Important issues to consider when creating a Risk Management Strategy:
Enterprise Risk Management
It is crucial to any effective Enterprise Risk Management (ERM) plan that the right manager has a comprehensive understanding of every significant exposure of the company, so these exposures are properly managed. Insurance products covering companies’ obvious or perceived “popular risks” do not completely solve companies’ potential risk issues. A proper ERM plan should ensure that a company is not taking on unnecessary, additional risk.
Indemnification Under UCC
Companies in the business of making and/or selling goods may have already accounted for the risk of being sued for patent, trademark, or copyright infringement. Ideally, they have considered insuring against that risk. During that evaluation of potential risk, they should also consider that they may be liable for expenses incurred in an intellectual property (IP) infringement suit against one of the purchasers of their products. Unless companies have specifically addressed the issue in their contract, the Uniform Commercial Code’s Implied Warranty Against Infringement (IWAI) can allow the buyer to sue you for the costs of defending an infringement suit based on the goods sold to them.
Mergers and Acquisitions
Mergers and acquisitions (M&As) continue to be a viable and attractive solution to intellectual property (IP) monetization. Many well-conceived M&As have the potential to create a win-win situation with respect to a small company commercializing its most important innovations. It has long been known that the best way to monetize an innovation is to create a company that produces a product incorporating it. After the company is up and running, the owner-innovator can feel satisfied that all has been done that is required to optimize the return from his or her innovation. They will have proven that the innovation works, that is, it can be scaled up to commercial production and that it can be sold. This is the quickest route to a maximum return, and has proven to be the best, since the innovator controls all of the critical development steps. This is in contradistinction to licensing, where others must pursue the passion-requiring steps of proving the innovation works, that it can be scaled up to commercial production and that it can be sold. Granted, by forming a company the innovator takes more risk but correspondingly reaps more reward upon an M&A.