Simplifying The Complexity of IP | With Tony D'Angelo | Founder’s Office™ Lunch & Learn

All right, it is Lunch and Learn, and it's going to be just a fantastic, powerful day today because it is, uh, September 16th. Candace, why is that day such a great day?

Well, you've pretty much like beaten it into us. I bet my kids could even say it. We have Constitution Day just around the corner. Tomorrow. I know. Just around the corner. And as Founder's Office, we have to founder to founder, see our fellow founding fathers.

Isn't that great? I love it. And, you know, last year I put out on LinkedIn, are you as smart as a 3rd grader? Your daughter, my oldest granddaughter, Came home with a constitutional test, right? And do you even remember some of the questions that were on there?

I didn't take it. She had— she did it with you.

She did it with me. So, so the first one was that—

I got the right person to help you with this homework.

How many articles are there, right? And, and if people guess 3, that's always pretty amazing, but, you know, 7. And how many, uh, you know, amendments and changes to the Constitution have we made? And it was 27. 7, and what was the first 10 called? The Bill of Rights. This is a 3rd grader. I'm riding in an Uber yesterday, and sure enough, college-educated, couldn't tell me how many are in the Bill of Rights, even what it means, the difference between the Declaration of Independence and the U.S. Constitution. And, uh, so yes, I love to celebrate this. I'll be speaking tomorrow, uh, right, with the Nevada, uh, Supreme Court Justice, Chief Justice, I think, and a couple others. I know, talking about Nerdsville, it's, it's awesome nerding out on this stuff. But not a nerd, someone who's just unbelievable today. You know, as founders, we spend years creating things, ideas, processes, brands, content systems, ways of solving problems that did not exist before we built them. And sometimes we do not stop and ask a really important question: what exactly did I create?

Yeah.

Who owns it and what might it be worth? And in today's AI world, that's ever more important. Well, Tony D'Angelo has spent more than 30 years as an educational entrepreneur and 25 years generating royalty income from intellectual property he created. His work today through The Intellectual Capitalist is about helping entrepreneurs get those ideas out of their heads and begin treating them as assets. The timing for this conversation could not be better. Tomorrow is Constitution Day. And Tony regularly starts with Article 1, Section 8, Clause 8. The framers gave Congress the power to secure for limited times exclusive right to authors and inventors to promote the progress of science and useful arts. So today I wanted to make this very practical. What have you already created? Do you actually own it? Have you protected it? And could it be creating value? This is a question and answer thing where we'll be looking at you guys and we've got the expert on there, Tony.

Hi, Tony.

This is going to be a blast.

Oh, it is, Tom. Thank you so much for having me. Thank you, Candace. It's a great delight. And listeners and viewers, thanks for being here today. I'll just say it out of the gate: your IP doesn't come from you, it comes through you, it comes to you. It's divinely inspired, and you are like a big Wi-Fi router absorbing that idea to bring it to not only to yourself but to expand human flourishing. So I'm super excited about to not only talk about the topic, which we're going to make simple and sexy— IP— but more importantly, To you, the founder, the creator. So we're gonna have a great time.

Simple and sexy.

That is a commitment.

That's how we do it, ladies and gentlemen.

Just a reminder, we've got the Q&A in your— in the bottom. Feel free to plug those questions into the Q&A.

You know, Tony, it is amazing. We work with some of the top leaders in AI presentation, and we'll have— we have weekly calls with these people that we're guiding on these scenarios as clients of ours in building their businesses and such. And They will mention something. And the first thing that we mentioned that Jackie's in court today, so she can't be joining us, which is a real bummer because she runs our IP side. But the first thing we'll ask is, did you get that in? Is that— did we trademark that? Where are we going on this? How did this go? And they're like, they get tired of us asking these questions. It's like, no, every time you do that, you created it. Now you're feeding it back into AI. You need to put a claim in and say it's yours. Right.

Amen. Amen. And it's not just Tom and I saying this, listeners. As Tom said, it's in the Constitution. Matter of fact, but if we want to even go back further than that, it's actually in the Bible, in the book of Genesis. That's where we first see this idea of property rights. So what is property? Simply is this exclusive right. And in the Constitution, this is why I love Tom and why we're talking to you founders. In the Constitution, Article 1, Section 8, Clause 8 is the, the only time that you'll see the word right, R-I-G-H-T. is actually in Article 1, Section 8, Clause 8. Of course, you'll see it in the amendments. That's the Bill of Rights. But in the Constitution proper, in Article 1, which that means it's in the power of the people through Congress, not the executive branch, the king at the time, or the president, right?

Yeah.

Not the judicial branch, but the Congress, the people, and what Congress gave us in 1790 through the Constitution, a couple years after they had to declare the independence and fight a big war, was this opportunity, first time ever in human history, for us to own a useful idea, a scientific invention. Now, not a trademark yet, because we didn't have trademarks in 1790. They don't come into vogue until about 1870. But in the Constitution proper, that IP clause, as Tom, you said in the introduction, it says specifically to do what? It says to promote the progress of science and useful arts. By securing for limited times to authors and inventors, AKA entrepreneurs and founders. By the way, we didn't have the word entrepreneur in 1790 when they penned the Constitution. Not until, what, 1806 did Jean-Baptiste Say coin the word entrepreneur. But every founder was an inventor, was entrepreneurial. Matter of fact, you know—

Did we have founder really as the initial name at that time even? I didn't start getting called founders until I was—

I don't think they saw them, right?

