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Issue #12-1 | May 3, 2012

Google cloud storage terms may raise valuation questions

A recent item in The Chief Officers’ Network called our attention to the terms under which users subscribe to Google’s cloud storage services (Google Drive):

When you upload or otherwise submit content to our Services, you give Google (and those we work with) a worldwide license to use, host, store, reproduce, modify, create derivative works (such as those resulting from translations, adaptations or other changes that we make so that your content works better with our Services), communicate, publish, publicly perform, publicly display and distribute such content.

The rights that you grant in this license are for the limited purpose of operating, promoting and improving our Services, and to develop new ones. This license continues even if you stop using our Services (for example, for a business listing that you have added to Google Maps).

Google’s terms for Google Docs are similar, with the added clause that states the user’s IP remains the user’s. But what if a user’s know-how is interspersed throughout content stored in the cloud, and what if this know-how is proprietary, representing trade secrets? How would trade secrets (IP) content be treated differently by Google?

Compliance issues go beyond this blog space, but are healthcare records being stored in the cloud?

Are corporate and IP counsel and chief intellectual property officers allowing a company to use Google’s cloud storage without strict controls on who is uploading and what is being uploaded? (The New York Times has warned its editors and reporters away from Google Drive.)

There is a PR attempt to make this concern go away by calling it “standard license language” or “standard legalese,” but it’s doubtful that will alleviate concerns.

The list of due diligence questions for valuation analysts continues to grow. In the study BVR is putting together benchmarking hundreds of purchase price allocations (to be released in June), content is an identifiable intangible asset that needs to be valued, especially in media companies. Is the value of content affected by whether or not it is stored on Google?

Two studies measure intangible assets versus total assets ratio

Ocean Tomo released its 2010 survey on market value versus book value of the S&P 500, concluding there has been little change in the makeup of intangible assets to total assets (remains at 80%) since 2005.

BVR released its findings after analyzing hundreds of purchase price allocations (PPAs), determining total intangible assets currently make up, on average, 72% of the total assets in acquired companies. (BVR’s results will be officially published in June as part of its highly anticipated PPA Benchmarks and Useful Lives research report.)

Without the willingness and wherewithal to defend IP rights, they are worth very little

Earlier this month, Richard Taylor wrote in The Telegraph of an inventor who burned the patent to his invention in front of Parliament in London to protest the cost of defending the IP.
Michael Wilcox from Pembroke, Wales, had a patent for new color printing technology, and, as is the system, he set about asking larger companies to respect his rights and license the technology.

Instead, companies allegedly copied the technology, in effect saying, “Sue us.” After spending nearly a quarter of a million dollars on development, no money was left to go after the infringers.

Valuation analysts understand this part of the equation. Without the willingness and wherewithal to defend IP rights, they are worth very little. Here’s a link to the story; it’s an instructive one to save for those conversations with IP owners when value is being so impacted. (A tip of the hat goes to Bruce Berman at IPCloseUp for calling attention to this story.)

Virtual celebrity appearances will create a scramble in IP enforcement and changes in estate valuations

The wonder of the recent appearance of Tupac Shakur in holographic form at a rock concert will undoubtedly be followed by extensive legal analysis, especially by those enforcing IP rights. As pointed out in the American University Intellectual Property Brief, a hologram can not only make a deceased artist appear on stage, but the image can also be made to perform someone else’s song, mouth someone else’s words, or crack someone else’s jokes.

Licensing copyright and publicity rights is about to get more complicated. As the article states, “It just might be a brave new world for the music industry … [and] for intellectual property laws.”

The phenomenon creates a new benefit stream for valuators of estates to consider. Appearance “fees,” once thought to have died with a performer, will remain. Who would doubt that a Marvin Gaye concert in holographic form would sell out Madison Square Garden?

Companies are making progress understanding the importance of IP valuation

In CPA Global’s latest State of the IP Industry Survey, 77% of corporate IP professionals said there is a greater awareness in their organizations of the importance of IP valuation than there was one year ago.

Haydn Evans, European head of IP outsourcing for CPA Global, summarized what needs to be done and how to do it:

Effective portfolio management is central to achieving revenue generation....IP departments need to be aligning their IP strategy with their organization’s broader business strategy throughout the IP lifecycle—from generation of ideas at the R&D stage to patent filings to the optimization and monetization of patent portfolios.

Evans said IP departments should be undertaking three steps regularly:

Step 1: IP identification
What IP do you have?

Step 2: IP analysis
Where is the value? This is what Fernando Torres of IPMetrics calls “triaging” the IP. How well is your IP aligned with your strategic business goals? What is the relative strength of all patents within a portfolio? Is the paperwork current? Are there ownership issues? What IP deserves the most time, attention, and resources? What IP should be abandoned or sold or just put out to pasture?

Step 3: IP management and optimization
Where are resources required? Are there tax benefits to relocating the IP? Are the most valuable IP assets protected and serving the organization’s best use?

Valuators should review strategic and IP plans to see whether they are in sync. The closer they are aligned, the more valuable is the IP to the organization.

Contact Us:

Business Valuation Resources, LLC
1000 SW Broadway
Suite 1200
Portland, OR 97205
(503) 291-7963

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