Forty-seven percent of the 195 technology executives taking part
in the survey also suggested that a large majority of IP-related
lawsuits were spurious and intended simply to harass the
competition. The figure was significantly higher among North
American respondents, at 63%.
The 76-page report, Technology Executive Connections: Exploiting
intellectual property in a complex world, looks at the challenges
faced by technology companies, based on research by PwC and the
Economic Intelligence Unit.
The view that IP management is too often treated as a legal
issue was particularly prevalent among North American and Asian
respondents, according to PwC.
An executive from an unidentified European telco told PwC that
his company gathers patents as a means of creating "currency" that
can be traded with other technology companies in a series of
cross-licensing agreements. One goal, he said, "is to reduce the
cost of licensing someone else's technologies. If you have enough
currency in the form of patents, you can strike a better deal."
But another goal of a broad portfolio is to create a line of
defence. An executive at a US tech company told PwC: "It's good to
have a broad portfolio, even if it's not something that you
yourself are commercialising in your own products." While the
executive insisted that his own company is not litigious, he added,
"let's just say that if you have your competitors' products
covered, they're a lot less likely to come after you."
Consequently, he said, "we do a tremendous amount of strategic
patent mapping."
Others said that characterising IP management as a legal issue
is an out-of-date approach that will not work in today’s technology
markets.
On top of the growing concern around the management of IP, there
is still a lack of clarity as to where the responsibility for IP
sits within an organisation. In 38% of companies, responsibility
sits with C-suite executives and only 21% currently have dedicated
specialist IP management units, according to PwC.
An area destined for change is the reporting strategy for IP. As
demands for transparency around corporate reporting increase, 35%
of executives said that they will add IP-related information to
their reporting within the next 3-5 years (currently 16% provide
supplementary reporting to financial data). Historically, company
valuations were determined by capital assets, such as plant and
equipment but today intangibles often account for more than half of
market value for the average company listed worldwide.
Eighty-five percent of technology executives say that IP will
increase in importance for their organisations over the next 3-5
years.
As companies pursue convergence-driven growth, 45% are
forecasting an increasing reliance on partnerships though 31%
doubted that their agreements with partners adequately accounted
for and protected their IP. PwC suggests that one of the first
steps to protecting their IP is often to plug licensing revenue
leakage. One of the ways companies can manage risk and reduce
revenue leakage is to conduct a royalty examination, a forensic
investigation to verify royalty yields and highlight any
misreporting, it says.
Melanie Butler, PwC's European Licensing Management Leader,
said: “Over the last five years, we’ve performed more than 1,000
royalty examinations. In 90% of those examinations we have
identified misreported royalties."
“As well as performing royalty examinations and reviewing their
IP arrangements with partners, companies also need to create
tighter links between their own research, technology acquisition
and business objectives in order to maximise and exploit all IP
revenues,” she said.
The report quotes an executive from Siemens who explained
why the company is linking R&D with business
objectives.
"So many companies are prolific in patenting, but we ask
ourselves, what is the value of that?," he asked. "To obtain a
multi-jurisdictional international patent – the cost of that could
exceed €200,000. Patenting something just to hold a patent?"
Instead, Siemens is "actively exploring and debating the
relationship between R&D, protected IP and the goals and
objectives of business units."
"We can't patent everything," said the unnamed executive. "So
what we are doing is trying to evaluate the value of each potential
patent. How unique is it? How advanced is it? What can be done with
it?"
At a time when significant amounts of IP are being created in
emerging markets (43% of respondents confirmed this), protection of
IP in some of these territories is perceived as inadequate.
Respondents also expect the frequency and degree of worldwide
patent infringement to increase considerably and not just in
emerging markets. However, PwC believes the tide will turn as
countries in Latin America, Eastern Europe and Asia begin to
acquire their own portfolios of legitimate IP and therefore
increase the need to protect all IP.
In order to protect and maximise their IP assets in the future,
PwC says technology companies need to:
- Create closer links between business units and research &
development (R&D) activities which will lead to a more accurate
valuation of existing IP assets as well as a tighter alignment of
research with the needs of customers and markets;
- Revisit their processes for determining which, when and where
and how they will protect their technologies;
- Review their approach to emerging markets. For example, ensure
that licensees are paying their fair share and review whether they
need to increase their compliance activities;
- Treat IP as a portfolio. Business units, IP professionals and
R&D should collaboratively and continually review the portfolio
to look for emerging opportunities and prepare for potential
litigation from competitors;
- Do more with their portfolios of protected technology. For
example, create central inventories of IP which can be marketed to
others, resulting in significant incremental income streams;
and
- Assess whether they are moving as quickly as they can in
adapting their IP strategy to meet the requirements of this
fast-moving industry sector.
Butler concluded: "Companies have little choice but to develop a
fully fledged IP strategy in order to stay competitive. IP is the
currency of tomorrow for technology companies."