No.

I don't— well, you're the expert on this, Tom. I want to defer that one to you.

But did the Founding Fathers— like, when did we decide that they were Founding Fathers? You're— I've never thought of that. They never decided they were the founding.

Do you think? Yeah, they were. And the Founding Mothers. The Founding Mothers kept the Founding Fathers in line. So it's just founders.

Oh, that is so true.

Totally right. Sorry, I was looking for mine because I was trying to read along with you, but I actually think it's in my daughter's room for Hang on a second.

I'll loan you, I'll loan you my specially wrapped—

I can screen share it. I always have it up. Do you want me to share it with everybody? Hang on.

1797. Now this is from the 16 states.

Wow.

Now what I love about this one too is because Candace makes a point that the, the, the person who originally owned this book, their child got ahold of their pen and doodled on it.

I'm pretty sure it's a quill. I was like, oh, so kids have been the same for hundreds of years.

Oh yeah. Can you imagine having this edition back then? We had 16 states at that time, and it was still talking about the Confederacy of the States.

Yeah.

Which, by the way, what, it was, uh, 18 articles, 21 articles, I think, in, in the original Constitution. So our original Constitution, which didn't cover any of this, or much of this anyway, uh, it was a confederacy because we were a confederacy of states.

Yes.

Right?

Yes.

So way before we ever got into this. But, but so why was ownership, property ownership— when we think about property ownership, people think that's the right to own land, basically. But there's ownership of so many other things, including your thoughts, your ideas.

Yeah. Well, it goes back to the only time in the Constitution you see the word right is right before that exclusive right. So another word for the word property is exclusive right. Now, what's interesting, and this is part of the distinction for entrepreneurs and founders to begin to see, exclusive right means the word property. And so if you're an inventor, the exclusive right or property that you could claim under the Constitution is something called the patent. And if you are a creator, an author, an artist, a portrait designer, because they didn't have photography back then, you could get a copyright on your useful art. Now, the whole goal, and this is the thing I want to bring to everybody's awareness, not once does it say protect, not once does it say monopoly, it says to promote progress. So, if you understand the founding fathers and mothers in their infinite wisdom, they wanted to create a world where people could actually own their ideas. Go backwards. When they declared their independence, they went to the Lockean model of life, liberty, and the pursuit of what? We know happiness. But before that, they had in there the word property. Now, at the time when they're declaring their independence, they themselves were stuck in an economic system which they knew was morally wrong called slavery. Okay. Many of the founding fathers did in fact enslave other human beings. It's kind of like you and I today. If I could just get out of my digital device, right? The economics were driven that were something bigger than ourselves. So they said, all right, first, we know this is morally wrong. but we have nowhere to go, so we have to create a whole new world. So first, we're gonna declare our independence, and instead of saying life, liberty, and the pursuit of property, let's just flip the switch for a second and go life, liberty, and the pursuit of happiness. Pause. Fight this big war, and when we come back to reconstitute the Confederacy into the United States of America in 1790, one of the very first things we're gonna do is we're gonna put this IP clause. So instead of owning other human beings, You now can own your idea, your invention, your useful thought. And I have to say, this is the nail that was put into the coffin of slavery that we then finally end through the Civil War, right? America is this great invention. And what the Founding Fathers did, they literally invented something. They created an idea. Like, the ultimate operating system is the Constitution, right? I mean, Tom, how— it's been around for how many years? 380 years?

380 years.

And not many upgrades to the operating system.

No. Well, you know, it really does. You go to the Magna Carta and you start going down through that, and then you get to the U.S., the Declaration of Independence, and we're at— so tomorrow, uh, you know, I often talk— I'm going to take a step back.

Yeah.

So, the Declaration of Independence for the United States was akin to an 18-year-old declaring their independence. They're not quite adults and they don't know quite what they're going to do to make income or how they're going to make this all work out, but I am independent. Now, it starts when they're about 4 or 5. years old, because we have that with Ozzy right now going on, like, I'm independent. They still need help going to the bathroom and other things go on and getting their snacks and treats. But at 18, they're like, ah, because we've got that too, right? I'm free. It took 11 years, a big war, a fighting between the states, a constitution that was in place except it was a Confederacy of States before we got to the Continental Congress In 1787, okay? So I'm not going to go too much into it, but that's 11 years. By the way, when you take an 18-year-old and you add 11 years onto them, they're at 29. They start really adulting at 29, and then it took two more years before it really got impacted, and we put the new president in place. If you go to basic civics, it sounds like magic. We declared independence. The Constitution appeared, and. General Washington said, "No, don't make me king. I want to be president." I mean, that's how the our civics look like it happened, right? But it's thirteen years of doing that.

But that's the original IP journey.

Oh yeah, that absolutely was. So here's the coolest part: IP journey of like documenting it. It is because if you actually so so here's the thing: we let's go to trademarks. So let's go back to George Washington, a founding father. So George Washington was a very successful planter, not an entrepreneur at the time because we didn't have the word. But he saw himself as being very inventive. Matter of fact, he was one of the very first people in Fairfax County to use a trademark because things were starting to become popular and other people were making grain, but his grain from Mount Vernon was GW Grain, and he would mark it. And he was one of the very first people. So—

He was an inventor. I mean, people always give Benjamin Franklin, and rightfully so, Dr. Franklin, but, you know, and they think kind of almost sometimes George Washington was kind of this simpleton, the stoic. He was a great leader, but, you know, kind of a stoic. Oh man, he was, he was hardworking. And he was a surveyor. He's out there. He was a moneymaker. Not everything always worked out for him.

