(Underlined italicized
text represents the latest additions to this training
guide. Underlined text represents the previous additions
to the training guide)
The key to gaining unparalleled success in any business
transaction in modern business is obtaining the
"Intellectual Property Position" (IPP) in the
transaction. This can be defined as that position which
owns or controls the ultimate property which is being
bargained for in the transaction. Another way of defining
it is that position which allows the attainment of the
superior profits in the transaction. The superior profits
in business today are those profits tied to royalty type
payments for a license or use of some proprietary
technology or process. These proprietary rights are
protected by law in every industrialized country and by
treaties among the countries. These rights are generally
referred to as Intellectual Property because they do not
embody any physical tangible property but only the right
to use an invention or creation for which you usually pay
a licensing fee. In modern business, Intellectual
Property gives the holder a unique advantage by providing
opportunities enhanced by the lack of competition the
I.P. affords the holder.
The legal definitions of these rights are Copyrights,
Trademarks, Servicemarks, Patents, and Industrial
Secrets. These are the primary types of Intellectual
Properties, the types that are protected by law. These
are the most coveted. The secondary types of Intellectual
Properties are protected by contracts and are basically
different forms of licenses given by the holders of the
primary Intellectual Properties to holders of the
contractual license. The holders of subsidiary or
secondary rights in the form of licenses still possess an
extremely powerful profit making instrument.
Modern business depends on the legal protection of
these rights in order to have a unique source of profits,
to function efficiently, to operate across national
boundaries, and to grow large and obtain the economies of
scale necessary to create monopolies, oligopolies and
competitive advantages in business. Without these
Intellectual Properties being protected by law
universally the way we do business in the modern
economies would not be possible. Therein lies the power
of Intellectual Properties and the need to obtain the
Intellectual Property position in any business
transaction. This is why we refer to intellectual
properties as the engine behind modern success in
business. It is important to look at each transaction and
determine exactly where the Intellectual Property exists
in the deal, and determine who is holding these rights,
to what degree, type and disposition.
The profits tied to the Intellectual Property Position
are "Superior" because they are generally derived from
the top of the plate before other costs of production are
paid. True royalty payments received by the holder of the
Intellectual Property Position (IPP) does not require the
I.P Holder to further expend resources to capitalize the
production process. The capitalization of the production
process is left to the licensee. it is he who must
produce the phyisical product dependent on the I.P. it is
the licensee who must makt the product, distribute it and
collect the sales price. It is the licensee that must
absorb all these costs.
It is the capitalization of the production process
that prevents the licensee or user of the Intellectual
Property from making superior profits. He or She must
capitalize a production process using the IPP holders
Intellectual Property. The royalty payments made to the
IPP holder becomes a cost of doing business, which is
factored directly into the mix. The liensee must then
make enough of a profit to pay the royalty and keep some
of the revenue generated for himself. The portion he
keeps for himself is what we traditionally described as
the earnings or profits from the production process. The
IPP holder walks away with a piece of the action for
which he does not have to expend any capitalization,
production, promotion or distribution costs. The IPP
Holders profits are then obviously superior in type and
position to that of the licensee or "Production Master"
whose profits can be termed the subsidiary profits from
the transaction.
It may be difficult in some circumstances to clearly
identify the IPP. However if you look closely enough you
will find it. It is always present but as business
relations become more complex and remote in modern
economies awash with collaborations mergers, subsidiary
companies etc. it becomes more difficult to
recognize.
The IPP is not always a pure position. There may be
several IPPs and partial IPPs. The wise negotiator in any
transaction or acquisition will search them all out and
determine how he or she spends valuable time and
resources, chasing superior profits, or subsidiary ones.
Attainment of full or partial control of the Intellectual
Property Position will ensure superior profits.