An Introduction to Intangible Assets and Intellectual Property

Look around you right now.  What do you see? Perhaps a pen? That pen belongs to you, right?  That makes the pen your property. Unless the person reading this is my co-worker, Amir, whose hobby is stealing my pens. That makes the pen my property and, Amir, you really need to give it back.

Intangible Assets

The point is, “property” is something that that is owned by someone.  We tend to think of property as physical or “tangible” stuff: money, cars, real estate, furniture,  jewelry,  pens and so on.  However property can also be non-physical or “intangible”.  Intangible assets are things that are useful and/or valuable but aren’t physical.  In your own life, if you have developed a great reputation in your industry because you are clever, responsible, work hard and do good work, that is an intangible asset. It has value because it can help you to advance in your career.  If you are a company, this would be called goodwill.

Identifying intangible assets or saying what they are worth can be an exercise in fuzziness, to put it mildly. For example, your customer lists and relationships are all considered intangible assets.  As to the value? That depends. For example, the value of your customer lists and relationships are based on (among other things) how loyal and lucrative the customers are. If your customers are all folks who have purchased from you BUT also regularly purchase from your competitors, and aren’t particularly loyal, the list is worth less than if your customers are fanatically devoted and will only buy your brand, a’la Apple.  This makes sense. In the latter case, you have greater opportunity to sell them additional products and services and charge higher prices because, again, they want you and not your sad and sorry competitors who, frankly, can eat your dust.

You can find a nice list of intangibles, by category, here.  Unless you are an accountant, I suggest you skip the accounting bits at the top of the page and just focus on the list of examples.

Intellectual Property

Intellectual property is a type of intangible asset.  These are assets (1) created by the intellect (a.k.a. your brain) and (2) which can be protected by law.  Intellectual property includes everything from scientific inventions; to technological processes; to logos and slogans; to books, movies and dance performances, including the truly dreadful one my friend and I saw at the Tel Aviv Opera House in which the dancers basically walked back and forth across the stage in slow, mincing steps. For. Two. Full. Hours.

Intellectual property rights are the tools set up to allow the owners of intellectual property to protect their rights in their property. You have probably heard of these.

  • Trademarks protect names, phrases and symbols.
  • Copyrights protect original literary, artistic, architectural, musical, photographs, dramatic work, movies and other creative, written or design work (e.g. computer programs or websites).
  • Patents protect processes, methods and inventions.
  • Industrial design rights protect product design or appearance (e.g. shape, color, materials) as opposed to the practical “how it works” elements.

For more detailed (but still clear) information on each of the above rights, see this lovely article.

These rights and how to register and enforce them can vary greatly from country to country.  For instance, your ability to defend your rights if someone takes (or “infringes”) your intellectual property will vary—it might be super-easy in Country A and super-complicated and expensive in Country B. In addition, an item can be protected in Country A but not Country B either because the rules for what qualifies are different or because someone else got there first and is using the name or trademark you want to register (curses!) .  Your legal counsel can advise you on how it is done and (just as important) whether it is worth your while to do so.  It’s a good idea to touch base with counsel (or at least do some very solid checking on your own) and make sure that the name and logo and such that you have set your heart on is actually available in your target market before you spend gobs of time, money and mental energy on business cards, website development, domain names, marketing, brand recognition and so on.  🙁

My thanks to Sharon Herman Hezroni of SHH Law Office for her help with this article.