All right, bring that back for just a second, Tom, because you said the magic word. Because it brings— you said he's a land surveyor. And land surveying— I'm the son of a land surveyor— and land surveying is helping people measure their property, quantify their property. And if we could bring it back here, I like to say, uh, George Washington was the OG intellectual capitalist because not only did he advocate— so if we go back—

I'm using that tomorrow when I'm on He's on the panel. Washington was the OG intellectual capitalist.

Well, he understood the power of having exclusive right, because going back to the Bible, when God said to Abram— Abraham— Abram, and then changed his name to Abraham to go from the father one, the father of many, to create the 3 monotheistic religions, he said, listen, trust me, plant your seed here. I'm going to give you a lifetime deed to this cave called the Cave of the Patriarchs and Matriarchs. You can be with your wife Sarah, who's now died. If you just stay here and plant your seed and own property, you are going to help the world become a more prosperous place. And in that, I'm gonna make every kid after you in the likeness and image of you. So I'm gonna create the 3 religions, Judaism, Christianity, and Islam. But in God's infinite wisdom, whether it's a he or she, she said, you know what? I gotta make this business called the world run 365. I'm gonna give you, the Jews, you're gonna take off on Saturdays. Christians, you take off on Sundays. Muslims, you take off Friday. I'm gonna get this sucker running 24/7, 365. Like a real, How's a capitalist? How's that? Yeah, exactly. Well, in capitalism, so here's— it gets such a bad rap because usually capitalism is defined by its enemies, right? So, we would call it free market. But what a capitalist is, is simply somebody who has surplus. What an intellectual capitalist is, is somebody who has— intellectual means understanding. It doesn't mean IQ. It means understanding. And capitalist is surplus. So, everybody listening, every founder out there, Again, your business didn't find— you didn't find it, it found you. Again, I'm going to say it was divinely inspired by your creator, whether that's Allah, Buddha, Jesus, or Yoda. You can pick your deity, right? But it didn't come from you, it came through you to you to solve the pain of humanity. And this is what this—

this is— Well, that's, that, that's the whole basis of free enterprise. Yes, being an entrepreneur is seeing a problem and solving it for the benefit of others. And that's why Zig Ziglar, I think, put it beautifully, which was, if you help enough other people get what they want, you will get what you want. Tony Robbins says it another way. Jim Rohn, the Bible, it's all about that. And capitalism, people confuse— sorry, Tony and I always go off on these tangents, but capitalism, they confuse the Microsoft and the Googles and the Amazons of the world as being capitalism. That is our market system that then brought capital to those. And it's actually more of an authoritarian model than it is true free enterprise, right? It's the greatness of being able to share the capital. But then those companies also start shutting down the small founders or buying up the small founders because they become protectionists.

Right.

That's not capitalism. That's part of it. It's a derivative of it. But free enterprise is really what changes the world. Whether I'm in Africa or I'm in South America or I'm in inner city Oakland, it's free enterprise, the people that bring those opportunities and create a better life for others and then themselves and their families.

So true. Well, and that's what I love about our interview. We had you on The Intellectual Capitalist, Tom, and what I love that you are— you bring— part of your job with the Founder's Office is to bring both a shield and a sword to protect the founder, right? So you create the company founder, but understand the moment you created a corporation, you created something independent of yourself. And that's why I think it's so critical, the services and the work that you provide, Tom, for your clients and for any aspiring founder, that you got to have somebody who has your back because your corporate attorney is not your attorney. It's the corporation's attorney. And so, I love that you are positioning yourself and putting yourself in that space to—

We are the found— we are the— and I appreciate that. We are the founder's advocate. And I mean, that is actually where we live when we approach things, when we bring financial, you know, insurance products. We had an insurance person on the other day and it's like, look, you're looking at this. Not insurance in the normal way. It's how do you extract the value out of the company today? How do you bring that? How do you bring that future into today? Which part of that, and why I want to talk with you about that, is because we do have a question here from Dustin. So, I want to make sure we cover that. But part of that is really when you breathe life into these ideas, when you give that life, you do get to claim it.

Yes.

Right. And then you can benefit from that because you are ideally benefiting other people from your ideas. And that is the point of IP. So here's Dustin's question. How do you value IP patents versus trade secrets, like the recipe for Coke or KFC? And so I don't— maybe we can even have him clarify that a little bit further, or maybe you already understand exactly where he's going with that, but how do you value IP?

Well, so first and foremost, let's look at IP versus IC, intellectual property versus intellectual capital. So one of the most important things to keep in mind is IP is the 5th asset class. What do I mean by that? Literally on the hand of your left hand, the— and we'll go in order. So, you have commodities first. Candice, check me because you're the financial guru. So, you got commodities, then you have real estate, land. Okay? Then you have— forgive the middle finger, everybody, but you'll remember this. This is a brand, right? This is intellectual property. It's the linchpin. After that, you have the business and then you have the stock. All— there are 5 asset capabilities. Now, within that, every asset can do one of 5 things. You can insure it, It has a protection capability.

We love that.

