exploiting intellectual property

*connectedthinking

Asset management

Exploiting intellectual property in a complex world*

Technology executive connections Volume 4

The survey

The quantitative findings presented in this report are based on a survey conducted by the Economist Intelligence Unit (EIU) in March 2007. The survey garnered 197 responses from senior executives based in five principal regions: 28% Asia-Pacific; 33% Europe; 31% North America; 6% the Middle East and Africa and 2% Latin America.

The following report is global in scope and features analysis and commentary developed from a combination of survey instruments and in-depth interviews with senior executives.

The interviews

In addition, over 30 executives were interviewed for this report: some on the record, some willing to name their company but not attribute their quotes, and others insisting on complete anonymity.

On the record:

Joseph Beyers, Head of IP, Hewlett Packard Richard Blanchet, Partner, Loeser e Portela AvogadosMelanie Butler, Partner, PricewaterhouseCoopers, Licensing Management Services Horatio Gutierrez, Vice President and Deputy General Counsel, Intellectual Property & Licensing Group, Microsoft Masanobu Katoh, Corporate Vice President, President, Law & Intellectual Property Unit, Fujitsu LimitedJean-Pierre Laisne, Director, Open Source Strategy, BullJean Lehmann, EDS Fellow, Member of the IP Governance Board, EDSDavid Marston, Partner, PricewaterhouseCoopersJohn Pironti, Chief Information Risk Strategist, GetronicsMatthew Szulik, CEO, Red HatYo Takagi, Executive Director, Office of Strategic Planning and Policy Development, World Intellectual Property Organization (WIPO) Kenneth White, Senior Media Advisor, National Security Agency (NSA)

Not for attribution—executives from:

AppleBT CiscoHCL TechnologiesTata Consultancy IntelLG Group NokiaPhilipsQualcommSamsungSiemensSwisscomTexas Instruments

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Dear Executive,

Welcome to PricewaterhouseCoopers’ fourth volume of Technology Executive Connections, a series of survey reports designed to help executives in the technology industries better explore, understand and share ideas about today’s pressing business and strategic issues.

Our unique combination of a broad, online, worldwide survey of senior executives and in-depth one-on-one interviews with industry leaders around the globe allows the Technology Executive Connections series to gauge the climate within the industry, gain insights into current views and opinions, and promote leading analysis of current issues.

In this, our fourth edition, we delve into the challenges of managing intellectual property (IP) in today’s global economy. While piracy continues to be an issue in emerging markets, technology companies eye these countries as both a source of R&D and a wealth of new demand. As a result, we’re seeing a shift in the corporate view of IP, moving away from being strictly a legal issue and towards inclusion in the company’s strategic portfolio of assets. Like any other asset, companies need to accurately value and protect the IP they have; maximise its value; and strategically manage its usage. Our survey reveals that executives are aware of these issues and are concerned that their firms are not reacting fast enough. Read on to discover our four main observations; what executives think about these observations; and how they are trying to address the gaps.

Our first Technology Executive Connections report asked technology executives about the challenges a rapidly-changing environment brought upon their strategy and tactics. The second examined the issue of convergence and its influence on M&A activity across the technology, telecommunications and media sectors. The third explored the industry’s struggle with finding and keeping the right talent. For soft or hard copies of these reports, please visit www.pwc.com/techconnect.

I hope this newest report provides interesting, thought-provoking reading and that it starts proactive IP management strategy discussions within your company. I welcome your thoughts on the issues we’ve discussed herein as well as your ideas for future topics to explore. Please feel free to contact me via email at [email protected].

Bill Cobourn Partner and Global Technology Industry Leader

June 2007

Table of contents

Executive summary 2

Introduction 8

Observation one: Although IP is an ever-more important asset class, technology executives don’t believe their companies are extracting its full value. Case study: Hewlett Packard: Four in one PwC connections: How to value intellectual property* Questions for further reflection

10

16 18 19

Observation two: IP is a core strategic asset: the focus is shifting from litigation to managing and enhancing its value. Case study: Fujitsu: IP and corporate strategy PwC connections: How to manage IP as a strategic asset* Questions for further reflection

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27 28 29

Observation three: Ample talent, lower operating costs and massive domestic market potential still lure technology investment to emerging markets, but executives must battle rampant noncompliance and outright piracy. Case study: EDS: Introducing discipline to IP management PwC connections: How to manage IP value in China* Questions for further reflection

30

40 42 43

Observation four: Companies are making incremental improvements to their IP management, but they will need to move faster. PwC connections: How to transform into a strategically driven IP company* Questions for further reflection

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50

51

Conclusion 52

Appendix Survey methodology Results of the survey Profile of the survey respondents Acknowledgments PwC technology industry leaders

54 55 56 66 68 70

2 PricewaterhouseCoopers

Note de syntheseExecutive summary

The concepts of innovation, research and development, breakthrough, patent, copyright, trade secret and intellectual property are lifelines in the technology industries. Nonetheless, as the following study demonstrates, technology executives believe they are not yet as compe-tent in the management of intellectual property as they need to be. In an era of accelerating innovation and discovery, technology execu-tives recognise they must maximise the value of their portfolio of intellectual property. To assist industry executives in addressing the related opportunities and challenges, the EIU and PricewaterhouseCoopers conducted a global online survey of 197 executives, executed in March 2007, supplemented by more than 30 in-depth executive interviews. The results follow.

