Return on Your Investment: Securing Family and Business Assets
Key Takeaways:
- Many IP ownership issues can be minimized by setting clear ground rules or expectations right when the business begins.
- When
IP is involved, family-owned business clients should understand and
record their plans for future ownership, licensing and/or sale of
patents.
- Regular family meetings will help to uncover and
resolve emotional issues that can strain even the closest of families
and their business.
Many conflicts can erode family
relationships in a family-owned business - succession, ownership, estate
management, leadership, retirement, perceived fairness and more. But
one of the most unique and damaging can be the disagreement over
intellectual property. The title of this article - "Intellectual
Property and Succession Planning" -describes what would seem to be a
straightforward process. But those two word pairs can hide a maze of
misunderstanding, confusion and heartache.
Intellectual property
can mark a point at which the family, the business, entrepreneurialism,
patents and copyrights may overlap so much that no one clearly
recognizes boundaries, sensitivities or direction. Past and future
collide in a fight for the fuzzy present. I have seen it create havoc in
personal relationships, tear apart family bonds and destroy business
possibilities. It can devastate a loving family and its thriving
business.
Take a moment to read this true story. The names and situations were changed to protect the family.
Real-life case studyWhen
I became involved as a family business consultant, an uncle (Joe) and
his nephew (Bruce) were in the middle of a dreadful succession planning
ordeal. The typical business-family issues of ownership, estate and
leadership were compounded by a painful history and intellectual
property concerns.
The painful history began 30 years earlier
when Bruce was 10 years old. Both of Bruce's parents (Joe's brother
and sister-in-law) were killed in an airplane crash. At the time of the
tragedy, Joe had left the family's construction business and started one
of his own, eventually bringing in his two sons, Bruce's cousins. (I
know this is complicated, feel free to read that sentence again!).
With
both parents deceased, Uncle Joe invited 10-year-old Bruce into his
family. Everyone did their best to make Bruce feel welcome and part of
the family, as all three boys were about the same age.
Joe's two
sons attended college and returned to join their father's business.
Bruce also graduated from college and went his own way, working at
various marketing positions and exploring his interests. After several
years he moved back to his hometown.
During that time, tensions
rose between Joe and his two biological sons over their construction
company. Their working relationship had deteriorated over differences
about workload, roles, responsibilities and decision-making.
Uncle
Joe, an engineer, had also created an invention. He had consulted an
attorney and obtained patent protection for his idea. He could see the
potential source of revenue and did his best to protect his patent and
revenue stream, but had done very little else with his idea. It was
essentially only potential, although Joe had ideas and future plans for
this separate company.
Tensions grew within Joe's construction
company. His two talented sons finally said either he would leave the
family business or they would. Reluctantly, Uncle Joe left. He was
phased out of his own construction business.
Having come back
home, Bruce became interested in his Uncle Joe's patented invention and
began collaborating with him on it. Bruce conducted marketing surveys,
attended trade shows and determined that there was an opportunity for a
viable business selling the invention. Initially, Bruce and Uncle Joe
got along well, but as this separate business grew, Bruce wanted more
control. Bruce pressured his uncle for a succession plan that would give
him future controlling interest in the company and, in the meantime,
allow him to continue to make major leadership decisions.
Uncle
Joe was in his early 70s but balked at creating a succession plan. He
was not ready to retire. Bruce realized that if he grew the company, it
would be more expensive for him to buy it. Plus, Uncle Joe owned the
patent that was the basis of the company's success. This was the state
of the dreadful succession planning ordeal that I was brought in to fix.
Getting succession planning back on trackI
talked with Joe and his nephew, Bruce. I interviewed family members who
were engaged in but not part of their construction business. I came to
recognize that neither Uncle Joe nor Bruce were good communicators. Each
could not respect the other's perspective. Uncle Joe did not understand
Bruce's concern about the expense of buying the company and controlling
his own destiny. Bruce could not appreciate Uncle Joe's need for
security, protection of the patent and feeling relevant in the company.
Despite
the help of their professional advisor and their own best efforts,
Uncle Joe and Bruce were deadlocked. No formal agreements existed
between them. Unfortunately, this is not unusual in many family
businesses. Written agreements and a formal structure are commonly
ignored by relatives who are in business together "because we love each
other." In fact, formalities such as this may be viewed with mistrust.
Merely bringing them up can trigger hurt feelings.
Unresolved
emotional issues added to the complexity between Uncle Joe and his
nephew, Bruce, as they tried to resolve patent and succession issues.
Bruce had never expressed his own hurt feelings over how his parents'
property and family heirlooms were dispersed at the time of their death;
he was 10 and Uncle Joe and his family never consulted him about their
"family treasures."
Uncle Joe, on the other hand, felt
unappreciated for taking Bruce into his family. The hurts were deep and
unspoken on both sides.
SolutionTo begin the
healing, I suggested an intervention I call a Family Forgiveness
Ritual©. The entire family participated, including Uncle Joe and his
wife, his adult children and their spouses, and Bruce and his spouse.
The emotional relief for the family was spectacular. The entire family
joined together to create a new beginning. The Family Forgiveness
Ritual© opened the emotional door and established an openness and
positive foundation for productive business discussions.
Working
together with love and respect for each other, the family resolved their
business issues - regarding ownership, leadership and the patent. But
it took time and many meetings. Uncle Joe eventually sold his share of
the business to Bruce. Uncle Joe retains patent ownership until his
death, and then the patent transfers to Bruce.
The family learned the hard lessons:
- Many, if not most, technical issues can be minimized by setting clear ground rules or expectations when the business is begun.
- Understand and record the plan for future ownership or potential licensing and/or future sale of a patent.
- Conduct
regular family meetings to uncover, discuss and relieve emotional
issues that can provoke the best of families and their business.
In
these areas and more, professional advisors can offer guidance and
leadership to help a business family avoid the maze of intellectual
property that is often emotionally charged as well as technically
complex.
ConclusionIntellectual property law firms and professional services can help you:
- Determine the patentability of an invention
- Prepare, file and prosecute patent applications in the U.S. and internationally
- Investigate, defend and prosecute claims of infringement
- Enforce patent rights through litigation or alternative dispute resolution (ADR)
- License, police and manage patent portfolios
- Oversee the acquisition and sale of patented technology