It has a cash flow capability, has a capital gains capability. It has a collateralization. In other words, you can borrow from it. And last but not least, it has a tax benefit. So first and foremost, the intellectual capitalist is all about getting out of the idea that it's just property, but it's actually an asset, an asset that you gotta get outta your head onto the balance sheet, either of your company or ideally your holding company. So is Dustin—

Stop there for just a quick second. I gotta—

Was it Dustin his name?

Dustin. Yes.

Dustin. All right. We'll still answer your question, Dustin, but I want to set it up. It's an asset. So, we'll look at how do you create the value around that. But go ahead, Doc.

You said something else. You said something really important there that, again, we drive a lot of times because so many founders, they use their credit card and put the money into the company and they don't realize that that was a loan, right? And then, they do personal guarantees and they don't realize that that was a loan. They come up with the ideas at 2:00 AM in the morning and they give that to their company and to their fellow shareholders and things and didn't realize That should have been a loan.

Amen.

And all of those need to be documented when you do it type scenario.

Yes.

And so, and when you're working for free, that's a loan, right? Because there is no indentured servitude in this country except entrepreneurs do it all the time, seemingly. So it needs to be a loan type scenario. And that is why separating out the founder's IP And being the founder's advocate from the entity. Now, there are times when you put money into a company and you want to tie that up, but it should be through agreement, not just through passive understanding. So, sorry.

No, I'm going to go to financial guru.

I'm finding so much of that and really our discovery phase with new clients and trying to, especially when they've had the business for a long time, unpacking that and the depth at which they have lent to their business and not even recognized it and it hasn't been documented, I would say that is such a significant amount of work that we do initially with our clients. And it is this big mindset shift. So I'm really glad you brought that up. That's one of the biggest, I think, takeaways that people can have from these Lunch and Learns.

Absolutely.

Well, go to Dustin's question. So how do you value IP? Well, how do you evaluate any of those 5 asset classes, and each of them have their own mechanisms and capability. The most simplest way to keep in mind, because everybody's done this before, everybody has either rented or owned real estate in most cases, right? If you're alive, you've, you've at least paid a landlord. So it's property. Instead of renting intellectual property, intellectual property is licensed. License just means permission, okay? So you don't lease it, you license it, and it doesn't pay rental income, it pays a royalty income. Now what does that mean? Once you— the way we— the way— there's multiple ways to, based on the different categories. So going back to the— not the 5 asset classes, but how to— it has a protection capability. So the protection with your IP is the insurability. Now, you don't buy IP insurance directly. You can, but first and foremost, you realize it's in the Constitution. That's why you want to register the IP with the federal government, because there's no IP police you call when somebody infringes on your mark or your patent. Until you have the registration. So you get the registration, that's going to give it market value. And that's usually the first reason why you have an asset, so you can protect it, right? Number 2 is the capital gain. You're going to buy something low and sell it higher. So you could use a capital gain strategy, which that's not my expertise. Keegan Caldwell at Caldwell. I'm certain, Tom, your team knows how to help do enterprise valuation on the IP.

Keegan's awesome too, by the way.

Yeah. And on the Intellectual Capitalist Show, we interview Alex Lepage, or Lepage, And he does IP evaluation. I use what you would use with real estate. So how do I value real estate? You value real estate on the cash flow that could generate from renting it. Remember, we don't rent IP, we license it. So what you do is you look at how much cash flow that the underlying IP is generating and use roughly— I like to be conservative— a 5x multiple. So you look at what the annual licensing revenue is coming off, And that will give you the base value. So don't take my word for it. You can look at Oshin Tomo on Visual Capitalist. They just updated this. We know that 92% of the S&P 500's valuation is in intangible property— IP, copyrights, trademarks, patents, all the, all the intangibles, right?

Trillions of dollars.

Yes.

Now I say to every founder, if I as the intellectual capitalist, and even if Tom or Candace, and we said to you 90 6% of your valuation is all IP, we'd be full of it. We'd be lying to you. Now, at the same point, we would be also— you would be lying to yourself if you didn't realize there was some IP there. So I say for most founders, not 90% yet, but at least 18.25% of your revenue coming in as a result of your unidentified intellectual property. I call it your UIP, not your UFO, but your UIP. Okay.

I'm gonna I'm going to come back to something you just said again. I know I do— we do this where I interrupt. So I'm going to take an Earl Nightingale kind of look at this. I think he was one of the first people that I ever knew that kind of said this. And you and I both work with Dan Sullivan at Strategic Coach, right? I'm the super slow learner. I've been there since 1999. Slow learner, deep pockets, as he says. You know, I'm his favorite kind of client. But the— I'm going to argue that All of our founders' wealth is in their thoughts, their business, their intangibles. It's just that Wall Street has figured out how to monetize that. And if you go to Napoleon Hill's Think and Grow Rich, the key word in that is think. And that is, again, breathing life into these ideas. And what you are talking about is democratizing the IP world.

Yes.

That's what you do.

And that's unlocking the asset class.

Yeah.

