The Critical Importance of Intellectual Property

Foreign.

Welcome everybody, to another edition of CPG Insiders. I'm your host, Mark Young. Co host, Justin Gerard. And Justin, today we're going to talk about intellectual property.

Getting into the good stuff.

I know, and, and one of the things we have to get people to understand, we need to get people to first off, think of intellectual property as property.

Yeah.

It's like real estate.

Yeah.

And it is something you own. And in many cases for your CPG product, it may be the single largest value of your product.

I mean, I think that's a great point. If you change your perspective of it to physical property, then immediately your mind goes, so what's the value of it? How do I protect it? How can I, you know, how can I increase the value of it, potentially? I think, I think that's a great shift.

So when we think about intellectual property, we think about it in three in three or four categories. We think about patents, we think about copyrights and trademarks, and we also think about the category of what we call trade secrets. So let's start with patents. So a patent is, I've made something that's unique. It's a unique formula, it's a unique device. I invented an iPhone, whatever the case is. And I get a patent lawyer who has engineers on staff and, or chemists or whatever we need, and we go and we apply for the patent. Well, there's, there's some value in those patents. First thing is, during the time that the patent's being applied for, which typically takes about 18 months, you are marketing yourself as patent pending, which means what your patent is has not been disclosed to the public yet. So it's actually the most safety because it's hardest for people to knock you off when they don't know what your patent will be because they don't know if I'm going to infringe on you or not if I try to knock you off. So it kind of gives you this little window.

Yeah.

Second thing, if you've really discovered and made something unique, then being able to prevent other people from knocking you off is huge. And, and it's the saving grace, by the way, that protects a lot of brands in the world of store brand competition.

Oh, yeah, it's huge.

Because when you make a CPG product, if the product is doing any good, the, the, all the retailers that you have are going to want to make a store brand. If you have a patented product, then they have to come to you if they want to do a store brand. Now you have the option of, do I want to do a store brand or do I not want to do a store brand?

That's another topic Right now when we.

Think about patents, there are two types of patents. There's utility patents and there's design patents. A design patent would be, I created a box of a certain shape so someone could make a box of a different shape. And it just got around my design patent. But when we have the other kind of patent, that means the utility patent. That means we have the patent on this formula, this process, this technique, whatever it is that's involved to make it. We own that piece of intellectual property. Now, here's what I want people to understand. A patented product, let's say someday you want to sell your company. A patented product on average will bring four times more money than a non patented product when you go to sell that company.

That's huge.

That's enormous.

Huge.

And let me give you an example here. 30 years ago, Justin. 30. Just 30 years ago. That was not that long ago. You were. You were already alive.

I was? Yes. I was here.

You were here. You were doing much business, but you were here.

I was here.

I was doing business. Thirty years ago, 85% of the market cap value of the s and P500 was based on hard tangible assets. Buildings, tools, inventory. Right now, at this moment, 85% of the value of the S and P is based on IP things you can't put in a wheelbarrow. But 30 years ago, it was based on. That's kind of the way we call it. It was based on stuff you could put in a wheelbarrow. Now it's based on things you can't put in a wheelbarrow. What a massive shift.

Huge.

Let me give you another example. As of. As of two weeks ago, when I looked this up, the company Airbnb, their market cap was $86.5 billion.

Okay.

Now, keep in mind, they're in the vacation and house rental business, but they own zero real estate, Right? None.

Yeah.

Now, on the same date. This will kill you. The market cap value on Marriott Hotels, Hilton Hotels and Intercontinental hotels combined was 84.1 billion. $2.4 billion less than Airbnb. So the three largest hoteliers with massive physical holdings.

Wow.

Are worth $2 billion less than Airbnb, who owns nothing but software.

That's wild.

Got another example for you. I want you to look at Tesla. When we look at Tesla. Tesla's not a car company. Tesla's an IP company. That's. That's the value of Tesla.

Yeah.

As of last Friday, Tesla's market cap was 616.47 billion.

Wow.

Okay, the market cap of Mercedes Benz. Now, remember, they've got way more factories and all those things, right? 74.9 billion. General Motors, 44.51 billion. Ford Motor Co. 50.38 billion. And the world's largest automaker, Toyota, has a market cap of 302.31 billion. Still less than half. Think about this. Toyota is worth less than half the value of Tesla.

