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INTELLECTUAL PROPERTY – INTANGIBLE, INVISIBLE BUT NOT INVALUABLE

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Intellectual property - intangible, invisible but not invaluable

You can’t kick it, see it or put it in a shop window but for some businesses Intellectual Property (“IP”) is the most valuable asset that it has. It can be sold, stolen, transferred, used as security for loans and used to pay creditors on insolvency, like any other asset. Yet how many businesses take the time to ensure that this asset is secure, being kept in the right place and its value maximised?

Denise Fawcett

Denise Fawcett

IP comes in many shapes and sizes – patents, trademarks, copyright, designs, database rights and know-how. Depending on the type of IP right, it may not be registered anywhere. IP rights can arise when developing new products or manufacturing processes, through creative activities of a literary, artistic, musical or dramatic nature, or simply as a result of the day to day running of a company. Therefore, IP may exist without being recognised as existing and it can belong to a person or a business without any formal agreement to that effect

Ownership can be determined by contract in order to avoid uncertainly and disputes. It is important to deal with this prior to the creation of such rights. Otherwise, ownership of IP rights usually lies with the inventor, the designer, the author or the brand owner. Where IP has been created or developed by an employee acting in the course of employment, ownership of the arising IP rights will typically vest in the employer under UK legislation. However, the situation may not be as clear as this in practice. Where a consultant has been commissioned to create a work, ownership of the IP (i.e. commissioner vs. consultant) depends on the type of IP right created.

With businesses having less tangible assets, many are looking to their intangibles to raise finance or to secure debts due to large creditors such as pensions schemes, to secure the future of the business. Whilst banks are used to having charges that cover “all assets” they do not recognise that they may have security over valuable IP, particularly where the business itself does not recognise the value of its assets. However, if IP is recognised as a valuable asset class and properly securitised, banks can be comfortable with existing or increased loan finance and find more opportunities for new lending to companies that it may not ordinarily lend to.

Before this can happen, banks and their customers need to understand who owns an organisation’s IP. They then need to understand its value.

It may be difficult for lenders to assess the value of IP before taking security over it given that it is an intangible asset. Industry specific IP may be highly valuable for the borrower, but may not be so valuable for a lender or charge holder. Most people would recognise the value in McDonald’s brand and Coke’s recipe, but it is harder to recognise let alone value IP in smaller business that may not be high street names. The IP may have indeterminate resale value, and a prudent lender should explore how it would exploit the IP if it was necessary to enforce its interest.

How separate or separable a company’s IP is from the business as a whole is an important factor in determining its value. Income generating IP (e.g. a music back catalogue) or registered IP rights that can be easily assigned or licensed (e.g. registered trademarks, patents or design rights) can be much more easily valued than integral rights.

Intellectual property - intangible, invisible but not invaluable

Intellectual property – intangible, invisible but not invaluable

A product may be protected by numerous types of IP rights operating simultaneously. For example, with a smartphone, the manufacturer name and logo and the smartphone name are likely to be trade mark protected, the shape of the phone may be protected by registered design rights, and the operating system source code may be protected by copyright. The value of the IP is likely to be in the bundle of rights as a whole and of much less value if separated. Ideally a charge holder would take security of the whole portfolio of rights, but problems arise if a particular right is also used for another product, or if some of the rights are licensed in from other companies.

Despite the various considerations, it is clear that IP rights are potentially very valuable and even a licence to use someone else’s IP, under the terms of a carefully drafted Licence Agreement can be of significant worth. When seeking to sell a company (as part of an asset or share sale), secure investment, release equity or obtain a loan, it is essential to have all IP used or owned by the company adequately documented. That way, by conducting due diligence on such of such information, the buyer, investor or lender has everything it needs in order to operate the company and/or value the company. The absence of such documentation may severely delay and possibly jeopardise even the process. Further, any attempt to effect any missing or inadequate documentation confirming IP ownership or valid licences may require significant additional cost to induce the relevant third party to review and execute the necessary documents after the event.

If a company goes into an insolvency process, any liquidator, administrator or other office holder will try to recover value for creditors from the trading or sale of the business. It is essential for the office holder to: identify any IP; establish who owns the IP; determine whether the company has granted security over its IP; protect the IP if necessary; and consider how to maximise the realisable value of the IP. It may be that IP is owned by a third party, for example a director or group company. In those circumstances it may not be possible for the office holder to continue to allow the company to use the IP in its ongoing trade without agreeing terms with the true owner.

Chris Laughton, Restructuring & Insolvency Partner at Mercer & Hole has first-hand experience of dealing with intellectual property in distressed situations. He said “our practical experience is that to maximise the realisable value of IP in a distressed business, swift action is necessary. Frequently, patent applications and trade mark registrations will not have been maintained as efforts have concentered on fire fighting. Focussed remedial work – often multi-jurisdictional – can however restore value to the IP rights portfolio. Failure to have an appreciation of the unique and complex issues involved could, on the other hand, result in a devastating impact on the prospects of rescuing the business.”