L’innovation, la recherche et le développement, les avancées, les brevets, les droits d’auteur, les secrets commerciaux et la propriété in-tellectuelle sont autant de concepts vitaux dans le secteur de la technologie. L’enquête suivante montre néanmoins que les dirigeants d’entreprises technologiques estiment ne pas avoir encore acquis le niveau de compétences requis dans la gestion de la propriété intellectu-elle. Dans une ère marquée par l’accélération de l’innovation et des découvertes, les dirigeants d’entreprises technologiques reconnaissent qu’ils doivent maximiser la valeur de leur por-tefeuille de propriété intellectuelle. Pour aider les dirigeants des entreprises technologiques à relever les défis et à saisir les opportunités inhérents cette situation, l’Economist Intel-ligence Unit et PricewaterhouseCoopers ont mené, en mars 2007, une enquête à l’échelle mondiale auprès de 197 chefs d’entreprises ; cette enquête a été complétée par plus de 30 interviews approfondies de chefs d’entreprises. Les résultats sont présentés ci-dessous.

3Exploiting intellectual property in a complex world

总结 Inhaltsübersicht

Innovation, Forschung und Entwicklung, Pat-ente, Copyrights, Geschäftsgeheimnisse und geistiges Eigentum sind das Fundament für den nachhaltigen Erfolg von Technologieun-ternehmen. Trotz ihrer zentralen Bedeutung sind viele Führungskräfte der Meinung, dass sich ihr Unternehmen in diesem Bereich bessern muss, um im Zeitalter beschleunigten Innova-tionsdrucks und steigender Entwicklungsak-tivitäten bestehen zu können. Führungskräfte haben die Notwendigkeit der Wertmaximierung ihres Portfolios an geistigem Eigentum für ihr Unternehmen erkannt. Um Technologiefir-men bei der erfolgreichen Bewältigung die-ser Herausforderungen zu unterstützen, hat PricewaterhouseCoopers in Zusammenarbeit mit der Economist Intelligence Unit (EIU) eine Online-Umfrage durchgeführt. Im März 2007 wurden dafür weltweit 197 Manager befragt und die Ergebnisse durch mehr als 30 vertiefende Interviews mit Führungskräften ergänzt.

理念创新，研发，突破传统，专利，版权，贸易机密和知识产权等是科技产业的重要生命线。虽然如此，接下来的研究表明负责科技的执行官们认为其公司在知识产权管理方面还未具有应有的竞争力。在加速创新和发明的时代，执行官们认识到他们必须将其知识产权组合的价值最大化。为了帮助产业的执行官认识到相关机遇和挑战，经济学家情报部和普华永道携手于2007年3月对197名执行官进行了全球网上调查，并对30名执行官进行深入访问，得出以下结果：


The four principal observations are: Les quatre principales observations sont les suivantes: Die vier wichtigsten Beobachtungen in diesem Zusammenhang waren: 调查的四项主要发现如下：

1. Although IP is an ever-more important asset class, technology executives don’t believe their companies are extracting its full value.

Bien que la propriété intellectuelle soit une catégorie d’actifs plus importante que jamais, les dirigeants des entreprises technologiques estiment qu’ils n’exploitent pas pleinement sa valeur.

Obwohl geistiges Eigentum als Vermögenswert zunehmend an Bedeutung gewinnt, nutzen Unternehmen sein Potenzial derzeit nicht in vollem Umfang

虽然知识产权是极其重要的资产，但是科技执行官并不认为其的公司利用了知识产权的全部价值。

In the global economy, knowledge assets now comprise a greater share of public companies’ market valuation than hard assets. Although this is particularly true for technology companies, technology executives themselves don’t believe their companies are extracting the full value from their firms’ intellectual capital.

Dans un contexte de mondialisation de l’économie, le capital de connaissances représente aujourd’hui une plus grande part de la valorisation boursière des sociétés cotées que les actifs tangibles. Si ceci s’applique particulièrement aux entreprises technologiques, les dirigeants de ces entreprises n’estiment pourtant pas exploiter pleinement la valeur du capital intellectuel de leurs sociétés.

Bei börsennotierten Unternehmen weltweit übersteigt mittlerweile der Wert immaterieller Vermögensgegenstände den der materiellen. Dies gilt insbesondere für die Technologiebranche. Dennoch scheitern die betroffenen Firmen daran, den gesamten Nutzen aus ihrem geistigen Eigentum abzuschöpfen.

在全球的经济中，知识资产占公司市场价值的比重比固定资产占公司市场价值的比重大得多。虽然科技公司事实上是这样的，但是科技执行官但是科技执行官并不认为其的公司利用了知识资本的全部价值。

The overwhelming majority of executives say IP management is vital to the success of their companies. Moreover, they say IP management will become even more important over the next several years. Nonetheless, more than 60% of executives say their companies could extract significantly more value from their intellectual property by means of active IP management.

Executives in general do not express a high degree of confidence that their companies are doing all they can, or all they should be doing, to maximise the usefulness of their IP assets.


2. IP is a core strategic asset: the focus is shifting from litigation to managing and enhancing its value.

La propriété intellectuelle est un actif stratégique : l’attention, jusqu’ici centrée sur les litiges, se réoriente vers la gestion et le renforcement de la valeur.

Geistiges Eigentum ist eine strategische Kernkompetenz. Daher verlagern Unternehmen ihren Fokus: Sie konzentrieren sich zunehmend auf die strategische Nutzung von geistigem Eigentum und weniger auf Rechtsstreitigkeiten

知识产权是核心战略资产：知识产权的焦点正在从利用诉讼保护转移到管理和提高其价值上。

Executives say that litigation is a fact of life with respect to intellectual property. But these days more attention is being given to the strategic management of IP than to courtroom battles.

Les chefs d’entreprises déclarent que les litiges liés aux biens de propriété intellectuelle sont une réalité incontournable. Mais aujourd’hui, l’attention est davantage centrée sur la gestion stratégique des biens de propriété intellectuelle que sur les batailles judiciaires.

