Comprehensive intellectual capital management step by step phần 6 pps

The IP Audit and Portfolio Creation—Not a Legal IP Audit IP legal audits have been used for decades by organizations for a multitude of reasons, for exam- ple, due diligence, to check legal compliance, to discard unused IP, and as a form of stock taking for mergers and acquisitions. The difference of an IP audit performed for business, rather than legal, purposes is that the audit (or stock taking) is performed to assess the commercial value and competitive use of the IP by respective businesses. Another difference is that while an IP audit for legal purposes lists all forms of IP owned by an organization, a business-oriented IP audit collects information about the primary form of IP and is therefore patent, trademark, or copyright spe- cific. A legal audit lists all forms of IP and considers their legal status (e.g., expiration, licensed or not, registration and maintenance dates and fees, etc.). A business-oriented audit focuses on how the primary IP form is being used in relation to products, services, market segments, its con- nection to sales, whether used in a strategic alliance, and its expected (business) life cycle. We deal here with the business IP audit only. The audit is the preparatory step to creating the IP portfolio. It should reveal the potential uses of the IP for strategic purposes, whether to generate revenue or to strengthen a competitive posi- tion. To do that, information should be gathered from the various businesses regarding the use of IP in business, its current and planned use, and possible commercialization opportunities as well as threats from IP owned by others that may undermine its value. This data should then be used by the auditing group to create a portfolio that presents a bird’s-eye view of the strengths, weak- nesses, opportunities, and threats associated with the primary form of IP. In cases in which the organization competes through using more than one form of IP (e.g., some software and con- sumer products organization that focus on both patents and copyrights), a shadow portfolio should be created for the other primary IP forms, again with reference to their use in business. Chapter 13 provides guidance as to undertaking the audit and creating a patent, trademark (brand), or copyright portfolio. It should be mentioned here, however, that every portfolio, regardless of the primary form of IP, should include reference to trade secrets, that is, know-how related to the various IP in the portfolio. An IP portfolio provides insight in two major ways that are crucial for any IPM program under the CICM approach. First, they reveal the strengths and weaknesses of the current IP base of an organization, and hence provide a sketch of the organization’s competitive prowess. Second, they provide a preliminary assessment of the opportunities and threats that the IP portfolio poses for business management and growth. These two purposes should be kept in mind in creating the IP portfolio, and well before that, in designing the audit exercise. To that effect, the audit questions should uncover the current and expected uses that IP is being put to by the various businesses. This provides a preliminary assessment of its value for business and guides future plans. Dow Chemical followed this methodology in its audit of its 29,000 patents. The auditing team required every business to classify the patents they have under three groups: most valuable patents related to high growth business, patents that had no current or planned use but are still of value to others, and patents that are unlikely to be used. The first group was left for the business unit competitive purposes, the second group offered for licensing, and the last either donated or abandoned. The purpose of these and similar classifications is to facilitate IP portfolio management. In general, there are a number of guiding rules for portfolio management: • Leveraging strong IP • Combining weak IP with strong ones • Divesting low-performing IP, or donating it for nonprofit organizations to claim tax deductions 20 144 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT The same rules apply to managing any IP portfolio regardless of the form of the primary IP. Proc- ter & Gamble’s (P&G) trademark/brand portfolio can be used for illustration. Following an audit of its brands, P&G leveraged strong brands like Crest and Tide by introducing a number of brand extensions, combined weak brands with strong ones (e.g., White Cloud and Charmin), and sold low-performing brands (e.g., Lava Soap). In addition to the general rules of portfolio management, there are a number of IP strategies that an organization can devise to utilize IP for competitive positioning and commercialization purposes. IP Strategies Defining the Focus of IPM Armed with the knowledge gleaned from the IP portfolio, top management should then formu- late the IP strategies to strengthen the organization’s IP portfolio in a way that enhances its com- petitive position and revenue-generation ability. Though there is some literature on the use of patent and branding strategies, there is no work that discusses the use of IP strategies for the dis- tinct purposes of competitive positioning and commercialization. Most of the literature on patent strategies focuses on whether to patent or trade secret and the countries in which to patent. Despite a number of recent books on the use of IP (meaning patents) strategies 21 for competitive purposes, only slight mention was made of trademark strategies and none of copyright strategies. It is important for IP strategies