IP is the Currency of Tomorrow for Tech Firms

Over half of all technology companies don't extract the full value from their intellectual property (IP), according to a new survey by PricewaterhouseCoopers, released today. This is despite a staggering 85 percent of technology executives saying that IP would increase in importance for their organisations over the next 3-5 years.

PricewaterhouseCoopers report 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 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 Others view this approach as out-of-date and an approach which won't work in today's technology markets.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 percent of the executives also suggested that a large majority of IP-related lawsuits were spurious and intended simply 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 specialist IP management 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 often 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 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.

Melanie Butler, European Licensing Management Leader, PricewaterhouseCoopers said "Over the last five years, we've performed more than 1,000 royalty examinations. In 90 percent 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.

In order to protect and maximise their IP assets in the future, 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.

Melanie Butler added "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."

Posted to the site on 18th June 2007