So. So, I mean, do you have any. Any more background on this shift? I mean, this is a major shift. Do you, do you understand why?

I guess because when we're, when we're, when we have ip, when we have protected ip, we now, the market now values its future value, okay? So when we look at General Motors, investors look at General Motors and they say, okay, I'm going to put money into a company that makes cars, right? When they put money into Tesla, I'm going to put money into a tech company that is changing the way automobiles.

Are being made and, and who knows what else, right?

And solar panels.

Right?

And home power units. So I'm betting, I'm betting when I buy that stock, I'm betting that the future for that company is exponentially bigger, right, Than the other company. So what it really means is the inventory, the physical assets, the factory, the buildings, they're irrelevant. Because if you think about it, buildings and tools and all that stuff, they're all commodities. I can go buy more buildings.

Right? Right. Limit.

Yeah. What I'm betting on is the future of the IP and the protection that the IP has Now. In addition to patents, we also have trademarks and copyrights.

Mm.

So, you know, what is the Coca Cola logo worth?

Right? I mean, I don't have the answer, but.

Well, think about this. Let's take. Let's take soda out of the equation, right? How much money is the logo worth on merch?

Right? That's what I'm saying. I mean, how could you even measure it?

I mean, Coca Cola shirts, Coca Cola glasses, Coca Cola cups, Coca Cola, you know, coolers, right?

I mean, Coca Cola is, is. I mean, it's an icon. It's a national icon, right?

Because they own the trademark. So again, and where I'm going with this is I want our listeners to, to realize protecting your intellectual property, copyrights for written content, trademarks for logos and names, patents for products, these should not be secondary goals or.

Right.

Things we'll get to later shouldn't be afterthoughts. These are things that need to Be in the beginning up front. Now there's a fourth category, Justin, and it's called trade secret.

Yeah.

So Coca Cola, the formula is actually a trade secret. And the reason it's trade secret is because patents only have 17 year lives.

Yep.

So the Coca Cola formula, which is over 100 years old, is a trade secret. Now how do you protect a trade secret? You don't file a trade secret with the United States. You know, Patent office.

Right.

What you do is you validate the trade secret. So the way you validate the trade secret is you prove it's unique, you prove it's protected. And how you prove it is protected is only a very limited amount of people are allowed to know it. You can show that all those people are tied to non disclosure agreements. You can show that at any given time in your company's history, only three people know the formula or four people know the formula. Colonel Sanders, 11 herbs and spices.

Right, Right.

Trade secret. So you still, if you're going to go the trade secret route, you need to do that on day one. Because if you go tell everybody in the company how you make something and then three years from now it's a trade secret. No, it's not.

Right.

You already told 25 people how to do this. It is not a secret.

Yeah.

So you need to establish the trade secret up front. Which means from day one, limited number of people know about it. They're all signing non disclosure agreements, they're all signing confidentiality agreements, they're all signing non compete agreements. And you're putting all these things in place immediately in the process?

Yep.

The difference that this makes in your company's huge. Now here's another thing, Justin, you'll be, this is I think surprise you. Using AI, there are now AI generators who can now establish the value of ip. So you literally put your patents, your trademarks, whatever it is, into this particular AI system and it will give you a dollar amount of what the IP is worth. Then there are now lenders who will lend you up to 50% of the value of the IP.

Wow. That is a new way of raising capital, that's for sure.

So I have a friend in, a friend of mine in Strategic Coach, a lot of friends at Strategic Coach, but I'm talking about one in particular and he is doing something absolutely breakthrough in the area of food, grocery and health. He has filed enormous amounts of pat of patents. The patent office and the patent systems have now estimated that his patents are worth $3 billion.

Wow. Wow.

And the reason it's worth $3 billion is because they're able to anticipate what is the future demand for this technology and what is the demand for specifically what this patent covers. Now, he can now go borrow half of that amount of money on those patents. So, yes, it is a whole nother way of generating capital.

Wow.

Without having to take on partners.

Right, right.

Because it's just, it's just a loan or just loan proceeds.

Yeah, exactly. So now you're not losing equity. You're not. You're giving up shares of the company. You're saying, great, absolutely.

But let's assume for a minute you wanted to bring in partners. Now, you and I talked to a company recently who has a. They're marketing a breakthrough product here in the US but they don't own the patent. The patent is owned by another company in another country. Yep. And they have the rights to the patent.