Für viele Manager sind Rechtsstreitigkeiten zur Durchsetzung von Urheberrechts- und Patentansprüchen nahezu unvermeidbar. Doch allmählich steigt das Bewusstsein, dass es sinnvoller ist, ihr geistiges Eigentum strategisch einzusetzen anstatt Zeit und Geld in langwierigen Prozessen zu vergeuden.

执行官认为诉讼是知识产权保护的本质事实。但是近来，公司更加注重知识产权的战略管理，而非希望通过法律解决。

Over two-thirds of executives today believe that IP manage-ment is too often treated merely as a legal issue—a belief partic-ularly prevalent among respon-dents in North America and Asia-Pacific. This is distressing, our interviewees say, because it indicates an approach to IP management that is out of date.

Essentially, executives say their companies are beginning to view IP as an asset class. So the challenge is one of creating an optimal portfolio of essential assets.

So, the desired strategy is one of creating tighter links between research, technology acquisi-tion and business objectives. Close integration here not only helps companies to develop portfolios of essential IP, it helps them to avoid costly litigation.


3. Ample talent, lower operating costs and massive domestic market potential still lure technology investment to emerging markets, but executives must battle rampant noncompliance and outright piracy.

L’abondance des talents, les coûts opérationnels moins élevés et le potentiel énorme que représentent les marchés domestiques continuent d’attirer les investissements technologiques vers les économies émergentes, mais les dirigeants doivent lutter contre les problèmes endémiques de conformité et contre le piratage.

Emerging Markets locken durch qualifizierte Fachkräfte, geringere Betriebskosten und einen riesigen Heimatmarkt. Diesem Potenzial steht zunehmender Diebstahl von geistigem Eigentum gegenüber

丰富的人才，低廉的运营成本和巨大的国内市场潜力一直吸引着对新兴市场的技术投资。但是执行官们必须与猖獗的非合规现象和盗版现象作斗争。

Survey respondents say their companies have expanded their research capabilities in emerging markets to the point where significant amounts of IP are now being created there. But at the same time, nearly two-thirds of respondents say IP protection in emerging markets is inadequate—and interviewees say critical IP is almost impossible to protect completely in some countries.

Les participants à l’enquête déclarent que leurs entreprises ont développé leurs capacités de recherche sur les marchés émergents, où une part non négligeable des biens de propriété intellectuelle est créée aujourd’hui. Mais parallèlement, près de deux-tiers des personnes interrogées déclarent que la protection de la propriété intellectuelle sur les marchés émergents est insuffisante, et les participants estiment que dans certains pays, il est quasiment impossible d’assurer une véritable protection des biens de propriété intellectuelle critiques.

Technologieunternehmen dehnen ihre Forschungs- und Entwicklungsaktivitäten vermehrt auf Entwicklungsländer aus und beginnen, auch dort geistiges Eigentum zu produzieren. Und das, obwohl Urheberrechte und Patente unzureichend geschützt werden. Zwei Drittel der befragten Führungskräfte sind der Meinung, dass wichtiges geistiges Eigentum in manchen Ländern nicht effektiv geschützt werden kann.

被调查的公司表明他们已经在新兴市场的拓展了研发能力。因此，很大一部分知识产权是在新兴市场创造的。但同时，三分之二的被调查者认为新兴市场的知识产权保护还不够完善，同时被采访者甚至认为重要的知识产权在一些国家有可能完全不能得到保护。

As for the future, executives anticipate a moderate improvement in the quality of IP enforcement in most emerging markets. However, some executives doubt whether IP will ever be fully protected in emerging markets.


4. Companies are making incremental improvements to their IP management, but they will need to move faster.

Les entreprises réalisent des progrès marginaux dans la gestion de leur propriété intellectuelle; elles devront néanmoins mettre les bouchées doubles.

Zögerlich verbessern Unternehmen das Management ihres geistigen Eigentums, doch sie müssen schneller agieren

一些公司在知识产权管理方面已经取得了进步，但是他们需要加快速度。

The interviews and statistics show that there is no question that companies are improving their IP management. In par-ticular, the survey shows that companies recognise the need to develop more accurate valu-ations of both specific IP as-sets and broader IP portfolios.

But the research also hints at a coming era of dramatic transformation. For example, executives speak of increased statutory reporting of IP. (The number of companies providing supplementary reporting about their IP to investors will more than double over the next three years, says the survey.) In addition, executives expect that markets will develop for the valuation, buying and selling of IP.

In general, the report shows that companies have little choice but to develop a fully fledged IP strategy in order to stay competitive.

Companies are endeavouring to introduce significantly higher levels of sophistication to their IP management. The process of upgrade is slow but will gather pace in the years to come.

Les entreprises s’efforcent d’accroître la sophistication de leur gestion des biens de propriété intellectuelle. Le processus d’évolution est lent, mais ira en s’accélérant au cours des années à venir.

Unternehmen bemühen sich, ihr geistiges Eigentum deutlich besser einzusetzen. Noch sind ihre Fortschritte gering, werden aber in den kommenden Jahren an Fahrt gewinnen.

公司试图引入更高水平的知识产权管理。虽然他们提高的过程很缓慢，但是其将在未来的几年内取得更好的态势。


Introduction

“Until recently, we tended to keep our patents in a drawer, collecting dust. Now we are marketing these to other companies. They are very valuable.” – An executive at a European telecommunications company

“If it’s core technology, you don’t ship it to an offshore contract manufacturer or licensee or partner of any kind. You just don’t. It will be stolen.” – An executive at a US technology company

“Constant innovation is the only real and effective remedy.” – An executive at a European technology engineering company


The global economy increasingly favours know-ledge over smokestacks.

Just thirty years ago, most company valuation was determined by capital assets, such as plant and equipment. Today, intangibles probably account for more than half of market value for the average company listed worldwide.

