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Unlocking Hidden Value: Leveraging Intellectual Property for Middle Market Company Growth and Success
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In this insightful conversation, Bryan Wheelock and Joe Walsh from Harness IP discuss the untapped potential of intellectual property for middle market companies. Discover how these businesses can uncover and protect valuable IP assets like copyrights, trade secrets, and unique branding elements that may not be immediately apparent. Learn actionable strategies for identifying, documenting, and leveraging these assets to gain a competitive edge, mitigate risks, and enhance business value. Whether you're facing challenges or seeking growth, this conversation provides practical advice to help you maximize the potential of your intellectual property.
Harness IP is an intellectual property law firm serving clients across the globe. Their attorneys counsel and represent clients across the full range of intellectual property law, including patents, trademarks, copyrights, trade secrets, litigation, IP management, and licensing. Learn more about Harness IP at https://www.harnessip.com/
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Transcript
Introduction and Focus of the Podcast
00:00:04
Speaker
Welcome to the Market That Moves America, a podcast from the National Center for the Middle Market. The center is the leading source of knowledge, leadership and innovative research on the middle market economy.
Exploring Hidden Intellectual Property in Mid-Sized Companies
00:00:15
Speaker
Throughout our podcast, we will feature middle market leaders and stakeholders to hear their real world perspectives on trends and emerging issues. In a previous Market That Moves America episode, we talked about the importance of intellectual property in the middle market. In this episode, we're going to explore More deeply, the concept of hidden IP, intellectual property that may not be readily identifiable to a lot of middle-sized companies, but is just as important to think about and protect.
Why IP is Overlooked in Middle Market Companies
00:00:49
Speaker
Joining me will be two members of the team at Harness IP, an NCMM member company.
00:00:59
Speaker
Welcome to The Market That Moves America. My name is Doug Farren, Managing Director for the National Center for the Middle Market, located at The Ohio State University Fisher College of Business. Middle market companies may not consider intellectual property as a significant issue, challenge or opportunity. And we are glad to welcome back one of our member companies, Harness IP, two of their leaders to talk to us today about some of the opportunities that lie around hidden intellectual property within their companies.
Guest Introduction: Brian Wheelock and Joe Walsh from Harness IP
00:01:38
Speaker
Joining me today are Brian Wheelock and Joe Walsh from
00:01:42
Speaker
harness IP. Welcome. Thanks, Doug. Yeah, thanks, Doug. ah So we had a conversation, oh, months back, I think maybe in 2023, where we um introduced harness, we talked about the idea of intellectual property, maybe at a at a higher level. So excited to kind of revisit this topic. and dig a little bit deeper into this concept of of what you mean by ah hidden IP and and how middle market companies need to think about it and address it. Before we get into some of those topics, could you both just, again, for our audience, tell us a little bit about yourselves, your background, and your current roles and responsibilities?
Unrecognized Intellectual Property Types
00:02:29
Speaker
Sure thing. Why don't you start, Brian?
00:02:30
Speaker
Okay, well, I'm a mechanical engineer by training and then, of course, onto law school. And I've been practicing solely in the area of intellectual property for the last 42 years. And for the last 20 of those, I've been teaching intellectual property at Washington University Law School here in St. Louis. And this is Joe Walsh. My background is chemistry, also a lawyer, patent lawyer, trademark lawyer, copyright lawyer, trade secret lawyer. And because I've been very fortunate to have multinational clients throughout my career, I've worked in virtually every industrialized country throughout the world dealing with these intellectual property issues. I've got six years less experience than Mr. Wheelock. I've been at it for 36 years now, I guess, or no, 38 years, 38 years. And 21 years ago, Brian and I,
00:03:27
Speaker
founded the St. Louis office for harness IP, which is one of the nation's oldest and most venerable intellectual property boutique firms. We just celebrated our 103rd anniversary and Brian and I started the St. Louis office a little over 21 years ago. So all we do is intellectual property, which is traditionally regarded as patents, trademarks, copyrights, trade secrets, related litigation and licensing. And we do it everywhere throughout the world. Excellent. Yeah, so im I'm truly am talking to the the experts in this space. So as I mentioned, you know our last conversation, our last conversation we we focused a lot on some of the things that that you just named, copyrights, names and trademarks and so forth.
00:04:14
Speaker
So you you know you mentioned your firm focuses only on these issues, intellectual property, and have a lot of middle market clients. Can you talk to us about what you see as some of the potential for these companies around intellectual property?