to distinguish between the uses of IP for competitive as opposed to commercialization purposes, since the two are based on conflicting contentions. For competi- tive purposes, IP is used to gain entry into a market and prevent competition from securing a stronghold in a particular market segment, where exclusivity of use is the main enabler. Manag- ing IP for commercialization purposes, however, aims at offering it for use by others as widely as possible to generate revenue, hence the importance of providing guidance from the top on when and how to use IP for the conflicting purposes, and which purpose should be the strategic focus of the business unit and why. The CICM model incorporates the two types of IP strategies, referred to as competitive and commercialization IP strategies. The main goal of IP competitive strategies is to block competi- tion from undermining the organization’s competitive position, and from gaining a strong com- petitive position themselves, as well as to deactivate the competition’s IP-related competitive tactics. They are also used to carve new competitive positions where the organization can set new market standards, and thus mark out the rules of the game. While competitive strategies look at IP as a competitive weapon, commercialization strategies look at it as a business asset, and hence aim at investing in it to use it for revenue generation. How to cultivate and exploit IP as a busi- ness asset is the concern of IP commercialization strategies. It should be mentioned that although licensing is used as a tactical tool under competitive strategies (i.e., to create a specific effect), it is used more as a strategic tool under commercialization strategies, as will be explained below. IP strategies, whether competitive or commercialization, mean different things to different organizations, depending on the primary form of IP and the respective industry. Patenting strate- gies are intrinsically different from trademark/branding strategies, and both are different from copyright strategies. While patent strategies focus on technological wars, brand strategies focus on winning consumers through making promises, and copyright strategies focus on capitalizing on popularity of authored works. The same goes for commercialization strategies. Though all commercialization strategies are based on level of resource invested in pursing deals and oppor- tunities, they are operationalized differently, depending on the primary form of IP. That being said, I developed two blueprints that are used as the basis for competitive and commercialization strategies related to the primary IP form—be it patent, trademark, or copyright. THE INTELLECTUAL PROPERTY MANAGEMENT STAGE 145 A BLUEPRINT FOR COMPETITIVE IP STRATEGIES—OF WAR Competitive strategies comprise the following: • “Design around” strategies create a number of IP rights around a major IP of the com- petition, in order to weaken the competition’s ability to use the IP as a competitive weapon. Also used to strengthen the organization’s bargaining power in cross-licensing or other IP-based transactions. • “Build a fortress” strategies acquire a number of IP rights around one’s own IP to create a strong competitive position and build a fortress that is hard for the competition to pen- etrate, hence preempting the competition’s use of “design around” strategies. These strategies always involve the aggressive use of litigation to deter competition from com- ing close to the “fortress.” • “Mapping” strategies map all IP activity in a certain market segment or field to map a road for developing new IP in a new area to secure market leadership. These strategies involve heavy reliance on competitive intelligence and overlap to a certain extent with the organization’s innovation strategies. As shown in Exhibit 8.1, while “design around” and “build a fortress” strategies are used in heav- ily protected areas and market segments, “mapping” strategies are used to find undiscovered ter- ritories where market leadership can be established. Below is a detailed account of how this blueprint can be used with patenting, branding, and copyright strategies. In addition, there is a competitive strategy that applies to all forms of IP: • “Value Transference” strategies are used to augment the competitive position or market share of the primary form of IP through the use of secondary forms of IP. This strategy 146 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT EXHIBIT 8.1 Blueprint of IP Competitive Strategies B A A A A A A A A A A A A A A A A A A A A A A A – Organization B–Competition IP of others Design Around Mapping Build a Fortress leverages the competitive power of the various forms where value of the primary form is transferred to another secondary form to lengthen the business life cycle of the product. Patent Strategies—Of Technological Wars If patents are the “smart bombs” of tomorrow’s business wars, then companies that fail to develop offensive and defensive strategies for their use will do so only at their peril. —Kevin Rivette and David Kline 22 Technological wars turned organizational patenting into a frenzy, with the most successful filing up to 5,000 patent applications 23 and receiving over 3,000 a year. 24 In 2001, the U.S. Patent and Trademark Office (USPTO) received a record 344,717 patent applications, a 21.4 percent increase over applications filed in 2000. 