Intellectual property (IP) is now the most critical component of value creation for companies around the globe. This is especially true for technology companies, whose business models are IP-based almost by definition. According to Horatio Gutierrez, a vice president and deputy general counsel in Microsoft’s intellectual prop-erty and licensing group, “We’re moving toward a global economy where the true strategic asset is IP.”

Though technology companies own enormous stores of IP, much of that value is being squan-dered. Forrester analyst Navi Radjou estimates that US companies waste $1 trillion dollars annually by failing to extract the full value of their IP through partnerships.

Speak to nearly any technology industry execu-tive, and you’ll hear laments about the need for greater sophistication in IP management. Handling IP is fundamental to their business strategies, yet it is not being done right yet. Executives are asking:

How do we determine the value of an innovation; the value of this IP?

How do we increase its value or obtain the most value from the IP we already have?

How do we determine the most effective way to protect our IP?

How do we balance the need to protect core IP assets while encouraging broader collaboration with partners and customers—or even open-source technology?

How do we create greater linkage between R&D, business strategy and IP protection?

The following report shows how the technology industry is responding to these and related questions. It also provides key insights about IP from leading executives in the field.

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Observation one: Although IP is an ever-more important asset class, technology executives don’t believe their companies are extracting its full value.


In the global economy, knowledge assets and related intangibles have overtaken manufacturing assets to account for the lion’s share of market valuation. This is particularly true for technology companies.

Consider Microsoft. “We are an IP company by definition,” says Horatio Gutierrez. “We invest over $7 billion a year in R&D and then we turn that knowledge, that intellectual property, into licensing revenue.”

Microsoft creates software. But even manu-facturing-oriented members of the technology community say that intellectual property is now, or is fast-becoming, their primary source of value-creation. For example, according to an executive from Apple, famous for its Mac and its iPod, “We’re a company that moves forward based on big ideas. Our core compe-tence and market valuation doesn’t come from manufacturing iPods. The value we bring to the marketplace and the world is the ability to keep dreaming up seminal ideas, like iPods.”

Similarly, adds an executive from a mid-sized Europe-based computer game maker, “You give me €50 and I’ll give you €2 worth of shrink-wrapped DVD.” The reason for the 25-fold difference between the materials costs versus what the gamer actually pays is the intangibles. Some of that is branding: the executive says his

company has a number of established franchises among gamers. But the bulk of the intangible value comes from the quality and playability of the game, which, he says, “comes from our considerable investment in development.”

Video games, he continues, “require thousands of development-hours, literally, and that’s not including the R&D that’s inside much of the technology we rely on to make these games. Games are so sophisticated today that in nearly every way—direction, actors, artists, scores, scripts, motion capture, we haven’t even mentioned programming or game design tools—they’re becoming as expensive to pro-duce as movies.” In short, says the executive, “our copyrighted, digitised, sometimes patented intellectual property is extremely valuable.”

Finally, says an executive from Qualcomm, “The manufacturing cost and the materials cost, that’s an ever-diminishing percentage of the total value of any technology device.” The real value today, “is the idea, the knowledge, the capability,” and ultimately, “the relevant patents.”


We asked our respondents:

How important do you think IP management is to the success of your company?

According to our survey, 83% of technology executives say IP management is either very important (52%) or important (31%).

Perhaps surprisingly, IP management is even more important to companies based in Asia-Pacific (89%) than it is to companies in North America (84%) or Europe (73%). For example, “With reference to creating and managing a portfolio of intellectual property, we are in a nascent stage today,” says an executive from India’s HCL Technologies. “But we are working to learn how to place a value on what we create, to align that effort to our business strategies and ultimately to learn to become a much more effective manager of intellectual property.”

Figure 2. Percentage of executives who expect that the importance of intellectual capital to the value of their company will increase over the next 3-5 years

85.1%

88.7%

83.9%

79.7%

100.0%

100.0%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa

Figure 1. Percentage of executives who think IP management is very important or important to the success of their company

82.6%

88.7%

83.9%

73.5%

100.0%

100.0%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa

As important as IP management is today, executives say it will become even more impor-tant over the next three to five years. Eighty-five percent (85%) of our respondents expect IP management to increase in importance. At 89% agreement, executives in Asia-Pacific lead in this category, followed by 84% of North Ameri-can and 80% of European executives.


More value to mine

Our respondents and interviewees alike agree that not enough attention is being paid to intellectual property. For example, 62% of survey respon-dents agreed (42%) or strongly agreed (20%) that their company could extract significantly more value from IP than it is now doing.

An R&D focused executive from Siemens puts things this way:

“I see that technology companies are waking up to the idea that as good as they believe they are at R&D, they have some problems. Piracy comes to mind, but beyond policing that yourself or auditing your licensees or various other measures, that’s not altogether under your control. You do what you can.

“The real issue is that you have these growing R&D budgets, and these efforts need to be in closer synchronisation with your business strat-egies. I was recently at a conference with many of my peers from other companies, and I can tell you that I was surprised to hear how many say that their companies are in no way doing this as effectively as they could. There is not a high

degree of confidence that things are being done as well as they could be.”

An IP-focused executive from Samsung had this to say:

“We try to be as organised as we can be. We try to get as much value from our research and IP investments as we can. We try to align our research with our business strategies. We try to create a good portfolio of technology. We try to work with the best manufacturers and license our technology. But this way of business, of intellectual property becoming a critical driver of value, it is still somewhat new and evolving. So we do the best we know how but we know there is much to learn and we will continue improving.”

An executive from a large European telecom-munications company agrees:

“Until recently, we tended to keep our patents in a drawer, collecting dust. Now we are beginning to realise they have value beyond what we might see in our own business, so we are marketing these to other companies. They are very valuable.”