Unlocking the asset class. Well, and you go back to that valuation formula. So just let's put some numbers to this and Candace, check me because you've got the financials. And by the way, my academic training is in public health with a concentration in nutrition and I had a voice minor. So I was going to become a singing dietitian, but there was no real career path. But, but basically, so this is, this is the strategy. You have $2 million of annual operating revenue coming in. So this is not investor revenue. This is operating revenue coming from the existing line of business. Hear this, listeners. Most people try to go in and do something called, I want to monetize my IP. I'm going to suggest instead of trying to monetize your IP, actually proprietize your money. Look at your cash flowing in. So you have $2 million coming in. Now, not 90% of that is coming from your intangible ideas or your trademark or your process. But I can safely say in working with probably about 500 entrepreneurs so far since the launch of The Intellectual Capitalist, I can roughly say conservatively 18.25% 18.25% of your revenue coming in is a direct result of your idea, of your unique process.

That's an arguable standard. And the reason this matters is because at some point you're going to use depreciation. You're going to use capital gains valuations. You're going to build the valuation of your company. And if that becomes a defensible position, then that's great.

Yeah. So what is that amount? Well, that's $365,000. So $365,000, $1,000 a day is coming into your enterprise. As a result of your divinely inspired idea, your IP.

Now, an 8x value?

Uh, well, not yet. I don't— I mean, I'm, again, I'm more conservative. I want to say a 3x, 5x. So I would, I would, I'm— but I, you know.

Yeah, but I'm from Silicon Valley.

I was gonna say. So, you know, I'm a, I'm a kid from central Pennsylvania, so I'm gonna be a little bit more conservative.

30x right there. I'm telling you right now, I'm worth $9 million because I had a good idea and it's bringing in 3 Right, right.

Yeah, and I got a crack pipe to sell you too, folks. But they— so, so again, I want to be conservative, and this is the power of Tom. When they come into your program, come into your system, they come into your ethos, you're going to be able to take that— what I'm just putting out there, that, that 5x idea— you're going to 10x it, 100x it. That's the magic of the Founders Group and, and what you're creating to be their advocate. So, but I just want to get the consciousness right, Dustin, back to your question. So 18.25% of that revenue coming in. So, what is that? That's $365,000. That's the condo that you've been building in the parking lot of your business that Tom was talking about that you were giving away for free to the company. And you pay the electric bill, you pay the landlord. Well, guess what? The creator of the IP also needed to get paid. So, what happens is that IP is held just like the real estate is in a separate holding company and the operating company pays a licensing fee.

Well— And how do we tax licensing fees?

Well, again, remember the assets have different impacts. So every asset class has special tax treatment. Now, I don't know the answer to that question, Tom, but I do know royalties are treated not as active income or portfolio income. They're treated as passive income.

Yes.

They have a tax favorable treatment.

We love that.

Yeah.

I love—

yeah. Well, and more importantly, going back to the Constitution, I'll keep it to the Constitution. The Constitution was about promoting the progress. So, here's the thing, inventor, engineer, next genius coder, God is giving you this gift to come up with the idea, not so that you can just be a hog, right? Pigs get fat, hogs get slaughtered.

Yep.

All right? And what we want you to be able to do is license the IP, give other people permission. Now, IP is not a fence, it is a gate. It's a toll booth. Now, because you're the rightful owner of the road, you can charge a rightful fare toll. So what's the toll? It's the licensing fee. Now, we can go to medical devices, and that's very— because small margins there. But—

But you use it for drinking Coca-Cola. You drink a license.

Exactly.

When you drink a Coca-Cola, you got a hot day and you're sharing it with the— When you—

here's the benefit.

You're drinking the light. You're drinking—

You are. Well, let's bring it— next time, listeners, you go buy— you buy a book on your Kindle on Amazon before you click it. All right. And Tom, what's your latest book?

No, we're not going there.

All right, I want people to buy Tom's latest book, but just go to Amazon, go to Thomas J. Powell and— or Dr. Thomas J. Powell— and buy an Amazon book. And what you're going to see is you're not buying a— you're not buying the book, you're buying a digital license. It literally says license.

Yeah.

Now what happens, that licensing money goes to the holding company, whoever the publisher is, and the publisher, the holding company Pays out the creator, the author, for the useful idea that's in the Constitution, the royalty. Now, what's powerful about that—

I do like those checks.

They're fantastic. Now, here's the beauty. Tom Wheelwright, an amazing person. If I make IP sexy and simple, he makes taxes sexier.

Well, by the way, on that line, Miss Kim Butler says hi. She just poked me and said, make sure and tell Tony hi.

There you go. I love Gil. Yeah, well, she got us connected. Well, Tom would say that all of the tax laws are incentives for entrepreneurship and free enterprise. And if you don't take my word for it, okay, go to a 1099 miscellaneous form and you'll see right above rents is the— is box number 2 for royalties. All right, now when you claim that royalty income, it has favored tax treatment. Why? Because you're an entrepreneur, you're not really good at passing many tests. You actually want to fail. The 7 tests of material participation. Why? Because your idea is so good, so potent, so powerful that it's not about you anymore. It is about being useful to the market. There you go. And so, for that, the government is going to give you a tax-advantaged income. Royalty income or passive income can be deducted against passive losses, which if you're an entrepreneur, you're going to have some passive losses through your real estate. So, you actually get tax-free money. See, this is the— back to Earl Nightingale, he would say— or this Napoleon Hill— W. Clement Stone, his name was one of the 3. He said, the universe is conspiring to support your success.

It is.

If you come from abundance, you will see that. If you come from scarcity and bureaucratic and not free enterprise, oh, it's hell on earth. But if you move into free enterprise and you see yourself as a founder, And that your property is—

yeah, you gotta go with another Napoleon Hill. So I, I don't say this very often, but there's another one called Outwitting the Devil.