25 A war it is, where patents are the most powerful com- petitive weapons. “What to patent” forms the core of the organization’s competitive strategy since it determines not only the areas in which the organization competes, but “how.” In the “how” lies the key to using patenting as a war strategy by deciding whether to design around, to build a fortress, or to map a technological road. Under “design around” strategies, patents are used to barricade the technological field covered by another. The key to these strategies is to spot the competition’s domineering patents and file for patents on improvements to it. The competition will soon discover that though it owns the domineering patent it cannot introduce desired improvements that are already patented by another. The competitive force of this strategy is that the owner of the improvement patents enhances its bargaining power and can force its entry into the market by forging an IP-based transaction with the market leader for a cross-license or a joint venture. Japanese companies used “design around” strategies in the 1970s to catch up with U.S. companies in certain technological areas, with demonstrable success. 26 “Build a fortress” strategies can be used defensively to disarm the competition’s design around strategy by feverishly patenting around one’s own domineering patents. Offensively, these strategies are used to force competition out of the area by keeping ahead of the competi- tion in patenting improvement to one’s own domineering patents. Under this strategy an organ- ization should patent very heavily in the targeted technological area, making it nearly impossible for the competition to infiltrate the fortress. This not only secures its competitive position but also opens gates of opportunity where the IP can be leveraged to enhance a com- petitive position even further. An example is Dell Company, which obtained 42 patents to cover its business method of providing custom-built computers while keeping its inventory at a mini- mum. Dell leveraged this strong position in cross-licenses with IBM, giving IBM access to its method, while freeing itself from paying tens of millions in royalties for using IBM’s compo- nents 27 —a move that would have been impossible if Dell did not own every patent that can be owned to cover the business method. “Mapping” strategies are used in searching for the “largest” patent territory in an existing or new technological field away from all the patent empires and territories. This strategy is used when the organization wants to create another battleground (platform innovations) where it sets the rules of the game and defines standards. The use of patent intelligence tools are essential here as well as future scenario planning to enable the organization to anticipate future needs and trends. But beware of vanity—any technological position no matter how superior can be defeated if the owner does not succeed in making it a market standard. While ahead, the organization should license the technology widely to establish it as a market standard. Indeed, licensing to a network of suppliers and distributors should be part of the investment plan, under this strategy. An example is Sun Micro Systems’ offer of Java script for free, despite the hefty development THE INTELLECTUAL PROPERTY MANAGEMENT STAGE 147 cost, to establish a network of users. A lucid demonstration of this also is the case of VHS and Betamax. While Betamax had a more superior technology for videotapes, it had a strict policy against broad licensing. VHS licensed its technology widely to manufacturers and had a wider market presence, which later facilitated the market’s adoption of VHS technology as the market standard. 28 Savvy IP organizations use the three mentioned strategies in various combinations to create a set of defensive and offensive competitive tools. An outstanding example are the patent strategies developed by Ronald Myrick, General Electric Chief IP Counsel, as a guide for the patent depart- ments and attorneys at GE to strategize the use of patents both defensively and offensively. Myrick defined four patenting strategies 29 for GE where patenting strategies are utilized as busi- ness strategies for patent-intensive businesses. These four strategies are 1. Benign neglect 2. Live and Let Live 3. Freedom of action 4. Exclusion Benign neglect strategies are based on an assumption that the technology can be licensed in, if and when needed. They are used in cases where the prospective invention is of no strategic importance for the concerned business. Under these strategies, however, patents may be filed for such inventions to avoid a turn of luck, lest unexpected market changes give the invention added significance. Live and let live are largely defensive strategies where patents are “secured to be placed on the shelf” just in case they are needed. They can be used defensively whenever the competition poses a threat to the business’s competitive position, by threatening one of its patents or products. Freedom of action strategies, in contrast, involve broad patenting activity in many technolog- ical areas, in order to license them out or use them to leverage the position of the business in cross-licensing or joint venture transactions. As such these strategies use patents as competitive tools to force entry into new markets. The use of these strategies requires strong competitive intelligence to assess the direction of the competition. Exclusion strategies are purely offensive and are used to secure strong competitive positions in defined market segments. Under these strategies, licensing the technology out is discouraged, at least until a strong competitive position is established in the market. The main motivation for this strict exclusion is to provide price sup- port to the products of the business, or at least add cost to