Figure 3. Our company could extract significantly more value from existing IP and IP formation if it devoted more assets and attention to relevant processes

20.0%

41.5%

26.2%

7.2%

2.6%

2.6%

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Don’t know


Enter convergence

Although technology executives say they are capable of competent IP management, both the survey and the interviews indicate that they see substantial room for improvement. Moreover, say executives, it is becoming vital to act now, because the way forward will be even more dependent on IP.

In particular, executives are forecasting an in-creasing reliance on partnerships—a significant element in the pursuit of digital convergence. According to an earlier report in this series1, alliances/partnerships will be the number two2 source of convergence-driven growth over the next three years. But at the same time, asked whether or not their agreements with partners adequately account for and protect IP, 32% weren’t certain and 14% said no, they do not.3

Figure 5. Our agreements with partners adequately account for and protect intellectual property and related assets

10.3%

43.5%

31.7%

11.7%

2.8%

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Figure 4. Likely sources of convergence-driven growth over the next three years

44.6%

16.9%

21.0%

Alliances, partnerships and

related collaboration

Acquisition of technology

licenses

Externallicensing of our

own technology

1 Technology Executive Connections: Shaping digital convergence through mergers & acquisitions; PricewaterhouseCoopers, 2006.

2 Ibid. p50, table 8.3 Ibid. p54, table 19.


Here, an executive for a European telecom-munications company explains, “all of this gets more complicated when you start to talk about partnerships.” In telecommunications, he explains, “most partnerships are based on this idea of cross-licensing.” Essentially, says the executive, “if we want to work with another company, each of us shares their [technology] portfolio—and if the value is great enough on both sides, we agree we won’t charge each other, we’ll just agree to cross-license.” Doing so, says the executive, “means we have to have a clear idea of our inventory of IP and its value, so there is considerable sophistication there.”

But are such systems perfect? “Of course not,” says the executive. “You describe what you have, you present what you believe it’s worth and why and both companies evaluate one another’s positions.” But in the end, says the

executive, “a lot of times you wind up agreeing to share with no payments between the parties not because the portfolios are precisely equal in value but because of the larger strategic value of the collaboration.” So close enough “is ok,” says the executive, “but you can’t make that assessment unless you have the sophistication.”

As digital convergence accelerates and tech-nology partnerships proliferate, executives are recognising the need to improve their IP management acumen. As an executive from Siemens explains, “partnerships complicate matters enormously.” Here, says the executive, “it’s a matter of getting fair value for your IP and protecting what you share. It takes expertise, negotiation and a good belief in the person across the table from you. It’s not easy.”


Case study:

Hewlett Packard: Four in one

In terms of IP management, Hewlett Packard’s acquisition of Compaq in May 2002, “was a true watershed event,” says HP vice president for IP, Joe Beyers. Along with earlier acquisitions of Tandem and Digital Equipment, the Compaq purchase brought together four top names in the history of computing.

Prior to the merger, none of the companies was a proactive manager of patents or copyrights, according to Beyers. “So what we had was four companies, each with a long history of innovation but none having any real focus on protection or monetisation of intellectual property.”

This would soon change. At a January 2003 meeting, the board of the newly combined companies directed the senior management team to develop a more integrated, energetic and value-focused approach to IP.

The reorganisation

The first step was to bring together four previously separate engines of creation. “In the past, each of the companies had been making decisions independently,” says Beyers. The desired approach was one of “collaboration and coordination.”

Each of the businesses now has a patent coordinator and its own legal team. The patent coordinators from each of the businesses work closely with one another, improving company-wide coordination.

“We wanted to make sure we were at all times maximising the value of the intellectual property we were creating,” says Beyers. HP spends more than $3 billion a year in research and development. To continue funding innovation at that level, HP has to get the maximum from its investment.

The company began encouraging its managers to think more critically about the business. “What can this piece of IP do for us? Does it deliver a strategic benefit to the company? Does it help us do more for our customers or does it deliver a direct financial benefit?”

For Beyers, the whole process became “a recognition that HP really is an innovation company,” and that now “we were going to focus on how to do that even more capably.”


Decisions, decisions

In 2003, HP proceeded to methodically analyse its entire portfolio of IP. Beyers explains: “We wanted to be more clear about the reasons we might want to patent our innovations, and then more clear about what we might want to use in our own products, what we share with others, what we might license to generate revenue, and what we decide we must keep for ourselves.”

The company made its choices and began taking action. As a result, HP discovered significant new revenue streams from licensing.

Companies may want to set up so-called special purpose units, which license existing patents externally. Beyers recommends that companies setting up special purpose units should make sure that revenues from their efforts are distributed to the business units. “If you don’t give the revenue to the business units,” says Beyers, “you create a disincentive to cooperate,” which can result in bad decisions.

Predicting the future

“Making decisions on patents or licensing, or on what to open source—to do that you need to be able to see where the industry is heading five, ten or fifteen years down the road,” says Beyers. He and his colleagues are engaged in nothing less than trying to predict the future of technology. The challenge is enormous, particularly in an industry that’s moving so fast. Thanks to a sound IP strategy and framework and close ties between its business units, HP is in an excellent position to meet that challenge.

Another important aspect of HP’s IP management structure is its defined process for dispute resolution. And disputes do occur. For example, a business unit might want to share a patent in an open-source environment whereas another unit believes the innovation is too strategic for broad distribution. Alternatively, one executive might resist licensing a technology for fear it might become more valuable in the future, while another believes the company is forgoing too much in the way of current revenue.

In such cases, Beyers explains, “we have a very specific escalation process,” where one level at a time, the issue climbs the corporate ladder. In rare cases, it reaches the desk of the chairman and CEO, but usually issues are decided at a lower level. “When you get smart people together with good information, that dialog will usually result in a common conclusion.”

