Do directors have the incentive they need to be fully informed about an organization’s IP strategies?


Ian McClure writes about director liability for mismanagement of IP assets.  It’s an interesting topic, one that is gaining momentum, but one that seems to suffer from a perverse logic.  As more boards have to consider the financial effects of business strategies integrating home grown and acquired IP, and accurate, fair value accounting is expected in the case of acquired IP, it may mean professional valuation analysts should be rendering an opinion on most transactions. 

However, until and unless the professional opinion is solicited, board members have little way of knowing about ramifications of actions involving an asset class so few really understand, and therefore the business judgment rule would seemingly be a stretch to enforce. In other words, directors may not have enough incentive to invest in the professional advice they need to make truly informed decisions regarding an organization’s IP.

McClure points out two IP mismanagement areas that should concern directors: waste and incorrect valuation. “Both stem from a lack of understanding or attention paid to the relevant IP assets.  Intellectual property is usually, if not always, an asset with diminishing value (patents expire, technology is superseded and becomes obsolete, etc.).  Thus, directors could become liable if complete information is not obtained and sound business judgments are not made which account for this inherent quality.”


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