competitors. Myrick explains that patents should be managed as a business, and hence the patent strategy chosen should both support and be aligned with the competitive strategy of each business unit. Thus, variations and combinations of the four and other strategies are to be used in devising the competitive strategy according to business needs. Now let’s see how the competitive IP strategies blueprint translates into branding strategies. Trademark/Branding 30 Strategies—Of Wars Over Consumers’ Hearts Fighting brands can be meant as warnings or deterrents or as shock troops to absorb the brunt of a competitive attack. They are also often introduced with little push or support before any serious attack occurs, thereby serving as a warning. —Michael Porter 31 Equally effective in competitive wars are branding strategies, but the war is of a completely dif- ferent nature. It is not about technological supremacy and patent “lands,” but about promises and 148 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT winning consumers’ hearts. Brand loyalty commands higher market share and enables the brand owner to maintain strong entry barriers for the competition, to have higher immunity to market changes, to protect against price erosion and hence to sustain a competitive advantage. The basis of competition here is not the tangible features of the product nor its technological superiority, but rather the promise and emotional value of the brand, which influences first and repeat pur- chase decisions. This is of particular importance in the knowledge economy, where the erosion of product superiority—now that most products are very close in terms of functionality, quality, and price—intensified the effect of brands on purchasing decisions, and hence became recognized as an important source of competitive advantage. The emotional value conveyed by the brand’s identity became the final focal point to win the customer. As a result, branding strategies gained more prominence in the knowledge economy even for industries that don’t deal directly with the consumers, as seen in the increasing use of ingredient branding. 32 Using the IP strategies blueprint identified above, branding strategies for competitive position- ing include “design around,” “build a fortress,” and “value mapping.” “Design around” branding strategies involve the introduction of brands to counteract the competitive moves by producing a duplicate in terms of the value proposition (not the trademark, of course). To avoid creating con- fusion in the minds of consumers as to the origin of the product—which is the gist of trademark infringement—the house mark can be used in conjunction with the new brand. An example is Maxwell House’s introduction of Horizon, in similar packaging to that of Folgers in markets where Folgers started to gain a stronger position. 33 This strategy is also used by Cadbury, Mars, and Nestlé to compete in the confectionary market where they match each other brand for brand. 34 “Building a fortress” brand strategies involve investing heavily in building a brand by extend- ing the line of products horizontally across product categories. In addition the brand is aug- mented by other supporting brands to extend it vertically along different market segments on the value hierarchy, as shown in Exhibit 8.2. This strategy also entails reinforcing the main brand with a number of slogans, aggressive marketing campaigns, trade dress, and licensing widely to a network of partners (customers, suppliers, and distributors) to maximize the penetration of the consumer attention zone. An example of the use of this strategy is Coca-Cola’s defense of the THE INTELLECTUAL PROPERTY MANAGEMENT STAGE 149 EXHIBIT 8.2 Use of “Build a Fortress” Branding Strategy Watches Sunglasses Apparel Jewelry Luxury brand (Lassale) High priced brand (Seiko Credor) Mid price brand (Seiko Pulsar) Low price—entry level brand (Pulsar Lorus) Mass-market brand Brand extensions across product categories Line extensions along value hierarchy fortress it built around the Coca-Cola brand. First, the brand is supported by a close web of slo- gans, designs, color schemes, and advertising campaigns. Second, litigation is used as a tool to aggressively deter the slightest competitive maneuvers as shown by its major suit to stop Pepsi Cola’s subsidiaries from offering Pepsi Cola under the term “Coke”! “Value mapping” strategies are used to build a new strong brand or to revitalize an old brand, by mapping the competitive landscape to uncover brand personalities and value propositions available in the market, in search of the brand promise with the strongest emotional impact. Research has shown that the most valuable brands are those that are rich in the emotional pack- age they deliver and invoke in the receiver and have a defined personality that is conveyed con- sistently. With the saturation of the market with brands, and the multiplication of common communication channels, the brands that have the most “loved” personality are the ones that command larger market shares. Branding specialists argue that the most successful brands are those that are loved rather than respected, because the consumers identify with the brands at a personal level. Value mapping is aimed at discovering a unique brand promise that will enable the organiza- tion to set itself ahead of the rest, one that builds on the organizational history, identity, and core values, and hence can hardly be imitated by the competition. Mapping strategies involve search- ing for and devising the brand promise and value that set the organization ahead of the rest by building on