Oh, that's the best one.

It is a great book. It is just—

Just reread it recently.

It's so great. So you know what? No. So my father-in-law passed away 2 weeks ago, right? He's a great guy and he's passing away and he's at our house in Tahoe. Uh, so the whole family could be there at different times and come and go. And this is a great guy, right? And he's also joking all the time. He's like, oh, you know, so I don't know, when I show up, I'm not sure I've got the password for the devil, uh, to get in. Uh, so, and then he also said, uh, we get the call from the mortuary afterwards and he'd filled out his paperwork and it said where it said, uh, race, he put human. Um, so, you know, that's kind of his personality. So I look at this and on my daughter, my other daughter's stand is, uh, Outwitting the Devil. And so I hand it to him. I said, maybe you need this as your guidebook as you get You know, get going on there as he's about ready to pass away. It's great. But that's actually not what it's about. What it is about is, is understanding the energy. And the world is conspiring if you want it to be, because it's written by Napoleon Hill, right? Think and Grow Rich. How do you get that energy? Because the devil does conspire against you being an entrepreneur.

Yes.

And our government certainly helps. They make it so complex in the rules and everything else. But when you get to the fundamentals of our, our very Constitution, right, Article 1 says right here, you own it. Yeah, that can't be argued. Amen.

Amen. Well, you know, another question.

We got another question. Dustin's still here.

Did we get it? Did we get Dustin's question answered? I don't know.

We got it fully answered. I'm going to let you go here for it, but I'm going to give you the second part of it so we can make sure and get it. How, how do we address enforcement of NEIP if you don't have the legal war chest to enforce it? Like Robert Kearns of the intermittent wiper system, which did basically broke suing all the automakers, losing his wife, kids, and life fighting it. Still lost it all. By the way, having fought the US government and spent $4 million out of my pocket plus another $10 million, and we're now at 10 years today. Yeah. To win is an uphill fight.

Right. No doubt about that.

So yeah.

I think it's fantastic. What's our, what's our, our questioner's first name?

Dustin.

Oh, Dustin, another. So this is Dustin's second question. Thank you, Dustin, too, for the question. So let me close valuation, and then, because here's what's happening, you're doing what most founders, entrepreneurs, individuals do, is they create something called Mount IP. And Mount IP can be very, very dangerous. This is why anybody who knows when you climb a mountain, which, Tom, you deal with mountains all the time, right? You go down them relatively fast as a skier. But, but the idea here is that your goal is not just to get to the top of Mount IP, but you want to get down safely. Because most people, when they climb a mountain, they don't die on the ascent, they die on the descent.

Yep.

This is why Tom's group is so important. You need to have an IP Sherpa. You need to have a team of people to help you go up the mountain of founding and entrepreneurship and safely back down so you can get home. The goal is not just to get to the top. You know when they die?

When founders die is when they sell, when they exit.

Yeah.

And they get a big amount of money and then that's That's a death knell. I mean, it's horrible. Yeah.

So, Dustin, back to the valuation question. I'll just close it out. So basically, if we bring it back to the $365,000 of underlying IP valuation from the $2 million coming in, your royalty rate for most businesses— okay, now when I say most, I'm talking in this case there's 45 different trademark classifications. The first 35 are for goods, physical things like pens, cans, iPhone cases, Then there's the other 10, and these are for service-based businesses. So I'm going to assume— I don't know what your business is, but forgive me for assuming. I don't want to make a you-know-what of me or you, but I want to just basically say when you get into the last 5, the services, okay, computer code, software, educational, entertainment, you're looking at about roughly a 20% licensing fee. So what is 20% of $365,000? It is $73,000. $73,000 is going to the licensing the, the light— the holding company for the licensing of the idea. From that, roughly half of the licensing fee, or 10% of the, of the gross revenue, okay, of the $365,000, should get paid out to the creator. What does that come down to? $36,500. Basically $10 a day for your idea or invention. That's what is— $100 a day, excuse me, for your idea. So when you— the goal is to start this idea of cash flowing it. If you— if that's the asset path you want to pursue.

Yeah.

Some founders don't want to do that structure and they just want to increase enterprise value because they're going to do a liquidity event. Either way, you want to make certain you package and protect that.

You can't— you can do both.

Oh yeah. How would you do both, Tom? How would you do both? Because you could—

you can give exclusive licensing rights. And so now the founder still held on to that because they did lend it. However, the exclusive— I mean, when the company gets bought, it gets those exclusive operating rights, but you still keep that cash flow. And if they want to buy you out, that's a separate check. It takes the negotiation differently. It's like you're selling the house and you've got the 1965, you know, beautiful Bronco inside there that the owner, the buyer really wants. And you're like, yeah, that's another $125,000 after you've negotiated the deal on the house. Right. So, by the way, yes.

I mean, I tried— I did try that on— remember the house that I put an offer on that had the VW van?

Yeah.

And I put in the offer. Like includes the van.

Yeah.

