28 May MIA member IPA – Opening the door to the fast lane
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GLM News
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Opening the door to the fast lane
Lessons from motorsport in how to account for innovation
No sport understands the value of a rapid innovation, iteration and implementation cycle like motorsport. For racing cars, it is far less about the gym and the training field and much more about the draughtsman’s desk, the wind tunnel and the factory when looking for an edge.
The results of a successful innovation, tested in and honed on the race environment, ultimately percolate through to the cars we drive on the roads, making them faster, safer, more efficient and better handling. That means there is a huge amount riding on every breakthrough from every team.
The need to protect the intellectual property (IP) behind each innovation becomes vital. Typically, businesses have used patents to do this. But there are two things that make patent applications wholly unsuited to motorsport.
What they require instead is a process that can:
· Quickly and accurately value their IP
· timestamp its creation
· provide immutable proof of origination
· capitalise the IP as an intangible asset on the balance sheet
· maintain privacy of commercially sensitive documents and
· deliver robust cybersecurity
These are benefits that would be helpful to all businesses, but it is motorsport that has recognised it first. For them, the innovation cycle for race teams moves too fast for traditional IP-protection routes.
They have also recognised how public disclosure destroys the value of their IP – if the goal of a patent is to protect the IP, it is perverse that it should all be made publicly available on the internet. Finally, they are keen to recognise the future value of their current IP by capitalising it on their balance sheets.
Of course, none of this applies exclusively to race teams alone. What businesses all require is legally defensible proof that they are the originators of an innovation, in a manner that is entirely free of the piracy risks associated with the patent process. Most could also probably benefit from legitimate balance-sheet strengthening by unlocking the value of their IP.
This is why IPA, a Chelmsford-based IP consultancy, has devised a proprietary process that can log, assess, value and protect the IP that companies generate – ticking all the boxes above, all in real time. That process creates what it calls Digital Novel Assets (DNA) – formally registered, blockchain-timestamped, intangible assets that sit on company balance sheets. These DNA are separable, transferable assets that can even be specifically and directly collateralised with lending.
And, while creating the facility to produce that proof of origination, IPA has gone a step further to solve the question of cybersecurity risk too. In the same way as for a patent application, the registration process relies on sensitive company documents being reviewed. These documents are also vital for the valuation assessment of the IP.
But, unlike in the patent process, there is no need to make public those sensitive documents that are used to register the IP. And because the documents behind the resulting assets will never be uploaded to the cloud, IPA’s process ensures the scientific and technological work that has gone into the innovation remains closely held.
To do this, IPA’s process has taken full advantage of technological breakthroughs in artificial intelligence for its asset-generation process. Its software takes the documents and the data they contain to assess what has gone into their creation. It values them accordingly, timestamps them on the blockchain and then stores them in offline, cold storage to ensure they are impervious to cyberattack.
The only human eyes that fall on the sensitive documents are those of the auditors who sign off on the accuracy of the asset valuation. Even the AI itself is developed in an offline sandbox, meaning documents are never even seen by online models. It is all fully in compliance with the FRS 102 accounting standards that apply to intangible assets, as well as HMRC’s CIRD regulations for tax filing.
Motorsport teams have been so quick to recognise the value of IPA’s DNA process that the consultancy has become a bonnet, door and endplates sponsor in the recent European Le Mans endurance-race series (see main picture).
But the IPA service is not just for motorsport teams, and it is worth every company considering what revenue-producing IP they hold. Once they have done so, IPA will then look at these developments to assess their suitability for conversion into balance-sheet items.
Where appropriate, IPA will then create formal intangible assets – what it calls Digital Novel Assets (DNA) – for its client companies. The DNA are separable and transferable intangible assets, which can be capitalised on a company’s balance sheet to accurately reflect the true present value of the future revenue generated through a company’s proprietary innovations.
All this has been made possible thanks to recent legislative developments in the UK parliament with the Property (Digital Assets etc) Act. The legislation was passed earlier this year to handle the accounting treatment of digital assets such as cryptocurrency.
Previously, the ownership of such assets was a grey area legally. Now, under the new legislation, there is far more legal certainty around the intangible digital assets companies hold.
You can read more about IPA
here.