its core ideologies and avoiding those projected by others if not rooted in the organi- zation’s culture. Value mapping is essential in revitalizing old brands as well. For example, to overcome its brand personality as being “cold and aloof,” IBM undertook extensive consumer surveys, consulted its history and culture, and mapped advertising promises in the market to revi- talize its brand’s image. These efforts resulted in new advertising campaigns portraying IBM’s international reputation with the “Solutions for a Small Planet” campaign showing people in dif- ferent parts of the world discussing IBM computers in their own language. Copyright Strategies—Of Soft Wars and the Next Hit In copyright industries, the war is over creative content—the organization with the most creative people and content has the biggest chances of introducing a hit. The creativity of the development team (whether working on a software program or a motion picture) is the key determinant of suc- cess. It’s a war over talent and over taking a good idea and expressing it in the most creative way. The key to using copyrights as competitive weapons lies in the fact that copyrights protect expressions and not ideas. Using the blueprint of IP strategies, copyright strategies for competi- tive positioning include “design around,” “build a fortress,” and “creativity mapping” strategies. “Design around” copyright strategies involve creating works similar to those of the competi- tion, based on the same idea but expressed differently to prevent the competition from securing a stronghold in the market. It is based on using the unprotectable elements of the competition’s popular work. This strategy is based on appreciating that copyrights protect only expressions and not the underlying ideas. To use this strategy, therefore, the ideas (plots, functions, themes, etc.) should be distilled from the competition’s work and then used to create new works around the competition’s successful work. This strategy is used by the most successful organizations in both the entertainment and software industries. In the software industry, for example, Borland Inter- national Inc. copied the Lotus program commands menu and provided it as part of its software program. Ruling that the commands menu is a functional feature, the court denied it copyright protection. 35 The strategy is of equal force in the entertainment industry as well, where it is repeatedly used. Once a work hits the jackpot, many works are produced based on a similar the- matic plot to the successful work (e.g., the range of vampire movies). 150 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT “Build a fortress” copyright strategies are based on leveraging existing creative content of a copyrighted work by surrounding it with multiple reproductions in varied media, strong brands, and adding more creative content to it by producing a number of versions and hence making it as immune as possible to competition’s imitation. That is achieved by rendering the competition’s imitation works useless through augmenting the core idea(s) with very highly expressive content, and forging a web of networks around the work—hence creating a fortress. As a result, competi- tion will be disabled from reproducing a similar work as the risk of infringing becomes higher, and the cost of replicating the supporting networks prohibitive. Microsoft uses this strategy vehe- mently. A number of networks with PC manufacturers, a number of versions, adaptations for per- sonal devices, Internet updates, and strong customer service support the sale of its Windows programs. Again, litigation is used as an aggressive tool to deter competition from coming close to the fortress. “Creativity mapping” strategies depend on the way that the organization develops its creative content, that is, whether it is developed in-house or licensed in from outside sources. In the for- mer case, the use of this strategy entails mapping the talent base to assess the level of creativity, compared to successful works in the market, and adopting the creative practices necessary to acti- vate the talent base. Disney and Microsoft use this strategy for the development of new copy- righted works where the focus is on the creativity of their in-house talent. In the latter case, organizations need to map talent agencies, and keep close watch of the market to spot any rising talent. In both instances, the use of this strategy entails the mapping of talent, popularity trends, creative content quality, and the reasons for success of popular works. Distilling reasons for suc- cess and tying that to consumers’ tastes would enable the organization to create a work that can set a new standard in the respective industry. An example of this is Disney’s Lion King, which created a new standard for animated films in adult entertainment, to the extent of being called the “Lion King mini-industry,” which alone generated around $1 billion in merchandise. 