That is great. Well, and, and that's the thing for the founders. You don't wanna include that IP, just like the real estate you wanna segment. So you're, you're not only doing this from an, from an asset creation, but also an asset segmentation. And, and as Tom mentioned, your number one licensee is actually yourself to start, or your operating company. So I'll go to Dustin's question if I could. The, the other part, like, well, how do you listen? I, I first, brother, I hear it. And this is where everybody gets scarified and horrified instead of educated. So the biggest challenge you're gonna face when it comes to IP is IP ignorance. You don't know that you don't know, so you do nothing. Hear me, hear me, hear me. If you haven't turned your ears and eyes on it anytime on this show, listen. If you don't have an IP strategy for your business, I promise you, you will come into contact with an entrepreneur or with a bureaucrat, which is even worse, who has a strategy for your IP, and you're not going to like them, and you're going to call them mean names. Now, here's my experience. I know the horror stories in the movie. I will just tell you, I'm a little David. And I've been able to go against some of the biggest Goliaths. And thank God, thank God I had a slingshot called my trademark. I had a slingshot called my IP, and I was able to defend and protect and actually get a settlement from— I can't say the name because of the settlement, but you can figure out the world's, uh, the number one personal finance author of all time had a legal battle over IP. And guess what? Because I had the IP, I was able to countersue, get a settlement, and get a check, which was rightfully mine, and keep my IP. I had the second largest school district. I can't tell you the name, but you could research it on Google. They didn't intentionally infringe on one of my trademarks, but they did. I was able to get them to cease and desist. I'm a little David. They're the second largest school district in North America, and they stopped. I had one of the largest manufacturers of clothing apparel. They own brands like Supreme, Timberland, JanSport, They infringed on one of my trademarks, and I was able to get them to cease and desist and pay a settlement fee.

So, I'm going to give you one more. I'm going to give you one more before we go there because this one's famous and it's near to us. And I don't, I don't think Candace remembers, but it's Eric Spangenberg. Do you know? Do you know Spangenberg? Do you know him?

Me personally or Candace?

He's no you. No, tell me.

I want to add this to my story.

He's the well-known patent.

Monetizer. Okay.

Every time he came up with an idea, he got it out there, and then they'd let the product get to market, and then he'd come back and go like, no, that was mine. Hot Wheels, that track is mine. Billionaire.

Yeah. Yeah. Well, I drive a Ford, not a Ferrari.

And everything else. Yeah.

All the things. But, and the piece, and the reason why I do my IP again is, so when you, when you play IP, you want to play asset bingo. There again, there's 5 reasons 5 asset classes, but 5 asset capabilities. Again, protection, insurability. Most people go to IP for that one reason, and the mistake is that's your only reason. So what's happening is you're coming into IP from a scarcity mindset. Go back to the Constitution. Not once does it say protect or monopoly. It says to promote the progress. You want to come from an abundance mindset with your goal of every piece of IP you create, you actually want to license it out into the free market. And in exchange get a reasonable royalty, or, or in this case, enterprise value that's going to build the value of your enterprise so that if you do choose to exit it, you will be able to have a much higher valuation. And there's, you know, I think, uh, who was the group that just did it? Um, there's a whole, uh, if you go to, um, from PitchBook, Morningstar did a whole report going from IP to IPO And basically what happened in that is they were able to see the multiplier or the multiplier effect of having IP, uh, going versus going to, uh, just with just basically going naked without, without the patent. But there's so many ways to be able to do that. So just to give context, so what they found in their study that for venture-backed U.S. companies that had an exit between 2011 and 2022 Patent companies were about 23% went public through an IPO, while about 77% of them were acquired. Okay? Non-patent companies, only about only 4% went public, while 96% went acquired. Now here's the key: the average exit size for the profit pardon me for the patent-seeking companies was a 2.1 times larger. So in very simple terms, because I like to keep IP simple. Is a company with IP was roughly 6x more likely to exit through an IPO, and its exit was worth about 2x as much as the average. Now then, don't take my word for it. Go to Morningstar, look at PitchBook, From IP to IPO. You'll find that.

Now you gotta watch that because there's a, there's a number of, of, uh, uh, academic articles written with that same title. So make sure you get the right one. It's at Morningstar, right? So make sure.

Yeah. PitchBook. Yeah. Yeah. Don't, don't get, don't get confused by the academics.

Yeah, yeah, you definitely don't.

Forgive me, Doctor. Forgive me.

You definitely do not want to do that. Hey, we got one more question. We are over time, but that's how it always goes. Dustin's put in here, interesting, only a tiny fraction, roughly 5 to 10% of all issued patents hold true economic or commercial value. Less than 10% generate enough financial return to even cover the legal and maintenance fees required to keep them active. And that's an interesting perspective. I don't know what your thought on that is.

Yeah, so I can only speak from my truth. My, my truth and reality is I don't have any patents. Uh, so the reason why is Dan Sullivan said patents are the nuclear weapons of intellectual property, and he's right. They're expensive, they're powerful, but I'm an asset guy. I'm a long-term cash flow guy. I'm a capital gains guy. And what I mean by that is I want to be in an asset class that's not going to expire within 20 years. I'm not saying patents are not important. They are. They're essential. But if you actually are looking from a long-term haul, You actually want to look at 2 things that are so close you don't even see them as IP. Number one is domains. Yes, domains and trademarks. Trademarks are the only type of intellectual property that as long as you renew them, you will have them forever. Don't take my word for it.

Wait, wait, Angela, what was that?

Say it again. Say it again.

Because I just got smacked upside the head yesterday for all of my domains and they, they actually put me on restricted.

Angela, mute him.

