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Will
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Big Four IP work
« on: Apr 30th, 2004, 8:09am »
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Can anyone comment on the Big Four accounting practice of Intellectual asset management? I have a MS in accounting (tax)and MS in biotechnology. I'm currently in law school and would like to get involved in a Big Four intellectual asset management group? Is this a big section of practice? Can anyone help me with any info about IP work in the Big Four?  It seems like there would be quite a bit of crossover with licensing and tax and the big Four should managing this?  Is this correct?  Or do patent lawyers send their tax issues to tax lawyers in another practice section of the firm?
 
Thanks in advance,
 
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JimIvey
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Re: Big Four IP work
« Reply #1 on: Apr 30th, 2004, 9:53am »
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First, most patent attorneys don't do that type of work.  I don't.
 
My understanding is that this type of accounting is (i) relatively rare, (ii) relatively new, and (iii) relatively inaccurate.  I also see and hear hints that this type of accounting (and generally the unrealized value of IP) is starting to get noticed and starting to take on new importance.  I'm seeing new businesses starting to buy up ignored patents and enforce them or sell them -- essentially IP arbitrage.   Is that arbitrage the equivalent of minor tremors before a huge earthquake?  Maybe.  Maybe you're in a great position to come into a new and exciting market in a few years.
 
But, this is all rumor and speculation on my part.  I'd suggest further investigation by you.  And, I'd love to hear what you learn.
 
Good luck!
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Will
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Re: Big Four IP work
« Reply #2 on: Apr 30th, 2004, 10:26am »
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Thanks James.  I've done a little investigating.  Take a look at this link and let me know if you think particular practice is big or just puff on a website.  Would lawyers do this kind of work? Or would it merely need accountants with IP experience?  
 
http://www.pwcglobal.com/extweb/service.nsf/docid/815C2B406A8AFC51852567 45006B3625
 
http://www.jobsinthemoney.com/html/jobs/138951.htm
 
This would obviously be an alternate career path, but what do you think?  If you were interested in licensing, transactional work outside of mere prosecution...
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JimIvey
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Re: Big Four IP work
« Reply #3 on: Apr 30th, 2004, 11:09am »
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Hi Will,
 
The pure evaluation of IP is generally an exercise in accounting.  Of course, how does one evaluate legal things without knowing something of the law?  Intellectual asset accounting has been around for a while.  Reporting of publicly traded companies generally requires that in some form or another.  I don't read business-speak, so I can't really tell if those positions are different in any way from the traditional intellectual asset management.
 
I don't know much about accounting, so I can't say how exciting those jobs have been to date.  I'm just noting which way the wind seems to be blowing.  I see people forming groups to go buy neglected IP from companies and then either flipping them (immediately re-selling for a profit) or enforcing them in court.  That arbitrage seems to indicate a newly realized value of IP in the next couple years as companies slowly wake up and see what's happening to their IP that they're selling cheap.
 
Would a lawyer do this work?  Maybe.  Accountants and lawyers frequently work together on requisite reporting for publicly traded companies.  Privately held companies generally don't need to report on their assets and can completely ignore the value of their IP (and they frequently do just that).  The attorneys that do this work are generally not IP attorneys.  They're generally tax and corporate attorneys.
 
Here's a quick break down as to how it works:  the IP attorney (me, for example) creates the property from the idea and just makes the property as valuable as possible by making it cover as much as possible.  The licensing/litigation/general counsel extracts value from the IP by negotiating licenses and/or enforcing the IP against potential infringers, maximizing value by trying to get every advantage they can for their client.  Hopefully, they also give feedback to those who select future ideas for conversion to property so that future property fits in the overall scheme of things.  
 
Then, separately from all this, someone tries to figure out what the IP is all worth -- either for internal accounting or for reporting.  This is now two degrees of separation from what I do, so it's hard for me to accurately describe it, but I assume they need to know something about what happened before and what can happen in the future to extract value (or eviscerate value) from the IP.  But I think this top layer is mostly accountants and maybe some corporate attorneys, not licensing or IP attorneys.  
 
This is the stratification as I believe it currently exists.  I don't see this changing much in the near future.  What I do see happening is that, as you see in any market, people who see inefficiencies are jumping in and taking advantage of them.  It's a form of market correction.  And I think it's a harbinger of things to come -- a shake-out of sorts at the top layer I described above.
 
Would I do it?  First, I am interested in transactional work -- partially to provide perspective to my patent practice, particially to help me should I decide to pursue one of my whacky invention ideas, and partitially for a simple change of pace in my daily work.  However, I specifically chose law over an MBA and I'm generally not interested in the accounting portion of IP.
 
I'm getting the sense that you're interested in some sort of hybrid account/licensing practice.  The closest thing I see to that currently are those small groups of arbitragers sniffing out undervalued IP.  They're lean and mean and do their own valuation and licensing.  They do a lot with few people, so people tend to do whatever needs doing.
 
Okay, I've killed far too much of the day already.  I gotta go.  I hope this helps.  
 
Regards.
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eric stasik
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Re: Big Four IP work
« Reply #4 on: Apr 30th, 2004, 11:21pm »
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Dear Will,
 
There are in practice four ways in which patents are valued: 1) tax, 2) accounting, 3) licensing, 4) litigation/damages.  
 
Tax valuation is focused mostly on estimating the value of patents as tax write offs. (capital asset depreciation and as "charitable donations.") I understand however that the US tax authorities have severly clamped down on these types of deductions.  
 
Accounting is a bit of a grey area. There was a lot of talk during the 90's about accouting for "intellectual capital." Leif Edvinsson was one of the early proponents of this. Edvinsson argued that the gap between "book value" and market capitalisation was a result of unaccounted for "intellectual capital" which GAAP do not adequately explain. Some companies in the 1990s (Skandia for example where Edvinsson was employed) attempted to account for this in their annual statements, but I do not believe it has become standard practice.  
 
In licensing, "patent" valuation is calculated as the cost of a license. It is generally based on looking at industry standard royalties, exposure base, etc. This is a big part of merger/acquisition work.  
 
Accounting for damages in litigation is a true specialty.  
 
As you suggest all four are related, but only loosely.  
 
The big accounting firms are generally involved in all four, but the latter two are more closely related to traditional IP work and you are likely to find some expertise in large litigation firms.  
 
Good luck.
 
Kind Regards,
 
Eric Stasik
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