EPS 53- Taking Inventory of Your IP

Erin Austin: Hello, ladies. Welcome to this week's Hourly to Exit podcast. Oh, sorry, I'm on the wrong one. Had the wrong script. All right, here we go. Hello, ladies. Welcome to this solo episode of the Hourly to Exit Podcast, where I ask and answer, does your expertise based business have inventory? Per Investopedia inventory refers to a company's goods or products that are ready to sell, along with the raw materials that are used to produce them.

Erin Austin: Inventory can be categorized in three different ways. Raw materials work in progress and finished goods. So now let's look at the typical stages of development for an expertise-based business. Most of us start by providing one-on-one services in our chosen field, which is usually the area of our prior employment.

Erin Austin: Many of us are ex-corporate, so maybe you're marketing or finance it or legal. So during this initial stage, we develop our expertise through. Obviously our firsthand experience that we brought from us from employment. From that, we may have some original ideas about the way things could be done better.

Erin Austin: Maybe that was the impetus behind going out on our own. As we get clients, the type of work that they request from us will learn something new with every client engagement that will add their expertise. Many of us will get certifications or additional training, and depending on your field, you also may need to do continuing education.

Erin Austin: We may do research, either primary or secondary when we find holes in our knowledge or we need something to support, um, one of our theories. And occasionally we will need to use a subcontractor who has an area of expertise that we don't have. And so those subcontractor de uh, deliverables will also be something that feeds our expertise.

Erin Austin: Now, what I would call these, Elements during the initial stage of developing our expertise based business. I call them raw materials. They're all the pieces, the nuts and the bolts and the screws and the things that we bring together, um, that will form our expertise. Now as our expertise matures, we will develop internal resources so that we can predictably and efficiently deliver the results that our clients value.

Erin Austin: At this point, we've been servicing our clients we're we figured out what they want and how the best way to deliver it to them. And so at this point we start creating some infrastructure. To deliver those one-on-one services more predictively and efficiently, and therefore more profitably, of course. So those include systems and processes and SOPs, templates, frameworks, and methodologies.

Erin Austin: And I'm even gonna put employees and contractors in this category, even though it's a little bit kind of to the left, but basically, I call these the works, the work in progress stage where we have taken all the raw materials from that initial kind of building our expertise stage, we've figured out, um, the best way to serve our clients, and now we're starting to put the.

Erin Austin: Scaffolding in place for to serve them. And, uh, and then I add the, uh, employees and contractors in there because they are the extension of building these structures that helps you, uh, serve your one-on-one clients, um, when you have these kinds of systems in place and frameworks in place and templates so that they can also serve your clients, uh, and provide those same results.

Erin Austin: So that's the work in progress stage. Now, eventually we hit a revenue ceiling or an impact ceiling because there's only so many, uh, clients we can serve on a one-on-one basis. And so we start looking for ways to increase our revenue or increase our impact without just putting in more hours. So we know what that means.

Erin Austin: We need to, uh, figure out a way to decouple our income or to decouple our in. Packed from ours. And so we start looking for resources that tell us how to scale, how to add leverage to our business. And probably you, you know, we are either hiring a business coach or we are following a business coach. You know, we're listening to their podcast, we're reading their books.

Erin Austin: Um, but in any case, however you engage the same. Uh, advice is that you need to turn your expertise into intellectual property so you can create new scalable revenue streams. So these are things like group, uh, programs and courses and books, maybe even software. I do put productized services in this one.

Erin Austin: Templates that are now being sold as opposed to use internally. And, uh, licensing when you have any of these things above that third parties wanna use as well. So these I call finished products cuz they are the things that you are literally selling that is not your time, but they are things that are separate from you that you'll be selling.

Erin Austin: So those are your finished products. So we have raw materials. We have work in progress and we have finished goods, and these occur throughout the development of our expertise-based business. And what is each and every one of them? Intellectual property. So just because you don't have a stockroom filled with shelves of physical materials, that doesn't mean that you don't have inventory.

Erin Austin: You do have inventory. Now, of course, this is not the, the, uh, accounting definition of inventory. You know, this is not the cost of good solds. It's gonna go onto your financial statements. But the common sense, uh, notion of inventory, where you have the. Inputs, the raw materials, the, the, the structures that you put in place to help, uh, prepare yourself to create those finished goods.

Erin Austin: And so you need to take the same care with your inventory that a car manufacturer does with its parts or that a retail store takes with its merchandise. So with your intellectual property inventory, you need to be thinking about the creation, the development. Protection and of course the monetization of your IP inventory.

