Here's how leading firms strategically organize their patents, copyrights, know-how, and other intangibles so as to extract value well beyond that created by utilizing the technology in their own products and services
A fundamental change is taking place in the way executives look at extracting value from their patent portfolios. Gone are the days when firms used patents mainly to protect their freedom to operate. Today, the patent portfolio is a growth engine. Intellectual asset managers have taken on the role of profit center, complete with revenue targets and profit/loss responsibility. As the chief technology officer of a major firm explained, "My CEO got the message; IBM earns over $1 billion a year out-licensing technology."
This is a radical change. Patents are actively managed as corporate assets, both as "carrots" that generate licensing revenue from willing licensees and as "sticks" that extract royalties from infringing competitors. The purpose of this article is to provide senior technology executives with recommendations on planning and implementing a licensing program for revenue generation. Our goal is not to define "best practices" because a set of practices that works well in one firm may not work in another. Rather, we will describe a set of "current good practices" that seem to work well in a lot of firms. These firms have transformed their intellectual asset (IA) portfolio into value well beyond the value created by utilizing that technology in the firm's products and services.
To understand how firms successfully extract value from their IA portfolio, discussions and interviews were conducted with more than 70 representatives of Industrial Research Institute member companies. Participants represented a cross section of industry sectors, including consumer products, life sciences, oil & gas, chemicals, pulp & paper, control systems, defense/aerospace, computer hardware and software, and electronics. Each was selected because its organization has extensive experience in licensing and technology commercialization.
The results of this study fall into two general areas: 1) how to strategically organize assets, and 2) specific methods for extracting value. We have split the discussion of these two general areas into two articles; this first one deals with strategic alignment and asset management.
Defining Intellectual Assets
Intellectual assets are intangible and fundamentally different from tangible assets such as capital equipment, buildings and financial resources. IA consist of patents, copyrights, trademarks, domain names, and trade secrets, as well as know-how and the related processes and protocols associated with production and delivery of goods and services. As shown in Figure 1, IA fall into two broad categories: the legally protected assets, such as patents, and the assets like know-how that are closely held in the minds of individuals and groups. When know-how-based assets are codified or reduced to paper, they can be legally protected (trade secrets), but most know-how resides in the special knowledge of individuals. While IA are some of a firm's most valuable assets, their creation, management, husbanding, and use are often not well understood by the many people who rely on them to create value.
[FIGURE 1 OMITTED]
Alignment Creates Value
The primary value of 1A flows from their impact on strategy. As a general rule, corporate strategies drive individual organizational strategies, which involve such key issues as:
* Competencies of the business unit.
* Needs of the market.
* Required infrastructure.
* Financial and human capital.
* Required technologies
* Competitive environment.
* Execution risks.
The technology roadmap is an important component of the business plan. It delineates the technology state-of the-art and its future direction. …