Examples of Hidden Intellectual Property
00:04:32
Speaker
Well, I think that yeah, our topic you know today was kind of focusing on this hidden IP because yeah every business has intellectual property, kind of whether they know it or not. And so we're talking about the things like brands, ah names for products that no one ever bothered to formalize, you know but probably should have. you know Even shapes and color schemes for products and packaging, ah that type of thing. there The know how, how to do things, that confidential information that is very valuable but no one has
00:05:07
Speaker
bother to document or formally protect. um And then a big area is copyright, which we did talk about the last time. But there are a lot of things that a business does that are copyrightable. And copyright is really the most business friendly kind of IP because it really doesn't cost anything to to get copyright. So it's those types of things that the business is using. And for one reason or another, they never got around to you know documenting or protecting. Yeah. what what is it What do you refer to when you say hidden? Does that mean that it's just not maybe obvious or a apparent or easily thought of when you when you think about hidden? i Exactly, Doug. It's not like it was intentionally or purposely hidden. It's really just unrecognized or unappreciated.
00:05:55
Speaker
intellectual property and brian kind of alluded to that intellectual property exists in every every form of business that i can think of and as brian pointed out it's things that you might not even consider intellectual property like uniforms for your employees for example you know ups is a good example you know they have protected the color of the uniforms that their people wear. So when you see a UPS s guy walking down the hall, he's got that particular pantone shade of brown.
00:06:26
Speaker
that it's called UPS Brown. that you know he and Even if you see him from the back, if he's wearing shorts or or she or long pants, you know that's a UPS s person. you know There are restaurants that have ah protected the form of uniforms for their employees. um so You may not even think about it, but you know it's the little things that enable you to compete And you may take them for granted. So when we say hidden, we're not necessarily mean like stashed away or purposely put into a box. We're meaning we're really referring to things that may not be obvious to you as protectable, but are forms of intellectual property.
00:07:06
Speaker
If that UPS example is a great one, particularly as you think about large companies, do you feel that there's more of these hidden IP opportunities in the middle market, given the fact that they they probably don't have you know the same resources kind of thinking about and addressing these things?
Challenges in Identifying Hidden IP in Mid-Sized Companies
00:07:23
Speaker
Well, I don't know if you know quantifiably there are more, but certainly they're less appreciated. And the obvious reason why is because you know major corporations have teams of people looking for you know and and identifying regularly what gives them their competitive advantage. Whereas middle-sized companies and smaller businesses, they don't have the resources to focus that that much.
00:07:49
Speaker
on you know those topics. So um so i don't know if you know I don't know if in sheer number they are greater, but certainly they are greater as ah as a class of assets that are less focused on and perhaps less appreciated. Sure.
00:08:11
Speaker
um are So you mentioned some examples, brands, uniforms, color schemes, copyright maybe being the most business applicable. What are some of the other kind of forms of hidden IP that maybe you see most frequently in these mid-sized companies? Are there there any particular ah categories that haven't been mentioned or yeah where do you see the predominance of these types of opportunities that may go unrecognized? I think then the first one would probably would probably be copyright. Everything that the business creates, is you know any kind of written material, graphic material, is copyrightable, but few businesses take the time to register the copyright, which confers
00:08:57
Speaker
very valuable benefits and isn't that difficult or expensive. But even business rarely even put copyright notice on it, which only costs you the time to put a C in the circle, the name of the company in the year that the work was published. So but the copyright ah is a big one and it can have really big effects on you know keeping business and keeping competitors away from your business. Another one is trade secrets. This is the secret information to have our product. Why is your product better? Oh, we know this process. We heat a little more. We have a secret ingredient. And everyone kind of knows, oh, I keep that secret. But there's no formal protection. The employees haven't been instructed. They haven't signed a confidentiality agreement. Someone gets disgruntled and leaves or you know and all of a sudden,
00:09:42
Speaker
Other people have that information. so that Those are the two big ones. Everyone knows if there's a big invention, holy crap, Joe just solved this problem. They're going to think, well, we'd better find a patent lawyer someplace. But it's it's those types of things that I think go on overlooked. Before this ah presentation, Brian and I were talking about this very
Benefits and Importance of Copyright Registration
00:10:01
Speaker
topic. and you know the copyr I'm going to go back to the copyright issue because you know we we consider copyright to be the biggest bang for your IP buck. and The reason is it's you know copyrights come into existence automatically you don't have to do anything unlike you know ah getting a patent on your invention or getting a trademark registration on your brand you know a copyright comes into existence the moment the original work of authorship is fixed in a tangible medium of expression which basically means if you put pen to paper and start writing something
00:10:35
Speaker
You work the copyright exists now in order to protect that copyright you have to federally register it if you want to sue somebody You know based on whatever it is you've written or created you have to get a registration the registration cost is $65 you know at the copyright office now most people don't know how to you know, file the application to do that. So we we charge a few hundred dollars. It's very inexpensive to our clients to go ahead and get the copyright registration. But once you get that registration, let's say for example, you create a user manual for one of your products.