Erin Austin: And so now we're gonna just go back over those stages of inventory and uh, and talk about the best way to manage it. In the context of intellectual property and these stages apply whether that IP is owned by you or licensed to you. So first, raw materials. So at this stage of development, it is most mostly about making sure that you are using and understanding contracts cuz it's contracts that govern the creation ownership.

Erin Austin: Assignment and licensing of rights. With respect to copyrights. So at the raw material stage, it's all about the contracts, um, with the exception of your original ideas. So when you have original idea, first we're making sure that we are creating copyrightable materials by putting them in tangible form.

Erin Austin: Of course, they have to be original and have some element of creativity, although that's a. Fairly low bar. Um, and so when you are putting your ideas, expressing them in tangible form, their original ideas, you are immediately creating, uh, copyright ownership in that, uh, element that you create in that material that you create.

Erin Austin: And it does not require registration. We'll talk about registration later, but at the raw material stage, um, it is just important to make sure that you are putting your original ideas into tangible form. Then the client work. So here, making sure that, uh, you know, I'm sure your clients are gonna request agreements, so now it's important for you to make sure you understand those agreements that you're reading them and that you understand.

Erin Austin: Who owns the deliverables. Now, sometimes you're creating something completely original for a client. You know, maybe you're doing something very creative, like, uh, creating a new logo for them. But if you're doing something that is based on your original ideas, they're coming to you because you know how to, you know, um, uh, you know, train, uh, Uh, workplaces for, to have a better culture.

Erin Austin: So you have your own ideas around that. You wanna make sure that those client agreements reflect the fact that some of those deliverables are your original materials and that you will retain ownership in them. Uh, when we are going out and getting certifications or trainings or continuing, uh, education.

Erin Austin: That is a circumstance of you borrowing or being licensed the right to use someone else's intellectual property. Here it's important. Again, it's a contract. A license is a contract. We need to understand the limits of your rights to use those materials. You know, typically you will have the right to use, you know, anything you get in a certification program or training program, you can use them in connection Pro.

Erin Austin: And providing one-on-one services to your clients. But what you can't do typically is sublicense those materials to somebody else. You can't create a training program that you're selling to somebody else using the materials that you got from a training program or certification program, right? So we need to make sure that we understand the limits of our licenses, and that is about understanding the contract.

Erin Austin: When we're doing research, you know, whether you're using AI or you're using other sources, um, make sure that you are tracking the third mar third party materials that are being incorporated into your work. Uh, you can incorporate, um, things so long as you are tracking them. Sorry, let's start back with research.

Erin Austin: Research, you know, whether you're using AI or other sources, make sure that you are tracking the third party materials that you are incorporating into your work. Now here, if you are using AI or if you are using other sources, you need to make sure that, um, you are. Uh, not infringing anyone's rights. AI in particular.

Erin Austin: I mean, I'll, I'll confess that chat. G B T is the one that I'm familiar with. They don't provide attribution for what they provide to you, so you will need to use other sources like Grammarly to make sure that you aren't infringing anyone's rights if you are, um, using research, depending on how you're using it, um, if you're not transforming it anyway, if you're just, maybe you're taking someone's.

Erin Austin: Um, pie charts or someone's, you know, survey results and you're incorporating them into your work. Um, if this is something that you're, are going to be, um, selling, uh, you should have permission to do that. Uh, so that's important to know there. And then your subcontractor. Deliverables always, always did I say, always use a written agreement with subcontractors.

Erin Austin: That is the only way to ensure that you own the deliverables. In the absence of a written contract, the subcontractor, the human being who created the deliverables, owns the copyrights in it. So you need to have that written agreement so that you own those deliverables. And the other thing that you get with your written agreement is that you can make sure you put in there a requirement or a warranty, that those deliverables are original.

Erin Austin: You don't want your subcontractor delivering, you know, some ai. Crapola, right? So you wanna make sure that you have clarification about the nature of those deliverables so you can depend upon them. And if your subcontractor is using their own preexisting materials, again, like they have some area of expertise that you don't have, and so they're using, um, some, you know, their own foundational materials to help you then.

Erin Austin: They, of course, are going to want to reserve rights in that preexisting material, but you need to make sure that the rights that you do get the license that you get to use your preexisting material is sufficient for your purposes. Let's say you do need to use it with your clients, then you will need a right to sublicense it, um, to your clients.

Erin Austin: Or maybe you need to use it more than once, whatever it may be. You need to make sure that you have the rights that you need. In the deliverables from your subcontractors if you're not going to own them outright. All right, so that was the, uh, raw material stage. Now, the work in progress stage that is really pretty much about positioning.

