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Intellectual Property Holding Companies: A Strategic Analysis

By George C. Lewis, J.D., P.E. of Merchant & Gould and Joseph R. Enzor, J.D., LL.M. of Enzor Law Group

In the technology-driven environment, intellectual property (“IP”) is often the "crown jewel" asset of a company, both as an unrealized asset and, more importantly, in terms of the revenue that that IP could generate if properly and fully exploited over time. While this statement is true across the full spectrum of IP (e.g., patents, trademarks, copyrights, trade secrets and the like), it is particularly the case with regard to patents, arguably the most valuable kind of intellectual property in a company's IP portfolio.

As a consequence, inventors and companies are becoming more concerned about protecting and exploiting their patent assets, and, to that end, many are moving toward a "two entity" legal structure. The first entity is the core company and typically the public face of the enterprise. This is where management sits, and where the business of the company is typically conducted (e.g. engineering, manufacturing, marketing and sales). The second entity is the legal repository of the intellectual property assets, and is singularly tasked with protecting, managing and exploiting the IP. This second entity is an intellectual property holding company (IPHC).

But is this two-entity IP strategy the best approach? It depends. There are several important aspects to the analysis, and it is absolutely essential that both inventors and companies evaluate all of these aspects before making a determinatio...

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