It may be that, on further enquiry, the office holder determines that the IP has been transferred away from the insolvent company ahead of its demise. This may well have been done with good intentions, perhaps the directors realised that ownership was vested in the wrong company. However, when assets are transferred away from a company , without market value being paid to the company, an office holder appointed at any time in the following two years (or longer in certain circumstances) will investigate the transaction and look to set it aside. Liability for directors may also flow from transactions such as this that were not I the interests of the company and its creditors.

An inter-group transfer can be set aside as a transfer to a third party can. The best interests of the group are not necessarily the same as the best interests of the transferor company and the finances of each group company have to be considered in isolation.

Where a company owns IP it may be possible to save a failing company through new lending, selling or licencing the IP to achieve value for creditors. This may make the business attractive for a share sale or new share issue to new investors, a sale of the business and assets through an administration, saving jobs and maximising returns to creditors or it may support a compromise arrangement with creditors to allow the business to continue to trade and pay creditors a proportion of sums owed and/or over an extended period of time, through a Company Voluntary Arrangement.

Chris said “a recent example is where we were able to secure additional funding for a period of 9 months to enable us to trade a business whilst in administration. This allowed us to implement a rescue plan, whilst protecting the company’s perpetual software licences, which ultimately allowed us to preserve the business with a return to the unsecured creditors in full. Through the constructive use of insolvency procedures, we were able to rescue a company that had run out of cash.”

The value of intellectual property should not be ignored. It should be treated as any other asset as if it were premises or plant & machinery and protected in the same way from loss, disputes over ownership and deterioration in value.

For more information contact Denise Fawcett, insolvency lawyer at Pitmans

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Can a leader’s level of enthusiasm and optimism really impact the bottom line?

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Can a leader’s level of enthusiasm and optimism really impact the bottom line? 1

By Mark E. Brouker, Captain, United States Navy, founder of Brouker Leadership Solutions

Can a leader’s level of enthusiasm and optimism really impact the bottom line? We hear of the leader’s ability to influence others in powerful ways in politics, academia, sports, among other areas. However, in business, profitability is where the rubber meets the road.  How impactful is the leader’s level of enthusiasm and optimism in creating a healthy bottom line?

One of the truly remarkable and rewarding tours of duty I had during my Navy career was with a small group of highly motivated doctors and pharmacists from all three services – Army, Navy, and Air Force. These professionals were all hand-picked to join a newly-formed team which was directed to reduce the escalating cost of prescription medications provided for all Department of Defense (DoD) active duty (Army, Navy and Air Force) and family members. Our task was made more challenging because we were to reduce costs without decreasing quality of care. At that time, there were over eight million men, women, and children eligible for prescription medications throughout DoD. The annual cost was over five billion dollars and climbing fast.

Our boss, Dan, was a brilliant, hard-working, and extremely passionate leader who was highly respected by all. Dan cared for us and we cared for him. We were a tight group. We treated each other as family. Dan’s passion was contagious, and he quickly established a culture of caring, hard work and trust. We were poised for success. Because I was senior to other members of the team, Dan selected me to be his deputy.

The idea of creating a small team to bend the cost curve for the entire DoD pharmacy benefit was novel – it had never been tried before. While the team shared a genuine passion for this noble and ambitious undertaking, early wins were few and far between.

After the 6-month honeymoon period ended, enthusiasm was slowly replaced with frustration.  Every morning we’d meet with Dan to share the progress or, more accurately, lack of progress with our respective projects. It was slow and insidious at first, but sarcasm, frustration and pessimism crept into the meetings. A few of the more vocal naysayers would spew their negative venom and Dan and I would make meager attempts to mitigate the damage, or in times of weakness simply join in. These meetings frequently went much longer than scheduled, drained everyone of energy, and were generally recognized to be a waste of time. In short, neither Dan nor I led these meetings. We attended them. One could feel the energy, passion and trust dissipate like air leaking from a balloon.

Mark E. Brouker

Mark E. Brouker

It was clear that Dan and I needed to change our attitudes. We candidly discussed the culture of pessimism that we were creating and, more importantly, how it was sucking trust and the creative juices from the team. Over a handshake, we agreed to help each other curb our negativity and celebrate small victories that were indeed happening. We’d address the challenges, but not mire in them. We agreed to not let anyone hijack the meeting with their negativity.