36 VALUE TRANSFERENCE STRATEGIES Value transference strategies can be used in conjunction with “build a fortress” strategies to lengthen the business life cycle of a primary form of IP, and hence preserve as long as possible the competitive position. It involves investment in secondary forms of IP near the end of the busi- ness life cycle of the primary form, as shown in Exhibit 8.3. The detailed use of this strategy is outlined in Chapter 13, but for now two illustrations are used. For pharmaceutical companies, the expiry of a patent is followed by a major drop in the sales of the patented product, sometimes THE INTELLECTUAL PROPERTY MANAGEMENT STAGE 151 EXHIBIT 8.3 Value Transference Between IPs Growth Maturity Embryonic Aging Value transference Maturity Aging Growth Maturity Aging GrowthGrowthGrowthGrowth reaching 80 percent. Investing heavily in a trademark/brand, however, near the end of the patent life cycle (whether legal or business) can save a considerable market share (e.g., in the case of Zantac). Another example for brands is the use of the right of publicity (IP) to revitalize a brand’s popularity by seeking celebrity endorsement (e.g., Nike’s Michael Jordan campaigns). BLUEPRINT FOR COMMERCIALIZATION STRATEGIES—OF PEACE One should be vigilant not to let the best intentioned licensing program generate royalty rev- enue at the expense of suffering a diminished market strategic position. —James O’Shaughnessy (Chief IP Counsel Rockwell International Corp.) and P. Germeraad 37 Commercialization strategies relate to using the IP portfolio to generate revenue by offering IP for licensing, using it to gain equity in joint ventures, or trade it for other strategic IPs (cross- license). IP commercialization strategies are either passive, reactive, or proactive, referring to the level of activity that the organization will expend in seeking and pursuing opportunities to com- mercialize IP beyond its use in support of products and processes. The various strategies may be used by the same organization for different classes of IP in the IP portfolio as follows: • Passive commercialization strategies can be used with IP for which competitive value cannot be ascertained, particularly at the early stage of the business IP life cycle. Such IP is kept and developed on a wait-and-see basis to see how it will venture in the market. Under this strategy, it still may be commercialized following offers from noncompetitors or under a joint venture for their further development with a competitor. • Reactive commercialization strategies can be used with IP that is of more ascertainable value as a competitive weapon. Opportunities for commercialization of these IPs should be pursued only after the organization has secured the targeted competitive position, where commercialization poses no competitive harm. Ford Global Technologies, for example, calls this strategy “Ford First,” which means that Ford should establish its posi- tion in the market before the IP can be offered for commercialization, a period estimated to be three years on average. 38 Reactive strategies are also used to commercialize IP to partners (customers, suppliers, and distributors) to create synergy and reduce costs. An example is Toyota’s offering of its patents to its original equipment manufacturer (OEM) manufacturers to increase their productivity, and hence improve Toyota’s overall com- petitive ability. These strategies enable the use of IP to augment the competitive impact of a chain or a network of partners, and in that case should not be offered to competitors. • Proactive commercialization strategies are used when it is clear that the IP concerned is of no competitive or strategic use for the organization but is of value to others. Proactive commercialization entails the active pursuit of opportunities through industry liaisons, contacts, agents, and any channel possible to generate revenue from the IP portfolio. These IP can be freely offered to competitors. Organizations like IBM that have a liberal patenting philosophy, encouraging innovation in noncore areas, multiply their chances of building an IP portfolio that can be offered in the great part for commercialization. Under this strategy all forms of IP, not only the primary forms, are used to create the best deal. Exhibit 8.4 shows the various forms of IP used for different types of licensing. 152 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT The choice of one commercialization strategy over the other depends on striking a balance between the use of IP as a competitive weapon and as a business asset. A proactive commercial- ization strategy can be used only when the IP can be used dominantly as a business asset. Cau- tion always must be used not to undermine the competitive position by commercializing particular IPs (e.g., by diluting a brand in a franchise, or producing an overkill by overmerchan- dising). Striking that balance in brand licensing can be achieved by maintaining close control of the use of the brand by the licensees. Striking such balance, however, when it comes to commer- cializing patents, can be achieved by limiting the transfer of trade secrets (know-how), that is, focusing on the licensing of the patent without the technological know-how. Achieving that bal- ance is more challenging when it comes to patents compared to trademarks and copyrights. Business based on brand developments always views trademarks as commercial tools that convey the brand promise to the consuming public. Commercialization of the trademark, there- fore, is realized as the main object at the preliminary stages of brand development and invest- ment, provided close control is kept on the use of the trademark. A similar trend can be seen when it comes to copyrights as commercialization of the work is actively pursued, being a (if not the only) motivating force behind investing in creativity. At an early time, organizations in all indus- tries capitalized on their strong trademarks and copyrights, exploiting them through multiple commercial transactions and distribution channels. Once established as a strong IP right, the market will be flooded with consumer products and merchandise that revolve around these rights. This, however, was not the case with the commercialization of patents. Patents were traditionally viewed as a way to secure the right to use certain inventions or compositions in production and/or to obstruct competition’s activity in a certain field. Many patents were left on the shelves to col- lect dust. A survey of U.S. companies found that “more than 35 percent of patented technologies are orphans that fell by the wayside after a merger because they were not part of the combined entity’s core business.” 