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Excess operating profits—Determines the value of IP by determining the company’s additional profits as a result of owning the IP compared to competitors who do not have the benefit of the IP.

Premium pricing method—Calculates the price difference between a branded product and an unbranded equivalent, net the marketing and other support costs to achieve this revenue.

Cost savings method—Values the IP by calculating the present value of the cost savings that the company expects to make as a result of owning the asset.

Royalty savings method—Based on the principle that if the business did not own the asset, it would have to license it in order to earn the returns that it is earning.

Market approach—Values the asset based on comparison with sales of similar assets. This is the preferred approach of the accounting standard setters.

Cost approach—Values an intangible asset by accumulating the costs that would be required to replace the asset.

If this sounds difficult, well it is—but certainly not impossible. Many technology companies entrust the valuation of intangible assets to valuation specialists who are able to reflect the risks and rewards attached to these assets by correctly applying the right valuation method and selecting the right discount rate.

For more information on how PwC can help your company value intellectual property, visit us at www.pwc.com/techconnect for links to ideas and solutions on how to exploit the value of IP in a complex world.

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Many technology companies admit that though they possess rich intellectual property, they cannot consistently generate premium returns on these assets. Even fewer can quantify their value.

The valuation of IP can be difficult. It’s hard to obtain the information needed to manage and enhance the value of IP. That, together with the sensitivity of that information, has held many companies back from even attempting to assign a value to their IP portfolio.

Instead, technology companies historically expensed intangible assets (e.g., cost of R&D or marketing). Even IP acquired through a merger or acquisition was often classified within goodwill under acquisition accounting—if at all.

This is beginning to change.

The strategic acquisition of IP as a competitive tool is heating up much of today’s convergence-driven M&A deals and along with it the necessity to value the IP. At the same time, companies are being hit with the double combination of increased accounting visibility due to regulations and greater scrutiny by tax authorities who question if they’re getting their fair share of taxable profits from a company’s IP during a transfer pricing event or when an intangible asset is acquired in different jurisdictions.

So how does a technology company value an intangible asset such as intellectual property?

Valuation methods

Most intangible assets generate incremental returns for the businesses that own them, either through an increase in revenues or through a reduction in costs. All valuation methods focus on capturing the value of these additional returns. There are a number of acceptable methods for financial statement purposes:

PwC connections

How to value intellectual property*


Questions for further reflection

How important is IP to your company?

What are your costs for acquiring/developing/ protecting IP and where do these combined efforts create value?

How do you know your company is getting the most value possible from its IP? How do you know whether your company is adequately valuing its IP?

How can you tighten the linkage among business strategies, R&D investments and IP protection?

How do you balance the need to protect core IP assets while encouraging broader collaboration with partners and customers—or even open-source technology?


Observation two: IP is a core strategic asset: the focus is shifting from litigation to managing and enhancing its value.


The survey shows that 69% of executives believe that IP management today is too often treated merely as a legal issue—a figure that rises to 74% among North American companies and 71% for companies based in Asia-Pacific. This is a particularly noteworthy statistic, say interviewees, because it indicates a legacy approach to IP management that will not work in today’s technology markets.

For example, Jean-Pierre Laisne, director of open-source strategy for France’s Bull, says, “There was a time when we had a protective, defensive view of patents.” In these early days, “there was this idea that we could try and patent everything and then it took a strong legal de-partment to protect what was ours.”

But today Laisne asserts: “A focus on patents and the courtrooms is counter-productive…Too many patents tend to stifle innovation within an industry.” Laisne maintains that without a significant degree of cooperation and collabora-tion, “the entire industry suffers.”

In any event, patent filing and administration in a global environment is too complex and expensive. “There are so many entities involved all over the world,” Laisne says. “So you cannot afford to patent everything and that means you must focus on your most vital technologies.”

Finally, says Laisne, the world is becoming “more open-source-oriented” and less focused on proprietary technologies. So “in an open-sourced world…you can see it makes sense to share a lot but then patent only what is essential to your business; what is strategic to your business.”

Figure 6. Percentage of executives who think IP management is too often treated as a legal, not a strategic issue

68.9%

71.2%

74.2%

62.5%

100.0%

54.6%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa


The value of patents

A company doesn’t have to have an open-source philosophy in order to anticipate a future of fewer but more strategic patents. For exam-ple, a second executive from Siemens says that his division is going through an evolution similar to Bull’s. “So many companies are prolific in patenting, but we ask ourselves, what is the value of that? To obtain a multi-jurisdictional international patent—the cost of that could exceed €200,000. Patenting something just to hold a patent?” Instead, says the executive, his company 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,” he continues. “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?” Answers to these questions aren’t always pre-cise. But obtaining the best answers possible, he insists, is important. To do that “requires a much closer working relationship between R&D and business units.”

So the most visible evolution in IP management at Siemens is creating a tighter link between research and business objectives. Increasingly, says the executive, “discussions with business unit people can help us determine the value of a technology, and that can tell us whether this is something to pursue or to protect.”

This is also a point where a “transaction” may take place, says the executive. He could not share the specifics of such an intracompany transaction, but essentially, “if a technology is deemed valuable, then the business unit buys in to the patenting process and begins helping to underwrite further development of the technology.”

Of course, business units and R&D labs at Siemens don’t always see eye to eye. Where there is a difference of opinion—say the R&D unit sees promise but the business unit doesn’t—the R&D group is free, within reason, to continue pursuing a given technology even without business unit backing. “There’s no set go/no-go point,” says the executive. Moreover, the expertise and intuition of the R&D execu-tives carry considerable weight. “It’s our job and our focus to see what’s coming—next month, next year, in the next five years. If we say it’s a viable technology, it’s something worth pursu-ing, we usually are allowed to keep going.”

