful information and materials used to make and sell your products. Consider anything caught in the net as a potential asset, whether technological, creative or simply business related.

For example, science and technology-based companies develop inventions, formulas, processes, devices or other technologies. Entertainment companies develop and sell creative works, such as music, books or computer video games. However, virtually every company (not just high-tech or entertainment) creates and develops business information, including advertising, promotional materials, customer lists, prospect lists, pricing information, sales figures, financial projections and other materials that give the company a competitive advantage.

All of these items – not just the technological or creative – are potential subjects of intellectual property rights.

Step two: Identify

The second step of an IP audit is to identify what rights, if any, apply to the items on the list. The four intellectual property rights are patent, copyright, trademark and trade secrets. Multiple rights can and do exist in the same asset.

For example, Microsoft’s computer software is clearly the subject matter of copyright, the processes embodied in the software may be the subject of patent rights, the underlying source code is likely a trade secret, and the word Microsoft and any logos used to sell the products are trademarks.

A patent is the grant by the U.S. Patent & Trademark Office of an exclusive monopoly for a term of years to the inventor of an invention. To qualify for patent protection, the invention must be novel, useful and non-obvious.

Copyright protects original works of authorship, such as literary, dramatic, musical, artistic, and certain other intellectual works. Copyright does not protect ‘ideas,’ but only the ‘expression of ideas’ in a tangible medium, such as written text.

Trademark protects any word, name, symbol or device that is used in commerce with goods to indicate the source of the goods, and is capable of distinguishing those goods from the goods of others. Trademark rights are used to prevent others from using confusingly similar trademarks to sell similar products.

Trade secrets are formulas, patterns, compilations, programs, devices, methods, techniques and processes that derive independent economic value, are not generally known, and are the subject of reasonable efforts to maintain secrecy. Unlike other IP rights, trade secrets are not disclosed to the public or registered with a governmental entity.

Step three: Analyze

The third step of an IP audit is to determine who owns the IP assets identified in Step 2 and whether there are any defects in ownership, registration or licensing. Create two lists. The first list is for IP assets owned by your company, including things created by employees within the scope of their employment. Analyze whether there are any defects in ownership or registration.

Review all registrations, assignments, employment and other agreements affecting ownership. Make sure trade secret information is secure and, if applicable, protected by non-disclosure agreements.

The second list is for IP assets owned by others. Review all license agreements to confirm the asset is properly licensed and whether any limitations on use exist. For each list, catalog the subject matter, ownership, nature and scope of each IP asset.

Common problems arise with chain of title, ‘work made for hire,’ assignability and scope of license issues. Ultimately, the goal of Step 3 is to catalogue all IP assets, determine if there are any further steps to secure and protect owned assets, and analyze whether proper licenses are in place for the IP rights of others.

You should probably get a physical if you have not been to the doctor for awhile. The same is true with an IP audit. But just like major changes in your health, there are times when an IP audit is essential. A merger, acquisition or other significant financial transaction requires IP due diligence. Indeed, a significant change in ownership often impacts the assignability of licensed rights.

An IP audit is also necessary for any proposed acquisition or transfer of a significant IP asset. Also, if there is a significant change in the law, companies should definitely reexamine their IP assets.

All emerging companies should consider the benefits of a regular IP audit well before any major transaction. An IP audit identifies core business assets and sharpens strategies for growth. To that end, an IP audit looks for hidden corporate assets worthy of greater exploitation.

An IP audit also highlights any defects in ownership and registration to ensure that appropriate measures are taken to secure and protect IP assets against infringement by others. An IP audit also identifies intellectual property used by your company but owned by others, and ensures that such intellectual property is properly licensed. Clearly these issues become critical for companies under the scrutiny of a proposed merger or acquisition, but they are important for all emerging businesses.

Just don’t wait until the 11th hour of IP due diligence to make sure your house is in order. You may be ignoring valuable rights or hidden problems that could have been uncovered in an IP audit.