Yeah.

And what, and what was our advice to them? You can't raise money because you don't have access to the ip.

There's nothing of value.

Right. And how do you sell the company when you sell it and someone else controls the ip?

Right. There's nothing to sell.

So the only thing you can sell at that point is the trademark.

Right. And that means you'd have to develop a brand that has such value that the trademark is worth the sale. Which that's. It takes a lot of money, a lot of energy, a lot of time. And that's a tough road.

It is. Now here's something that I'm always telling people. And as you know, we're doing a new book right now that's really going to be helpful for people. And one of the things that you will, as you start to peruse the book, you will find there is a bit of a trend in it. And that trend says you don't save money hiring cheap lawyers, cheap accountants and cheap ad agencies.

No.

There'S a reason why a lawyer. Why one lawyer gets a hundred an hour and another one gets a thousand an hour.

Right.

It's not just because the thousand dollar guy likes to have Brioni suits. It's not because he dresses better. Yeah, he probably does dress better, but it's not because he dresses better. He dresses better because he can charge a thousand dollars an hour.

Because you get the value of that.

Because that lawyer's Thinking is worth 10x what the other lawyer's thinking is.

Exactly.

So you want to get the best patent lawyer, the best trademark lawyer, the best copyright lawyer, the best cpa. You want to have these people on your team.

Immediately. Immediately. Just like you're saying the. What th. This is the foundation. And, and you're right. I mean, we talk to so many clients that come to us, and they've got a great product that they believe in, and it could be a great product, but they haven't done this homework. They haven't protected it. They. They haven't looked at the trademarks for the name or copyrights on anything. And then we say, well, well, guys, you have to go do this work. You have to make sure you are protected and you're building something of value before you start investing money and trying to give it reach.

And, and let me give people another warning here. So in the year 2022, how many patents do you think was issued in. In 2022, Justin?

Thousands, I would assume.

I mean, there were 646,000 applied for.

Okay. 646,000. Okay.

And 383,000 patents issued.

Wow.

Now, the reason I bring this up is because I want to promise you 383,000 new products didn't make it on the market this year. Most of these patents will never see the light of day.

Yep.

Because mo. And many of them are incredibly clever and amazing pieces of technology, but they're created by inventors who don't have enough sense to get out of their own way in many cases, and don't know how to advertise and don't know how to market, don't know how to build a business. And these patents just sit in the closet. Here's the reason I'm telling you that because you've just invented something, you better make sure you're not stepping on somebody else's patent, because there's a very good chance somebody else had the same thought you did.

Amen. Yeah. Well, and, and, and we've talked about this a lot, too. When you think about the major companies, you know, unilevers, these corporations. Right. A lot of the times they're going to do this work just to protect their known entities. Currently, they'll go get a patent, have it created. So then if some competitor tries to come out, they're saying, you can't, you can't. We own that. It's never going to see the light of day. It's literally protecting their own assets in a different way. And they've got the money and the time to do it that way.

Same thing goes for trademarks, and the same thing goes for copyrights.

Yep.

So when you're getting ready to launch your product, you first need to start by going to the website uspto.gov.

Yep.

That's the United States Patent and Trademark Office, uspto.gov and there you'll find a function called basic word search. So go there and type your new company name in. You're going to be shocked when you find out we're going to call this, you know, Bubba's Beer. And you go in there and you find out, Holy crap, there's 18 different bubbas.

Right.

With a trademark already. And by the way, let's. I'm going to just follow through with Bubba's Beer. Well, let's say that somebody has Bubba's Soft Drinks, but they have the trademark on the use of all beverages. All of a sudden you're not Bubba's Beer anymore because you know Bubba's Moonshine is going to come along and sue you eventually.

Yeah.

So you need to start by making sure if you. Is the name I have clear? Can I use it nationally? Is the trademark clear?

Well, even. Even on top of that, think about it. And again, this is all good in the book now, but with how prominent Amazon is in the consumer packaged good industry and for consumers in general who are purchasing products, they have layers of protection to ensure that they don't have any products that are going on onto their platform that are doing these things. So you're trying to register your brand there to sell and you don't have this ready to go. You won't be able to.