Well, but it's true. So remember, going back to the same thing as property, So all property, when it's registered, you know, the reason why we call it real estate doesn't mean it's physical estate. It's a Spanish term for royal estate. It's, it's, it's property of the royalty, which is the government now. But the government wants you to be rich. God wants you to be rich. God wants you to be wealthy. And the reason why you have to pay the taxes, because they are going to enforce— they're giving you the, the, the capital right, right? The book Kim Butler got me hooked on is The Mystery of Capital, right? And, and that powerful book And it's these laws that allow these ideas. So back to Dustin's claim, you're 100% right. But Dustin, I promise you, you have a trademark in you, you have a copyright in you. If you want to sue for damages, copyrights are going to be more valuable than, than a patent from a damage. You have each type of the IP. There are 8 types of intellectual and intangible property, 4 types of intellectual property, but there's 8 total types of intangible property that we would put value around. I can't say enough about trademarks. Now listen, remember the 5 assets?

We're gonna— I'm gonna cut you off because we're just gonna have to—

Shucks, I missed the buzzer.

Little thing though, huh? All patents are IP, but not all IP is a patent. And I think that's where some of this crosswire is happening.

Yeah.

Uh, because when you're talking about specific patents, patents are IP, are, are One of the eight types. Yep, exactly.

Great clarification, Candace. You awesome. Thank you.

Hey, on Dustin, I just want to do a shout out to Dustin because he gave us a bunch of feedback today, and it's deeperbreath.ai. Deeperbreath.ai. I've never checked it out. I don't know Dustin at this point, but thank you for coming on.

Yeah, it sounds like a really good brand, Doc. I would say definitely if you're getting, I mean, get the AI, but if you can get the dot com on that and then maybe add the dot in front of it. By the way, and here's a value piece for listeners right out of the gate. If you don't have an IP strategy for your business, you're going to come into contact with an entrepreneur who does. So, before you file a trademark, be certain to get the domain. There are whole hedge funds that run IP front-running. They go to the— they wait till you file your trademark, they go buy your domain for $10 and sell it back to you for at least $5,000. Thousands.

Yeah. No, and they are out there.

They will save money just by doing that on this show.

We have had that twice now happen where we will mention an idea on a show like this We go try to get it. It was just immediately right before when we said it.

Well, listen, I would—

well, that sucks.

I would be remiss. I'm gonna give 2 domains that I want you to try and go grab. I want you to go to theipconversation.com, Dustin, or anybody. I love that. That'll give you a— or freeipaudit.com, and that will give you a calendar contact to me, and I will do an IP audit complimentary to any of your listeners.

We got that right here, Angela.

We're gonna pull it up.

Our engineer has got this. Actually, first thing is they're gonna pull up is our show. You and I had another show. together because we just don't get enough time on this scenario. By the way, Kim has also been a repeat. Kim's going to get— Kim Butler is going to get the green jacket like SNL coming on the show so many times. But you can get in that line there, Tony, as well. So this is how you find Tony on LinkedIn. You get your complimentary IP audit or IP conversation. Check those out. And of course, connect with him. It's great to follow him. And then our show that was done previously, Angela, you got that there too?

Yeah, on the Intellectual Capitalist Show, you were a very, very high fan favorite.

I gotta tell you, my, you know, I can't blame my mom or dad anymore because they passed away. So, you know, it's, it's, I don't know who's filling the bucket on that. Maybe it's my kids.

I own the IP, so actually you owe me. I leased my dad out. He's—

That is true. That is true. So this was the Intellectual Capitalist Show. We had a great time on that one. We talked about all sorts of, uh, goofy topics at that point.

Yeah.

And listen, I have to, listeners of this show, if you really want to get to know Tom, listen, you sharing the story, I can't, I keep picturing you in the breezeway reading Think and Grow Rich when you're 8 or 12 years old and how you literally are the embodiment of the American dream, Tom, is just such an inspiration. And I'm just so humbled to be in your presence and grateful for that. So, thank you.

Thank you. I have had the good fortune of living an unbelievably remarkable life and I continue to do so. And I'm very, very, very fortunate for that. Fortunate to have friends like you and people that are here in the space, and of course my family. And as we come into Constitution Day, I am so thankful to our founders for not just declaring independence, because that would've been a short-lived life, is that they actually then a decade later said, hey, how do we put this together? How do we set up some rules? And I will say this out there, as we move into more and more AI governance pieces, we've got a pretty good framework if we just go back to the founders and we look at it and say, okay, you know, we get— Power against power, we get separation of powers, we get ambition versus ambition, and we get a clear set of guidelines. We can allow people to have freedom and safety at the same time. So that's my pitch for tomorrow. Candace, WTF? You guys just—I—I was a guest.

I was just waiting for you to to dance mom yourself on this one. I was. Yeah, we have a very special guest. We had two. You got a double.

I did get it back to back. I was so good, they asked me back right away. It was so amazing.

Good. We're still— you and Kim both get green jackets for WTF.

Wow, Kim, you are in the race. All right, well, Tony, we'll have to have you back again. WTF, make sure and check that out. Make sure and check out The Intellectual Capitalist. Uh, Tony, it's a pleasure. You make constitutional law so much fun. Uh, and I appreciate it. It is sexy.

Sexy. Thank you, Tom. Thank you, Candace. And thank you, listeners.

Have a wonderful day, everybody. Enjoy the country's 2 birthday tomorrow. Uh, we're not quite 250. We're not adulting yet. So for 250 years, but enjoy it. Thanks, Tony. Take care. Be well.