Erin Austin: So it's less about, um, contracts, but more about how you are becoming the go-to person in your space. So you, you've, you've. Figured out like the way that your clients like to be served, what the best results are, the best way to create those results. And you're building that infrastructure, the systems, the SOPs, the templates, the frameworks, methodologies.

Erin Austin: And so at this point you are working, focusing on getting those nailed, right? So. You can, I mean, there are some circumstances where you can copyright a system, a process, or a method. Generally you cannot, because the system itself is kind of an idea. It's, remember, it's the expression in tangible form that, um, can be, uh, protected with copyright.

Erin Austin: So, but, but. That's not really what's the most important. My opinion is not the most important thing that's happening here. The most important thing that's happening here is making sure that you are known as the authority, um, in the space. So I like to use the analogy of the cook and the chef, the work in progress state.

Erin Austin: Stage when you're working on your positioning, think of your systems or your SOPs or your templates and things as the recipe. And we're not worried about being the cook. You know, I, you know, I can't, couldn't do a thing with any of anyone's recipes, frankly. But you need to worry about being the chef and given them Michelin star service and that is that work in progress.

Erin Austin: Um, state is. Building those systems. Um, even if they can't be copyright, they're very valuable In enhancing your brand and your positioning, you become the authority with respect to the outcome that your framework provides, and there is potential to, to protect it with trademarks. Um, if you heard me talk about copyright versus trademarks before, you know my.

Erin Austin: My gross bias is toward copyrights that when you are in the, when you have corporate clients, like your corporate clients, don't care what your trademark is, frankly. Um, so as long as they get the outcome that they receive, you can call it anything you want. Um, if you fall in love with the name, then you fall in love with the name and, and trademark lawyers will certainly tell you if you have a name that you would.

Erin Austin: You know, it would kill you to lose then, you know, go for your trademarks. But when we're talking about like where to put our focus, um, it is in making sure we become the authority in, uh, the, the outcome that your framework provides. So that is the work in progress stage where we're, it's all about positioning.

Erin Austin: Finally the finished product stage. Here we are squarely in copyright registration territory. Um, when you have an asset that is going to be a direct revenue driver, meaning something that you are selling directly to the end user, it makes sense to register it in the copyright office. So just a reminder that your copyrights attached.

Erin Austin: As soon as you created them, you put them in tangible form. But registration is required if you want to enforce your copyrights against an infringer in court. So to use courts, um, to, for compensation and to, um, uh, enforce your rights against infringers. You, it does need to be registered. And if it is registered in a timely basis, then there are also statutory damages that are available to you.

Erin Austin: So there are, uh, a number of business reasons in order. To, to encourage registration for those things that are revenue drivers. So again, the finished products, you know, your group trainings and programs, courses, books, et cetera, and productized services, uh, probably cannot be registered. Um, but maybe some of the underlying materials can, um, templates and then licensing, you know, You've put together a whole program, you know, around your framework that includes, you know, workshop materials, scripts and worksheets and things like that, and those things that are being licensed to your licensees.

Erin Austin: You would certainly want to have those registered. So in some you have inventory and the form that it takes is intellectual property, and you have that. At every stage of your expertise-based business, um, it's not all about registration, as I just mentioned. It starts at the beginning when you're starting to develop your expertise that you're, um, making sure that you're putting your original ideas, intangible thought.

Erin Austin: Form so the copyright attaches. At that time, you are making sure that you are using contracts with your subcontractors. Always you are reading any agreement that the client puts in front of you to make sure that there are no restrictions on your um, Uh, yeah, you're not giving them a, giving them your expertise.

Erin Austin: Um, and I forgot, you know, I'm just gonna throw this in, uh, and you've heard me talk about it before, is making sure that there's not non-compete provisions in there or anything that restricts your ability to develop your expertise by working with other clients on similar matters. You, you really wanna make sure that you are reading those cuz that you know, Those, those are niche killers and frankly, they're expertise killers.

Erin Austin: Um, and then, you know, the, the same as with any company that has inventory retailers or car manufacturers. You need to make sure you're tracking it and then you, you know what you own and what you control, whether it is something that is original to you, something that is. Created by a subcontractor and assigned to you through contract or something that you are licensing from a third party through a certification program or, uh, through research and that you are tracking your rights in your intellectual property inventory, cuz that is the only way that you can protect it.

Erin Austin: So I have created a visual summary of today's episode. Um, so you can find a link to that in the show notes just to help you kind of wrap your head around it, um, because there is a, a lot, uh, uh, I've talked about a lot here. So of course, as always, you can find me at thinkbeyondip.com if you have any questions.

Erin Austin: Thanks.