Four Ways IP Provides Value During Bankruptcy

On occasion, companies face financial difficulties and have to file bankruptcy. Even some of the largest and most popular companies run into issues. While bankruptcy signifies the end of some companies, it is not always the case, especially for companies with strong intellectual property (IP) portfolios. For those companies, IP may still hold value in the event of financial difficulty. In fact, the IP may be the saving grace. Click Read More to discover four ways IP still retains value during bankruptcy.

1. Brands and trademarks provide recognition. Although a company may face financial challenges, if a strong brand exists, a company may have a better chance of surviving than a company that does not have a strong brand. Loyal consumers are likely to overlook a bankruptcy. Additionally, if a company provides products that are uniquely different than others on the market, it may overcome financial difficulties. Take General Motors (GM) for instance. GM filed bankruptcy in 2009, but has experienced climbing revenue since then. In fact, since it filed bankruptcy, GM experienced its largest revenue earnings last year at $166 billion.

2. Companies with strong IP have a better chance of recovering or selling. A strong brand or large IP portfolio may make it more appealing for other companies to invest in a bankrupt company. For instance, the Hostess brand was bought for the second time in 2016 since it filed bankruptcy in 2012. The new owner considers the brand “iconic” and worth the investment.

3. Patents and other IP still hold value. Patents protect inventions. In some cases, those inventions may still be valid, thus, valuable at the time of bankruptcy. For instance, telecom giant Nortel filed bankruptcy in 2009. However, its IP portfolio proved extremely valuable as a host of big name companies expressed interest in buying the IP. In the end, a consortium formed consisting of Apple, Microsoft, Sony, and RIM that bought the IP for $4.5 billion.

4. Intangible assets provide more opportunities than tangible assets. Intellectual property offers various ways to create value. For instance, with IP, an owner can license, sell, form a joint venture, or use other methods of generating revenue with IP.

As indicated, companies that own IP at the time of bankruptcy may have a better outcome than companies that do not own IP. IP provides great value in many ways, thus providing more opportunities for survival. However, many companies that file for bankruptcy are mistakenly tagged as worthless. This is why it is important to seek an IP valuation to determine the worth of IP assets.