We were more careful in the words we chose – we rid ourselves of cynical remarks. We were careful with our body language. No scowling or worried looks. Above all, we focused on staying positive. We’d invest a few minutes before meetings to reflect on past successes, however minor, and mention them at the beginning of the meeting. We’d then address the challenges, and close each meeting with a reminder, once again, of past successes.

Frustration and pessimism were slowly replaced with enthusiasm and optimism. Wins starting coming. More wins followed. Within 2 years, our small team was saving DoD over $100 million annually with no reduction in quality. Our small team was recognized within the industry as a center of excellence. Our success was nothing less than stunning.

How did this happen? It turns out that Dan’s and my behaviors had a much more profound impact on our team members than we could have ever imagined. In fact, studies have shown that the leader’s level of enthusiasm and optimism directly impacts their team members level of enthusiasm and optimism. Why is this the case? A study by Gallup found that employees who are supervised by highly enthusiastic leaders are 59 percent more likely to be enthusiastic than those supervised by unenthusiastic leaders.[1] In other words, the leader’s behaviors, in this case optimism and enthusiasm, are contagious. Further, studies have indeed shown that businesses led by enthusiastic and optimistic leaders were significantly more profitable than those led by apathetic and pessimistic leaders. [2] [3]

Can a leader’s level of enthusiasm and optimism really impact the bottom line? Unquestionably the answer is yes. The leader’s ability to influence in politics, academia, sports and yes, profitability in business, is profound. Those businesses led by leaders who understand, respect, and embrace the strong correlation between the leader’s level of enthusiasm and optimism as it relates to performance and profits – and most importantly practice these behaviors – are at a distinct competitive advantage.

Be a great leader – lead with enthusiasm and optimism.

Mark E. Brouker, Captain, United States Navy (retired), Pharm.D., MBA, FACHE, BCPS, is founder of Brouker Leadership Solutions, and author of Lessons From The Navy: How To Earn Trust, Lead Teams, And Achieve Organizational Excellence. For more information visit http://www.broukerleadershipsolutions.com/.

[1] Gallup, “State of the American Workplace, 2017.” Accessed February 12,2020.

[2] Michael Bush, A Great Place to Work for All (Oakland, CA: Berrett-Koehler, 2018), 26

[3] Marcus Buckingham, First, Break All the Rules (New York, NY: Simon and Schuster, 1999), 40

 

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JPMorgan to launch UK consumer bank within months

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JPMorgan to launch UK consumer bank within months 2

LONDON (Reuters) – JPMorgan Chase & Co will launch a digital consumer bank in Britain under its Chase brand within months, the U.S. banking giant said on Wednesday.

The bank said the new business had already recruited 400 people and would offer a range of products, including current accounts.

The UK venture will be led by Sanoke Viswanathan, who has been named chief executive. Viswanathan was previously chief administrative officer for JPMorgan’s corporate and investment bank.

The digital bank will be headquartered in London’s Canary Wharf financial district, with customers supported from a new call centre in Edinburgh.

Reports about a likely tilt by JPMorgan at the UK consumer market have been circulating for around a year, but the bank had publicly disclosed few details.

“The UK has a vibrant and highly competitive consumer banking marketplace, which is why we’ve designed the bank from scratch to specifically meet the needs of customers here,” said Gordon Smith, CEO of consumer and community banking for JPMorgan.

(Reporting by Iain Withers; Editing by Jan Harvey)

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European regulator clears Boeing 737 MAX airliner for return to service

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European regulator clears Boeing 737 MAX airliner for return to service 3

(Reuters) – Boeing Co’s modified 737 MAX airliner is safe to return to service in Europe, the European Union Aviation Safety Agency (EASA) said on Wednesday, lifting a 22-month flight ban after two crashes of the jet which caused 346 deaths.

EASA Executive Director Patrick Ky said it had “every confidence” that the plane was safe following an independent European review of changes ranging from cockpit software to maintenance checks and pilot training.

“Let me be quite clear that this journey does not end here,” Ky said in a statement.

“We have every confidence that the aircraft is safe, which is the precondition for giving our approval. But we will continue to monitor 737 MAX operations closely as the aircraft resumes service.”

Regulators around the world grounded the MAX in March 2019, after the crash of an Ethiopian Airlines jet five months after one flown by Indonesia’s Lion Air plunged into the Java Sea. A total of 346 passengers and crew members were killed in the two crashes.

The United States lifted its ban in November, followed by Brazil and Canada. China, which was first to ban the plane after the second crash, and which represents a quarter of MAX sales, has not said when it will act.

Relatives of some crash victims have strongly criticised the move the clear Boeing’s best-selling airplane.

EASA represents 31 mainly EU nations, excluding Britain which formally left the bloc this month. Britain is expected to issue its own separate approval on Wednesday.

(Reporting by Sudip Kar-Gupta, Rachit Vats; editing by Jason Neely)

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