00:11:08
Speaker
All of that is handwritten. It's you know it's the result of an employee's you know original thoughts and formatting it, laying it all out. It's very very definitely copyrightable. Let's say that a competitor you know wants to figure out a user manual for for their competing product. It works basically the same way yours does, and they just copy your user manual. Well, you know, they've they've infringed your copyright. But if you have a registration in existence before they infringe, you get access to statutory damages. And I think maybe in the last program we talked about damages being the most difficult thing in any lawsuit. I don't care if it's a dog bite case or a real estate transaction or a medical malpractice case, proving damages is the most difficult thing to do. Here with a copyright,
00:11:59
Speaker
case, if you have the registration before the infringement happens, you get a statute that shows you what your range of damages are. And you just have to argue to the judge that you're entitled to you know the the maximum amount that you want to get. And if you win the case, if it goes to a decision, you get your attorney's fees back. There's no question whether you get your attorney's fees, they have to be reasonable and the judge has to you know establish that they're reasonable, but you get your attorney's fees. So that's what I mean by the biggest bang for your buck. Anything that you create, packaging for you know your products that you send it in, if it's fanciful, if it has some interesting logos or designs on it, you can register the copyright in that. you know any ah Your website, you should be you should be registering a copyright in your website content, all of it.
00:12:49
Speaker
it's all been now there's There's an interesting point there too, because if you hire a consultant to develop the content for your website, the consultant is the author and the owner of the copyright unless you get an assignment from them. So you need to make sure they have an agreement with all of your outside ah vendors who are contributing you know to your website and to your packaging and your materials and all that. You need to get assignments of those copyrights, but they're usually more than willing to do it you know in exchange for the work. It's a lot easier to get it up front too than it is later you know after the work is created and you've already paid for it. So so these are some of the issues we're talking about you know when when we go back to hidden IP, it's not so much like it's stored up in a box. It's stuff that's unappreciated and you you didn't really take the time to figure it out. and
00:13:36
Speaker
if you If you're at a point where you've got a problem, a dispute has a arisen, if you haven't thought about this stuff in advance, oftentimes it's going to cost you a lot more money to figure it out than it would have if you you know had taken the appropriate steps early on. And I think that's ah pretty much a maxim that applies universally in life. no yeah yeah Are there other risk exposures by not going through that copywriting process? So you know clearly clearly having your stuff plagiarized or you know copied by a competitor or damages, what other exposures does does that create if you if you don't do the diligence of ah registering?
00:14:20
Speaker
if you dont reg Well, if you don't get the registration promptly, then it it isn't proof of your ownership. So you need to get a registration promptly for that and to get those benefits. and ah And you want that registration before the infringement begins, as Joe explained, because you're not going to get the most damages. But you don't want other people claiming that material is theirs. The consultants Joe mentioned, the agreement says the business owns the work product, but they go and register it. There's complications. So and just it it's always better to
00:14:54
Speaker
take the time and do things properly upfront, but in the exigencies of business, that doesn't always happen. But with copyright, it's pretty pretty straightforward. you know If you go through one exercise with us or another IP lawyer involving a copyright matter, you're going to know how to deal with that every future time it comes up. Yeah. Do you, obviously I'm not looking for specific names and so forth, but can you share any other examples of maybe middle market clients that you've worked with where you've had, I don't know, maybe it's copyright, maybe it's even like a trade secret um that wasn't ah you know properly managed and there there was an issue that arose. Do you have any, like a case example or a- Yeah, I've got i've got one for you Doug.
Strategic Use of IP to Enhance Business Value
00:15:42
Speaker
Yeah, sure. and And it's not copyright. it's more it's more patent It's more patent involved. It's an invention. But we had a client years ago, several years ago, who manufactured welding products. And a big part of their revenue stream came from the tips that are expendable during the welding process. you know you You have the torch and then you have a tip that draws the bead on whatever the the substrate is. And you know they made a lot of money selling replacement tips. Well, they wound up having a lot of foreign competition for these these expendable tips. And the foreign competitors were pricing them lower and beating them in the marketplace. So they saw the revenue stream for the replacement tips drop way off.