So my advice to you is simply this. When we get to the name of your company, the name of your products, your secret ingredients, start by going to uspto.gov, do a word search. Let's say that your word search shows no conflict. Great. Start right now. Go to a patent and trademark lawyer and pay them to do a deeper search. Because trust me that this is not an exhaustive search. The reason I'm having you start here first is because if you find it in five minutes, then you don't need to pay a lawyer four hours time to go do a deep search on it.

Right.

So I'm just saving you some legal fees by finding the obvious. So start there. Do I have conflicts now? You might look and say, well, I'm making Bubba's Beer, but there is Bubba Soda. Then you need to talk to the copyright lawyer. You need to talk to the trademark lawyer. Am I the same thing? Well, let's look at what they got a trademark on. Well, they got a trademark on all beverages and ingestible fluids or something. Okay, we're out.

Yep.

Maybe their trademark is on Non alcoholic sugar based drinks. Okay, right now I could make a beer, but what if my logo resembles Bubba's soft drink? Now, I've got another problem. So you have to guarantee this. Then you have to find out, okay, the product is that I just made. Am I stepping on somebody's patent? Now, if all you're doing is combining patented items. So if you're buying a drug that has a monograph and a patent and you're dumping it in some emu oil, okay, you're not stepping anybody's patent because you are buying a patented ingredient.

Right.

Or monographed ingredient. But let's say that you have figured out a way to take eight different supplements and put them together to get this different outcome. Somebody may have patented that, or someone may have patented the process of how to make it. So I'll give you an example. Our client, Heliocare. So Heliocare's secret ingredient. The secret ingredient is called polypodium leukotomus burn block one.

Come on.

Now the patent on polypodium leucotomus is actually up. So other companies can now go make polypodium leukotomas, but they can never make polypodium leukotomas as efficacious and bioavailable as the fern block because they have a trade secret on how they extract it. So they extract it in such a way to make it more available, to make it stronger, to make it better. So these are the things that you have to go out and you have to do the research on. Now, if you need help in this category, by the way, we know the best lawyers in these areas. Yep. So you're free to reach out to us, and we're happy to. Happy to introduce you to literally the best people in the business. This goes hand in hand, Justin, and we'll do another show coming up. And maybe the next show we do is our how to Stay out of Jail show.

Sure. Yeah.

I mean, since we're kind of talking about legal stuff right now, we're already there. So maybe our next episode will be how to stay out of out of jail.

Yeah.

So how to not have the FDA and the FTC and all these other three lettered, you know, organizations that all start with Fs.

Yeah, the fun police, you mean, huh? Yeah.

Come after you and ruin your life. So. And again, this is about having the right experts. A patent lawyer is different than an FDA lawyer and an FTC lawyer, which is different than a tax lawyer, which is different than a corporate lawyer who might be defending you against exposure for liability.

Yep.

You need to have all of these skill sets. There's no such thing as I've got a lawyer. No, that's like saying I've got a doctor and I've also has. And I also have a brain tumor and a hemorrhoid and I'm going to have him operate on both.

I use the same one.

Well, you do. I know you do, but. Well, you got to figure your brain surgeon should be smart enough to remove a hemorrhoid. You would hope, but I don't know if I want my proctologist opening up my head.

Generally not. Generally not.

See, it might go in one way and doesn't go the other way.

Who knows? I mean, maybe that's the way you. Maybe you just love living life that way.

But you kind of. But you kind of get my point.

100%.

There's specialties in everything.

Yes.

And you need to find the best people you can afford in each one of those categories.

Yes. And remember, it is worth the investment to get the right one because we assure you it'll cost you a lot more in the future if you don't.

So when you say I can't afford a good lawyer, the answer is you can't afford not to have a good lawyer.

Yes, exactly.

Well, as always, if you like today's show, leave us five star review wherever you got it, wherever you get your.

Show.

We'Re happy to have you reach out to us if you need help with any of these things. And just I think let's come back next week and let's, let's carry on this legal discussion and go into the fda, FTC and some of these other legal issues that have to be addressed in my CPG business.

Yeah, that sounds good.

All right, we'll see you on the next show. If you're looking to greatly increase sales on your CPG product, don't hesitate to contact us at Jekyll and Hyde Advertising and Marketing. By the way, the only advertising agency with a guaranteed result. Just go to Jekyll, Hyde agency.com or feel free to give us a call at 800-542-10.