Any discussion of specific details, says the executive, misses the point. Instead, “What you should understand is that these processes are becoming much more strategic and much more closely aligned with markets and the businesses. We’re not mysterious to one an-other. We’re working together consciously.”


The open source view

Of course, open-source-focused companies are the most vocal about championing a less patent-oriented IP strategy.

Matthew Szulik, CEO of open-source technology-focused Red Hat, says that the era of patent- or courtroom-focused IP strategy is over. For the last century, says Szulik, “Most companies at all costs tried to keep knowledge inside their four walls.” But now, says Szulik, particularly in complex and fast-evolving technology fields, “Collaboration is becoming an essential—if not the dominant—means to value creation.”

Look at today’s most successful technology companies, says Szulik, “and you will see that they are embracing models of open collaboration.” Next, “Look at the top engineers or scientists coming out of schools in any field today, and you’ll see a striking difference between now and ten or fifteen years ago.” Engineers of both today and yesterday “have absolutely outstanding critical thinking skills,” says Szulik. But the difference is that today’s crop “didn’t gain their experience working in a proprietary, solitary way. Instead, they’re a product of a highly collaborative, digitally-distributed environment.”

Szulik acknowledges that there is a place for patents and corporate secrets, but these should apply to only “your most essential, strategic

capabilities.” In fact, says Szulik, companies in all fields of technological endeavour that do not embrace open collaboration are doomed to sub-optimal performance. “Whether it’s a new line of code or a new process, we benefit from having thousands or millions of reviewers looking at a challenge, with each one having an opportunity to add something of value.” It’s the Wikipedia model, with hundreds of readers weighing in about any one item. Companies that don’t embrace this level of collaboration, says Szulik, “will find themselves at a severe disadvantage in their markets and with their customers.”


A second executive, this time from a European telecommunications company, says his com-pany gathers patents as a means of creating “currency” that can be traded with other tech-nology companies in a series of cross-licensing agreements. One goal, says the executive, “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 a secondary goal of a broad portfolio is to create a line of defence. As an executive from a US technology company explains, “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 insists his company is not litigious, he adds, “let’s just say that if you have your competitors’ products covered, they’re a lot less likely to come after you.” Consequently, says the executive, “we do a tremendous amount of strategic patent mapping.”

The landscape of lawsuits

Today, 47% of executives agree that a significant percentage of lawsuits are spurious, intended to harass the competition or extract an unde-served toll. The figure is significantly higher among North American executives (63%) than among executives in Asia-Pacific or Europe (both weighing in at 41%).

“Lawsuits are part of the landscape,” says an executive from a large US medical equipment maker. So even though his company is being more strategic in its IP management, “that’s not to say we’re not suing or being sued or haven’t been sued or haven’t sued or aren’t taking steps to reduce the chances of being sued in the future.” Naturally, “it’s your preference to avoid litigation in the first place.”

The most important step in avoiding litigation, says the executive, “is before you move for-ward, make sure you acquire or similarly have all the rights to all the needed patents.” Techno-logical due diligence is critical.

Figure 7. Percentage of executives who think today a significant and growing percentage of IP lawsuits are spurious, intended to harass competition

46.7%

40.7%

62.9%

40.6%

50.0%

18.2%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa


Patent trolling

Patent trolls are specialised companies with no research, manufacturing or selling assets of their own. They simply buy patents and wait for opportunities to collect fees. Patent trolls in one sense perform a service in that they help industries discover the value of IP. But at the same time, when the patents they deploy are of dubious commercial value, these also tend to stifle creativity, increasing the cost of conducting business.

Patent trolling affects companies worldwide. For example, Masnobu Katoh, a corporate vice president at Fujitsu (see page 27), cites patent trolling as one of the most critical issues facing his company. But the good news is that mat-ters may be improving. Specifically, on April 30, 2007, the US Supreme Court issued a ruling in the matter of KSR v. Teleflex that will make it more difficult to both obtain a new patent or defend an existing one. Essentially, the court greatly expanded its definition of what is “obvi-ous” and therefore patentable. Though this ruling should have no effect on the purchase and sale of legitimate patents based on sophis-ticated advances, it is viewed as a significant barrier to the most blatant acts of patent trolling.

Think fast; move fast

Though lawsuits remain common today, executives interviewed for the report say that IP management is perhaps only a few years away from a significant tipping point. An attorney for a major US consumer electronics company explains things this way:

“We know that technology is moving forward at a ridiculous pace. We know that patents are time consuming and expensive to file, manage and enforce on a global basis. Now think of the many avenues and great capacity for reverse engineering or otherwise circumventing any innovation. So a better approach is to become an engine of ideation coupled with incredibly rapid exploitation. Think fast; move fast.”

The attorney continues: “Patents have their place. If there’s something that’s absolutely fundamental to a product or service concept, you have to do your best to protect it. I’d be laughed out of any conference room if I was to indicate otherwise—and rightly so. But funda-mentally, the direction we’re heading, and the direction the technology markets are heading, is that things move too fast today and are too global to build business strategies based on pure IP protection.

“But now for the irony—we maintain a portfolio of defensive patents. These are technologies we’ve developed or acquired that aren’t neces-sary for anything we’re specifically engaged in pursuing. But they are essential and they’re right in the path of strategies our competitors are pursuing. So if they decide they want to sue us, we’ve got a deterrent.

“We’re not there yet. The marketplace isn’t there yet. But that’s where we feel you need to move your business models to survive in this century.”


Airtight security: The NSA

Of course, sometimes the value of the intellec-tual property is so great that not even a patent offers enough protection. That’s precisely the case with advanced military technology. An executive from a large US technology company asserts that, “the US government has so many concerns relating to security of IP that they created a special entity for the manufacture and distribution of advanced microchips.”