00:16:28
Speaker
Well, we decided to have a powwow with the client. We spent an afternoon with them you know talking about where they make their money, where they're losing money, and all that. And this topic came up. And one of the suggestions we had after a couple hours of discussion was, hey, what if you reconfigure the way the tip fits to the welding device? Because they were an industry, they they were one of the dominant players in the industry. So they weren't afraid of not selling their welding tools. But we said, what if you adapted the end of the welding tool so you know you had a specially configured replaceable tip that you you could only use your tips and then will patent that design?
00:17:12
Speaker
Well, it took a couple of years but within three years they saw their, and so they took our advice and then within three years we saw their sales of these tips go way up obviously because if you bought the tool you were going to be buying the replacement tips from them as well because if you bought the the foreign competitive product it was an infringing product and we went after those infringers and stopped them. so There's an example of how intellectual property helped a medium-sized company ah restore lost revenue. yeah yeah We touched on this a little earlier in the conversation today, but you know we say here at the center, oftentimes we use this phrase, you middle market companies face large company problems with small company resources.
Resource Constraints in IP Management for Mid-Sized Companies
00:18:01
Speaker
We talked about that a little bit, but can both of you expand a little bit more on like how you see that playing out in a typical mid-sized client who you know they probably don't have an in-house counsel, they may only have you know a handful of people in ah HR, communications, whoever's tasked with kind of managing things like IP? Yeah, if you don't mind, I'll take this one too, or at least start off. um I think as we're trying to impress upon everyone, all the listeners, intellectual property is vital, despite whether you have a large business or a small business or a medium-sized business. it's It's an integral part of what you do. And if you bury your head in the sand and refuse to acknowledge it, somehow you're going to wind up losing something.
00:18:47
Speaker
You know sales product lines customers whatever you gonna lose something if you're not if you're not paying attention to intellectual property now the one thing most you know we have large multinational clients and we meet with them literally monthly if not by weekly. you know or bimonthly, where we have these review discussions. We spend an hour talking about all the new innovations, things that have come up, figuring out ways to protect all this stuff. Medium-sized companies, smaller companies don't have the resources to do that. What they do have the resources to do and what we actually make available to our clients is we say, look, you know if you're if you're not in our hometown, just pay our our travel expenses and lodging expenses and we'll come, we'll spend the day with you for free.
00:19:33
Speaker
you know and We'll talk about your business and you know where are you getting your revenue from? what what What trends have you seen with the revenue? What new products have you developed and put in the marketplace lately? What steps have you taken to protect these things? We'll brainstorm like this and it's a very cost-effective way to really get your arms around ah you know what intellectual property you're not appreciating. And if you do that once or you know better yet, twice a year, I think that's money well spent for a middle-sized company. Yeah, that that's exactly right. i We kind of call those IP audits and doing it on a periodic basis, having people who know IP come in and just
00:20:14
Speaker
point out the things that you think, oh, that's just the color of our package. No, that's your trade dress. Oh, that's just the copy on the instruction manual. No, that's your copyrighted explanation. So doing an IP audit, doing a little bit of, in conjunction with that, some employee training.
Protecting IP through Employee Agreements and Training
00:20:32
Speaker
Once employees are aware of it, everyone gets kind of excited. Oh, I invented this. Can this can this be patented? Or I've done this. can Can we protect this somehow? So a little bit of employee training. Getting people you know in the habit of documenting what they've done on a periodic basis is good, and then you know carefully pursuing the right legal protection. You don't have to protect everything, but you got to protect the things that confer a benefit to your business or would be you know help your competitors compete against you if they could do it. Interlace with that are appropriate agreements with your employees, too.
00:21:09
Speaker
You know, and that's really the starting point. You know, every employee should have an employee agreement, which is different from an employment agreement. An employment agreement specifies a duration of time and in a salary and what the expectations are. An employee agreement is still, you know, pertains to at-will employees, but sets out the obligations and requirements that the employer has for the employee, like the requirement to assign all inventions that are developed, you know, that pertain to the business. There's different ways to handle this. But, you know, if you don't have these agreements in place, you you this this intellectual property is walking out the door and going to your competitors the moment this employee leaves. So making sure you have the right agreements. And then, you know, Article 1, Section 8 of our Constitution
00:21:58
Speaker
actually provides for patents and copyrights because you know our founding fathers knew that in order to advance the state of the art and to incentivize people to you know improve the quality of life and the standard of living and you know come up with inventions, you got to give them something.
