Can Accounting Reform Help U.S Balance Sheets?

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June 10 (Bloomberg) – Executive Chairman of Patent Properties Jay Walker and Article One Partners CEO Marshall Phelps discuss valuing intellectual property and fixing U.S. patent law. They speak on Bloomberg Television’s “Market Makers.” (Source: Bloomberg)

Troll industry to the american economy?

Certainly bad reputation only for intellectual property.

I can say that.

I do believe that there are some really bad actors in the troll industry.

They are small law firms that blanket the world with 15,000 lawsuits and a time.

-- at a time.

More analysis is going to that, by the way.

That reputation hurts.

How do you fix it?

There are a number of things going on.

The supreme court has made it a point to encourage see shifting.

The loser pays in a piece of litigation.

I love that.

If you were an individual inventor went been taken advantage of, you might love it when somebody is egregiously suing people.

If you got stolen from, you would not like the fact that a big company could bankrupt you by taking you to court.

May be the positive is this incentivizing bad behavior.

And we change the laws in this country, we end up with counter side effects we don't like.

Although i love washington, it's not my place to solve business problems.

At the end of the day, i would be very cautious.

It is easy when you're going after a few bad guys to catch a lot of good guys and that net.

Then you really do damage to the economy.

How about the fact that laws were written decades ago before things like patent trolls existed?

They have been around for 200 years.

These laws that have been around for 200 years, some are called the bill of rights.

We just need to not equate old laws with that loss.

We need to be thoughtful.

The supreme court has said that this is used fully in exceptional cases.

The question is how that broadens.

We need to deal with the abusers.

There is a handful.

We also have a way bigger issue here.

Intellectual property is not on the ballot sheets of any of these companies.

What happens here?

Network at the biggest -- hold on a second.

What about goodwill and other intangibles?

In this long area -- lumped area, a lot of times google will argue with your accounts.

The goodwill line is generally relegated to transactions that have occurred.

It is not related to how many trade secrets do you have or how many patents you have.

Your copyright portfolio or trademarks.

None of that it appears.

That causes two problems.

It is pretty opaque for an investor.

You figure out what that means.

Since is not on the ballot sheet, generally under managed -- it is generally under managed corporations.

You can't count it, so does not exist.

They are invisible assets.


They are quite large.

Ibm used to have tens of thousands of patents for which it generated no licensing revenue.

Marshall said, it's not on our ballot sheet and he turned it into a multibillion-dollar revenue stream per year at ibm.

It wasn't even on the ballot sheet.

That is a super relevant point.

If you can generate revenue from intellectual property, every single investor would agree that it does have value.

Take a patent that is not generating revenue and put 10 people in a room and asked them to come up with a value for it and none of them will be able to agree.

That's right.

You need a context for it and you need to know if it's relevant.

A drug patent is not relevant to ibm.

It might be the most relevant thing pfizer owns.

Is in it have make sense for these companies do have patents as place card holders?

You don't want to have a party with those place card holders.

If you want more invention in america, you need more research and development.

If you want more research and development, you have to reward it and recognize those are investments and assets.

Just like your brand name is an asset or your copyright.

We are coming off the financial crisis.

We are coming to a time where shareholders are demanding every week, every month, every quarter results, responses from ceos.

Isn't it hard to have this beautiful lofty idea and it meant them -- and implement them?

We are actually in better shape than we think we are.

I do think a little sunlight in the dark corner would make a lot of sense for companies to do.

The accounting profession has not stepped up.

We still have an accounting system that is an antique.

20 years ago, economists would say 20% of your assets are invisible.

80% of the property.

Today, it is reversed.

We talk about rmb as one idea . you have worked at some of the big companies.

There are difference between research and element for investors?

Is a 10-1 ratio.

Most money is spent on development.


People listening to the conversation will have a hard time getting their heads around the idea that accounting reform can actually speed the innovation process.

You believe this?

There is no question that we ift if we account for renovations, it will change what motivates businesses.

I'm not arguing for accounting shenanigans.

I'm arguing for reality.

Here at bloomberg, your assets are not just plans and equipment.

Of other things that are valuable.

This text has been automatically generated. It may not be 100% accurate.


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