Successful corporations of the 21st century will not be able to rely on the old levers of competition: labour, capital and land. Rather, they will have to manage these assets along with intellectual assets and, more specifically, intellectual property: patents, trademarks and technology. The "knowledge company" of the future should regard its intellectual assets as leverage points to generate licensing income, as intangible contributions to joint ventures, and as tools to ensure that standards and technology platforms support business strategy.
Intellectual capital derives from the knowledge, relationships and personalities of people. Much of this information is codified as intellectual assets in the form of documents or electronic media, and as intellectual property - legal instruments that protect the ideas embodied in intellectual capital. The manufacturing, distribution and marketing resources of knowledge companies complement intellectual assets and allow them to be exploited. For example, in 1999 IBM leveraged its patent portfolio in supply agreements with domestic and foreign companies, and increased the sale of components by $39 billion (€45.61 billion) over five years. This was in addition to annual licensing income of more than $1 billion for the past three years. The market value of IBM stock grew $24 billion in 1999 and has increased by nearly $170 billion in the past seven years. Based on the experience and best practices of others, an effective licensing strategy can be developed that will fund research and development, and increase shareholder value. Specific areas to include are:
Portfolio management - methodologies designed to identify technologies can be leveraged for licensing and joint venture activities.
Licensing strategy - identifying key company intellectual assets and industry information in establishing the brands, patents and technologies appropriate for licensing to others.
Financial management - monitoring a company's portfolio of agreements, recovering unpaid royalties and evaluating the tax benefits of intellectual property-holding companies.
Dispute resolution - developing strategies to prevent infringement charges escalating into litigation.
Standards adoption - emphasising the adoption of standards favourable to a company's strategies and the avoidance of unintended patent grants. It is a good idea to look at how high-performing companies have developed licensing strategies. This has fallen into five main phases. First, freedom of action - companies traded their patent assets for access to the patents of others. This was followed by activity driven by technological change and a greater emphasis by top management on licensing issues. Second came initial patent enforcement. In many companies, patent enforcement activities were a direct result of increased competition from competitors who were not making large investments in R&D. Companies used intellectual property as leverage in joint ventures. Next was patent expansion and leverage. Initial enforcement activities were quickly followed by an expansion into other growing industries, requiring continuous infringement analysis work.
Expansion to technology and brands was the next logical step. This was driven by three factors. First, licensing became an important component of a company's income. Then brands became a source of income and eventually pressure on research and development spending increased. Finally, the greatest leverage was placing a company's technology in the marketplace. Licensing income was traded off and a series of development and procurement agreements were negotiated with original equipment manufacturers.
