3 ways businesses can find cash flow from what they’ve already created

Advising CEOs: Are There “Rembrandts In The Attic?”

How could a company create a recurring net revenue increase of 3,300% in largely free cash flow? It is possible, and it’s been done multiple times; a model that can (and should) be replicated by small businesses.

In the early 2000’s this was done by a CEO who was vocal about his discontent with continuing business as usual, and hoping for a different result. Instead, he decided to take a look at the untapped resources of the company- and found what was later coined a collection of “Rembrandts in the attic”. In other words, assets of value shoved aside in corporate strategy, collecting dust. Those assets were the untapped potential of the company’s intellectual property, and business opportunities therewith (licensing deals and assignments).

Backing up slightly: every single business, no matter the type, automatically creates various pieces of intellectual property assets in its day-to-day work.  For example: the business’s name, logo, and slogan are all trademarks. Anything tangibly created falls under copyright laws; anything invented becomes a patent. The term “intellectual property asset” isn’t random.  These are all very literally assets that businesses can monetize.

These types of opportunities available to every single business were showcased by the strategic advantage that certain CEOs capitalized on in the 2000s onwards. 

In the early 2000s, Richard Thoman was appointed CEO of the $20 billion Xerox Corporation and was vocal in his discontent with conventional corporate strategies.[1] Notably, he did this while ushering the corporation into a new Era (the “Digitization Era”), similar to today[PH2].  In an article studying the effect of his focus on intellectual property, the Harvard Business Review noted the following[2]

“To understand why Thoman thinks that way, you have to go back to his days as chief financial officer at IBM. There, he saw firsthand how an aggressive intellectual-property effort boosted annual patent-licensing royalties a phenomenal 3,300%—from $30 million in 1990 to nearly $1 billion today. This $1 billion per year, it should be noted, is largely free cash flow—a recurring net revenue stream that represents one-ninth of IBM’s annual pretax profits. That money goes straight to the bottom line. To match that sort of net revenue stream, IBM would have to sell roughly $20 billion worth of additional products each year, or an amount equal to one-fourth its worldwide sales.

Thoman is taking a similar approach to IP management at Xerox. He plans to boost the copier and document management company’s patent royalties from just under $10 million to more than $200 million annually within two years. And that’s not all. Just as IBM now leverages its patents for strategic and economic gain—Big Blue used them as the currency for $30 billion worth of new component sales in 1999—Thoman also believes that Xerox’s rich portfolio of patents could become passports to lucrative new market opportunities. He believes patents could help the company regain its leadership role in the global technology industry.

Thoman’s concentration on intellectual property marks him as one of a new breed of chief executive. These IP-savvy business leaders believe that, in a world where battles are increasingly being waged not for control of markets or raw materials but for the rights to new ideas and innovations, the management of intellectual property must become a core competence of the successful enterprise. Though still a minority among their peers, they nonetheless lead some of America’s most successful companies, including Microsoft, Lucent, IBM, Dell, Dow Chemical, and Gillette. These leaders all recognize that the knowledge economy has given rise to a new ecology of competition in which intellectual assets rather than physical assets are the principal wellsprings of shareholder wealth and competitive advantage.”

The New Era

While fascinating to learn about, of course, not every small business has a billion dollar’s worth of assets ready to be monetized. However, nearly every company we work with does leave money on the table when it comes to monetizing IP assets. Additionally, we are entering a new era[PH23]. This means that new opportunities have presented themselves, and intellectual property provides forms of silver linings for business owners. Here’s what we’re flagging for our own clients:

1. Opportunities to defend your marks and capitalize on abandoned marks.

Recessions are a good time to monitor for potential infringers of registered and unregistered marks. For example, litigation remained at usual levels during the Great Recession, simultaneously while trademark office actions fell. Additionally, this is the time to capitalize on dead marks. If a mark isn’t live on the registry and it is no longer in use in commerce, it’s available with the caveat that sometimes an old owner will come calling for a fee as soon as you are having some major success. 

2. You can prioritize your marks on a limited budget.

As discussed, intellectual property provides significant strategic monetary opportunities. This is a wise time for businesses to invest in registering that IP. Again, trademark rights exist whether the mark is registered or not. When advising clients, an advisor can help with reverse engineering the logic to determine what rights are most important to obtain first. For example, a business will likely need to register its brand name first (as rebuilding the public-facing reputation a brand name provides could incur a significant blow to any business).

3. Reassess licensing opportunities that may be available to you.

Do you have a slogan or coined term that you know other businesses would like to use? Do you have a course that someone may want to sell on their own platform? Do you sell any type of templates or online resources that other businesses want to sell within their own containers or programs? These are all licensing opportunities. We’ll be sharing much more on this topic soon, but for the time being, begin drawing up an internal list of assets you may have.

In Summary

The most visionary business owners are able to tap into that visionary side, even when looking at businesses that have been running “business as usual” for quite some time. Work with an experienced trademark attorney to determine what reactive measures that must be taken in order to obtain ownership of the intellectual property you’ve created, and identify your own Rembrandts in the attic. Reach out to our team at paigehulselaw.com/contact.

  1.  “Discovering New Value in Intellectual Property” by  Kevin G. Rivette  and Henry R. Nothhaft and David Kline, https://hbr.org/2000/01/discovering-new-value-in-intellectual-property ↩︎
  2. “The New Renaissance and Entrepreneurship” by Paige Hulse, J.D. https://paigehulse.com/2023/06/02/the-new-renaissance-is-an-invitation-for-the-entrepreneur/ ↩︎
  3. “The Modern Renaissance And The Redefinition Of The American Dream” by Paige Hulse, J.D. https://paigehulse.com/2023/06/02/the-modern-renaissance-and-the-redefinition-of-the-american-dream/ ↩︎

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