39 Such orphan patents were estimated to have commercial value in excess of $115 billion. 40 To date, most organizations exploit only the tip of the iceberg of their patent THE INTELLECTUAL PROPERTY MANAGEMENT STAGE 153 TYPE OF LICENSING TRADEMARKS PATENTS COPYRIGHTS TRADE SECRETS Technology X X transfer Franchising X X X Software X possible X licensing Merchandising X X Patent X licensing Publishing, X digital rights, music, motion picture EXHIBIT 8.4 IP Forms Used for Different Types of Licensing [...]... 8.5 IP Strategy Units and IP Synergy Teams 1 56 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT The task of IPSTs may also be carried by: • Small focus groups like Dow Chemical’s Intellectual Asset Management teams42 • An independent business unit like DuPont’s Intellectual Asset Management Business • An independent company like Bell South’s, AT&T’s Intellectual Property Company, and Ford Global... pioneers will be outlined and examined using the above criteria and looking through the Comprehensive Intellectual Capital Management (CICM) lens The two companies, Skandia AFS and Dow Chemical, have been chosen not only 163 164 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT for their success in managing their IC comprehensively, but also for their vast contribution to the field This contribution... values communicated by employees through customer service (human capital) , brand promise and value propositions as perceived and valued by the customers (customer capital) and the marketing relations and networks, and corporate identity 162 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT and reputation associated with the brand (structural capital) Therefore, trademark strategies will be referred to... Director of Intellectual Capital, and entrusted him with making business sense of the IC concept PASSING THE TORCH TO EDVINSSON AND HIS TEAM Edvinsson’s job was to create ways that enable both management and employees to visualize and develop IC The first step was to define what is IC Edvinsson designed the Intellectual Capital Value Hierarchy, classifying IC into human capital and structural capital, ... flowing around in the business environment— knowledge management, intellectual assets, intangible assets management, intellectual capital, hidden resources—Near had to go to the basics and isolate the object of his attention Near, along with input from a variety of international experts, laid out the following definitions: • Intellectual capital management The “process of proactively managing, protecting,... innovation, and IP management stages THE BUSINESS MODEL AND THE IC REVOLUTION— CARENDI AND THE FIRST TORCH Carendi introduced a new business model for Skandia based on alliances and relationship management, or as he calls it, “specialists in cooperation.” Instead of selling its own savings products THE PIONEERS OF INTELLECTUAL CAPITAL MANAGEMENT 165 or managing its funds, Skandia outsources fund management. .. changes This is further enabled by the development of systematic tools for the valuation and assessment of IP value Chapter 13 outlines the implementation of the IPM stage step by step But before we proceed to that, it is important to see how the CICM approach exists in real business life, by exploring the comprehensive ICM systems of two pioneers—Skandia and Dow Chemical NOTES 1 Intellectual property consists... Intellectual Capital: How to Convert Intellectual Assets into Market Value (New York: John Wiley & Sons, 2000) 15 See J Davis and S Harrison, Edison in the Boardroom (New York: John Wiley & Sons, 2001); and Granstrand supra note 13 16 See, for example, Rivette and Kline, op cit., noting Xerox CEO, Richard Thoman, on maximizing value through managing IP THE INTELLECTUAL PROPERTY MANAGEMENT STAGE 161 ... professional service businesses (e.g., 160 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT consulting, financial services) are an exception A closer look, however, reveals that competitive performance in service businesses predominantly depends on know-how, and work systems, which are protected by trade secrets and copyrights, and possibly patents for business methods 3 In 19 96, Financial Times valued the... Economics, Vol 38, October 1995, pp 466 –473 4 Sherwood, R., Intellectual Property Systems and Investment Stimulation,” IDEA: The Journal of Law & Technology 37, no 2, (1997), pp 261 –370 5 Siwek, S., “Copyright Industries in the U.S Economy: The 2002 Report” (Economists Incorporated: Washington DC, 2002) 6 Anti-Dilution and Anti-Cyber Squatting Acts 7 McCarthy, J., Intellectual Property: America’s Overlooked . Sons, 1997). 51 Available online at www.dkpto.dk. 162 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT 9 The Pioneers of Intellectual Capital Management Skandia and Dow Chemical It’s certainly. of the competition, but should be kept as a general rule. 1 56 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT • Digital rights management and cyber security systems to protect against copyright. note 13. 16 See, for example, Rivette and Kline, op. cit., noting Xerox CEO, Richard Thoman, on maxi- mizing value through managing IP. 160 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT 17 For