Incentivizing Innovation to Protect IP
00:22:17
Speaker
so you know We have clients that give you know thousands of dollars to their employees when they come up with something. We have other clients who give movie tickets or $25 Visa cards or whatever. so If innovation is even marginally important to your business, come up with some sort of little incentive program and you know and make you know make it fun.
00:22:38
Speaker
because you're gonna wind up getting a lot of information about your business that you may not even be aware of that's going on on the manufacturing floor right now. yeah Well, yeah, what I'm hearing is this needs to be implemented on ah at least an annual, if not more frequent basis, just like strategic planning, just like annual budgeting and all those other types of tools that are you know just pretty good, straightforward, simple management. Reviewing IP needs to be embedded in that as well.
00:23:10
Speaker
Yeah, we agree. yep So yeah, I guess just in closing, and again, I have both of you kind of weigh in on this. So if we, you know, for any middle market leaders that could be listening to this right now and thinking, you know, my goodness, I've got a lot of opportunity here because I'm not doing these things, or I need to really go back and take a hard look and identify where I may be exposed or have some of these hidden IP opportunities. What would be your advice on next steps or how they should start this process? I mean, you talked about coming in and maybe leading a day long conversation, but what other pieces of advice could you share with our listeners about how to start this process if they're not doing it already?
00:23:53
Speaker
well of Well, before I get to that, i I will get to that. I just want to address one point. Now, there's probably a lot of people listening that think, you know, the business is going okay. You know, what is talking to a couple of smart, and as far as a podcast audience knows, good-looking, you know, IP attorneys going to do for my business? And, that you know, I just think they ought to think about this. One, you have a competitive advantage from the stuff that you've created. IP helps you keep that advantage and stops your competitors from taking it from you. It also presents some unique monetization opportunities. So you're doing something well in one industry and your brand is pretty popular. There's related products. Boy, I'd love to sell our related product under that brand, you know so you can license the brand or license
00:24:39
Speaker
some of the materials you have so licensee licensing what you come up with if you've documented your IP you can do that but also risk mitigation you know it's a fluid workforce people come people go these days and they go you know they stop working for you and they go back to a competitor now your competitor knows how to do something or Does it the same way so it's that you know mitigating your risk and finally the valuation Your business is more valuable the more IP you have so if you're going for for financing you're looking for investors or at some point it's time to sell out and The amount of IP you have is almost always the biggest value of any transaction. These are balance sheet assets, you know and if you don't protect them, they're not you know easily quantifiable. and In fact, if you're you know going to take your your business to market and try to sell it, one of the first questions a prospective buyer or their lawyers is going to ask is, show me what you've done to protect your intellectual property.
Engaging with IP Lawyers for IP Protection
00:25:38
Speaker
you If you come at them with a bunch of inventions, you know patents covering your your primary inventions and trade trademark registrations and copyright registrations, they know they're getting some value. and so To answer your question, how do you get started? Just start paying attention to the to inventions and to brands and to works of authorship and the secret and confidential information you have. you know there' There's no shortage of IP lawyers out there who'd be happy to talk to a new client. As Joe said, on ah you know we travel quite a bit and talk to clients, spend a day with them, just helping them find what they got. So call a friendly IP lawyer, someone that sounds like you could work with them, and get started. And the sooner you do it, the better the plan can be and the greater you can spread out the cost any cost that you may have to incur.
00:26:28
Speaker
So, it's just, you know, the way to get started is to get started. Call someone. And I'll just add, as a final point, just like in so many other areas of the of of life, you know, follow the money, follow the revenue, trace your revenue. You know, where's your revenue coming from? Is it protected? You know, where's your future revenue going to come from? Is that protected? you know, it's all about sustaining the business. So knowing where the revenue is coming from and where it's likely to come from in the future are good ways to begin thinking about, you know, have I done enough to protect that revenue source? Yeah.
00:27:09
Speaker
Well, these have been great insights and as always appreciate all the expert advice and just you know bringing a lot of attention to these topics, which which again, I think have the ah the um ability to be you know pretty easily overlooked in a busy mid-sized company that again doesn't have a a ton of resources. So Brian, Joe, want to thank you again for joining me today and for all your time and expertise. Hey, our pleasure, Doug, anytime, and we enjoy doing these, so call us again. Yeah, thanks for the opportunity. Yeah, certainly. Thank you. For more of our about Harness IP, please visit their website, which is www.harnessip.com. Thank you. Thank you for listening to The Market That Moves America. Never miss a new episode by subscribing anywhere podcasts can be found. You can also subscribe to our email newsletter at middlemarketcenter dot.org.