Intangible assets in financially distressed companies
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Financially Distressed Companies The Role of Patents as the New Asset Class
Intangible assets in financially distressed companies

By Scott Oldach and Tammy D'Amato of Patent Board™

In this challenging economy, an ever increasing number of companies are under severe financial pressures and even face bankruptcy and/or liquidation.  Both large and small companies have been affected in this downturn.  Companies that have been historically successful at innovating and commercializing their ideas can be squeezed by a lack of capital or lack of patience.  These financially distressed companies will have essentially four potential endings; (1) generate enough cash to see them through, (2) get acquired, (3) go into bankruptcy in order to restructure debt, or (4) liquidate their assets. However, the historic investment in patents, and to a lessor extent patent applications, remains an asset that is not quantified in the balance sheet and often not carefully thought about in this situation. 

When under financial distress, companies will behave in ways that they would not have anticipated under normal circumstances.  First, a company will look to conserve cash –often by cutting back on longer term investments.  This means that R&D projects and the fruits of the R&D process, patents, will decline.  However, as patents have a long latency and lifetime, a company may hold a large number of assets from before the financial crisis or have new inventions that are still under examiner review.  Moreover, many rival companies that are not under severe financial pressure look at thi...

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