London, 14 June 2007 - Despite a growing awareness of the importance of Intellectual Property (IP) assets to the future success of their companies, over half the technology executives questioned for a recent PricewaterhouseCoopers report don’t believe that they are currently extracting the full value of their IP. When asked about the importance of IP for their companies in the next 3-5 years, a staggering 85% said that it would increase in importance for their organisations.
PricewaterhouseCoopers, “Technology Executive Connections: Exploiting intellectual property in a complex world”, looks at the challenges that technology companies are facing at a time when innovation and discovery is moving at breakneck speed and the identification and exploitation of their IP assets will determine their future success.
Despite an overwhelming view of the importance of IP, over two-thirds (69%) of executives believe their IP management is too often treated as a legal issue (a view particularly prevalent among North American and Asian respondents). Others view this approach as out-of-date and an approach which won’t work in today’s technology markets. Forty-seven per cent of the executives also suggested that a large majority of the lawsuits were spurious and intended to harass the competition.
On top of this 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 separate IP management specialist units. One area also 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 probably account for more than half of market value for the average company listed worldwide.
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. One of the first steps to protecting their IP is often to plug licensing revenue leakage. One of the means for companies to manage risk and enhance revenue leakage is to conduct a royalty examination, a forensic investigation to verify royalty yields and highlight any misreporting.
Melanie Butler, European Licensing Management Leader, PricewaterhouseCoopers 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.”
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, 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.
So what can technology companies and executives do to protect and maximise their IP assets in the future?
- 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 e.g. ensuring 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 e.g. central inventories of IP which can be marketed to others, resulting in significant incremental income streams.
- Ask themselves whether they are moving as quickly as they can in adapting their IP strategy to meet the requirements of this fast-moving industry sector.
Added Butler:
“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.”
Notes to Editor:
- For more information on PricewaterhouseCoopers Technology Industry practice or to download a copy of the white paper visit www.pwc.com/techconnect.
This report is the result of a global online survey of 195 executives in March 2007, supplemented with over 30 in–depth executive interviews, conducted by the Economic Intelligence Unit and PricewaterhouseCoopers LLP.
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