Intellectual Property, Deal Making, and
Superior Profits
Excerpts from a presentation by:
Harlington L. Hanna Jr.
C.E.O., Hannaian U.S.A. Corp.
Superior profits in the global business environment accrue to those who are
at the table at the beginning of any business venture. Long before any product
rolls out to the market for other subsidiary entrepreneurs to exploit, the
cream of the profits have been spoken for and divided up among these Deal
makers at the table. The product that they are dividing at the highest level
of these ground breaking business deals is usually Intellectual Property.
The ultimate rights, contracts, and licenses which allow subsidiary entrepreneurs
to operate and exploit the opportunities all emanate from this table. The
owners and controllers of these copyrights, trademarks, patents, and licenses
then sit back and reap the best profits from the ultimate operation. It is
not unusual therefore that when companies are sold or taken over, the bulk
of the valued assets is usually identified as the intellectual property holdings
of the companies. A review of most large acquisitions will readily revel
this fact. These profits are superior because they are not burdened by the
costs or risks of production, they are taken of the top of the revenue stream
in the form of royalties or other contractual and even legal obligations
the subsidiary entrepreneurs must meet to continue their operations.
This situation has become even more prevalent and important considering the
effects of the global business environment and the modern shift to huge companies
becoming even larger. Today "mom and pop" operations are being put out of
business due to the economies of scale brought to the marketplace by these
large companies. A careful look at the significant gains in the major securities
markets in recent years reveals another phenomenon which is not easily recognized
except by the very wise businessman. As these new ways of doing business
develop one of the only ways a small entrepreneur can profitably operate
is to jump on the band wagon of these large companies. The easiest way to
do this is through investment in the stock of these companies. As with every
thing else in business this involves risk. However the risk of investing
in the stock markets is probably no more than investing in your own startup
business. Potential entrepreneurs must consider this stock investment form
of doing business as a viable alternative to operating their own business.
Perhaps even more important entrepreneurs should highly consider adding the
dimension of such investments as an integral part of their current business
operations, particularly if their current business is one which will fit
the concept. If you look closely this is another modern trend which large
companies follow. They are usually well invested in the securities of other
companies and ventures which fit their concept of doing business.
To return to the concept of achieving superior profits by being a deal maker
at the intellectual property table, it is important to recognize that the
holders of truly valuable intellectual properties usually realize what they
have and it will not be easy to get a seat at the table, much less come away
with the apples. Intellectual properties are usually highly protected even
by those whose properties are not valuable, and which will never be valuable.
Every property owner thinks he has something valuable, unfortunately this
is not the case. The prerequisite to walk away from the table with any truly
valuable apples is simple, Knowledge, Knowledge, and more Knowledge. Perhaps
this is a fitting analogy in that what we are talking about is in fact
"Intellectual" property, so the knowledge prerequisite is highly appropriate.
Most people will not have this level of knowledge and obtaining it will not
be an overnight accomplishment. Knowledge in the legal and business aspects
of contracting, the customs and practices of the particular business and
industry, the legal underpinnings of copyrights, trade & service marks,
patents, industrial secrets etc., and marketing are all necessary.
Another proposition is to invest in the stock of holders of intellectual
property. But even this requires a lot of knowledge and of course the rewards
are not as superior as that accruing to those who can sit at that ground
level table. In fact, this may be the only way to participate in the holdings
of most valuable intellectual properties. Truly valuable intellectual properties
usually end up in the securities markets disguised as some form of the subsidiary
holder's business or physical product.
To be successful in today's modern economy and business practices it is becoming
more and more necessary to play the same game the big companies play. They
control the game and the direction of modern business. To play in a different
ball game, or not play in the new modern global game, or not recognize
this need, flies in the face of reality and just doesn't make "cents" for
anyone hoping to be a successful
entrepreneur.
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