Kenneth White, senior media advisor with the United States National Security Agency-Central Security Service, won’t acknowledge the security aspect of the programme, but acknowledges that the executive is fundamentally correct. “The Trusted Access Program Office (TAPO) was established to provide a path for the Department of Defense and the intelligence community to have

guaranteed access to trusted microelectronics technologies for their critical system needs now and into the future.” Essentially, says White, “TAPO has bought prepaid access to certain IP that it makes available to [authorised] customers on an as-needed basis.”

According to the technology company executive, the NSA is doing a lot more than that. “They might make it sound like a routine operation,” says the executive, “but the truth is, they’ve realised they need to do more to provide access to leading-edge components and technology without exposing themselves to a whole lot of partners.” The programme, says the executive, “is intended to control access and protect IP. It’s an acknowledgement that there’s not a lot of faith out there that without special safeguards, our military technology is safe.”


Case study:

Fujitsu: IP and corporate strategy

At Fujitsu, Japan’s information and communications giant, R&D operations are a cauldron of intellectual property creation. But it is the linkage between IP management and business strategy that creates real value.

Maximising value

Masnobu Katoh, a corporate vice president at Fujitsu, is also the president of the company’s law and intellectual property unit. As Katoh explains, “Fujitsu is a technology company, of which the most valuable assets are technologies themselves—and the people holding such technologies in their brains…Our goal is to maximise such corporate value.”

“To obtain and enforce IP rights is not the ultimate goal,” says Katoh, but rather “is one of the ways to achieve the ultimate goal,” which is to create value for stakeholders. We work very closely with R&D groups and decide together the directions of the new tech-nology development and com-pany’s business strategy. We try to do our best to connect our IP-related activities, i.e., to acquire, manage and utilise an IP portfolio, with overall Fujitsu business strategies.”

Specific IP challenges

In terms of the most critical IP challenges facing the company, Katoh’s list includes:

Patent trolling Patent trolls are specialised companies with no research, manufacturing or selling assets of their own. They simply buy patents and wait for opportunities to collect fees. Patent trolls perform a service in that they help industries discover the value of IP. But according to Katoh, they also stifle creativity and increase the price of conducting business.

Open standards Katoh sees the open standards/open-source issue as a question of where to draw the line. Like many other technology companies, says Katoh, Fujitsu is trying to balance “the requirement for open standards and interoperability while keeping the appropriate proprietary and exclusive IP rights.”

Managing globally An intriguing aspect of Fujitsu’s approach is that its IP portfolio is centrally managed. As Katoh explains, “Our IP-related activities are global—and my group directly files and manages

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the global IP portfolio of almost all Fujitsu-affiliated companies.” According to Katoh, having a single, centralised patent portfolio for all Fujitsu companies “gives us more flexibility and maximises the overall value. There is no domestic and very unique market in our industry any more. If our business is global, our IP-related activities should be global, too.”

The future

Looking out into the future of IP management, Katoh sees a handful of critical trends and developments. First, he expects to see “more harmonisation on global IP systems, such as mutual recognition of patent registrations, at least among the world’s leading economies.”

Second, he believes it will become essential for technology companies to learn to operate amid open standards and open environments.

Third, and perhaps paradoxically, Katoh believes that illegal copying and piracy, especially in the developing economies, “will become a much more serious trade issue.”


PwC connections

How to manage IP as a strategic asset*

A strategic IP management strategy along with a robust monitoring system and an effective enforcement programme help technology companies increase revenues, improve licensing compliance and maximise the value of the company’s IP.

Sounds good, but most companies acknowledge that they lack the skills and processes to manage their intellectual management programme. Many are making it a top priority.

Leadership, processes and vision

Intellectual Asset Management (IAM) programmes offer a framework for the management of intangible assets. IAM programmes share common areas of focus:

Secure the company’s commitment to invest resources to develop a corporate IP programme.

Find the champion who will own the programme and drive a culture of IP through the organi-sation’s R&D, strategy and legal units.

Create the organisational processes and decision frameworks that help companies control their IP in terms of security and tracking.

Explore new economic models. Convergence-driven deals suggest that IP is being shared across industry lines and through new distribution channels.

Mining IP through licensing strategies

Technology companies can tap a huge reservoir of profit by licensing ideas to other companies. Out-licensing maximises the value of the IP while freeing the organisation from manufactur-ing and distribution risks. In-licensing can help companies quickly fill new product pipelines.

A separate PwC study, Licensing Competitiveness Study, shows that 50% of tech companies

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expect to increase their revenue from out-licensing this next year.

With an increasing reliance on licensing revenues, the risk of revenue leakage also grows because of underreporting.

License underreporting isn’t usually deliberate by the licensor. Rather, multiple and complex agreements can make monitoring and enforce-ment difficult and controls and IT systems might not align with the licensing agreement.

Technology companies often turn to third-party advisers to establsh compliance systems and perform forensic royalty procedures to stop leakage.

Managing your IP tax responsibilities

To the extent that intellectual property generates profits, governments want to tax it.

The impact of transfer pricing (the price at which goods or services are transferred between countries within the same organisation) on the management of IP often boils down to a simple choice: retain ownership, spread ownership around or create a hybrid approach. That choice, once made, may be the basis for a tax policy—each with its advantages and disadvantages.

A responsible approach to tax on intellectual property is about three things: complying with your obligations; paying what you should without overpaying; and taking the relief that is available. Seasoned tax professionals can work with technology companies to create the most opportunistic IP approach.

For more information on how PwC can help your company manage intellectual property as a strategic asset, visit us at www.pwc.com/techconnect for links to ideas and solutions on how to exploit the value of IP in a complex world.



As currently practiced, is IP management a legal issue or, more broadly, a strategic issue? What is the justification for this orientation and should the existing balance be reviewed/recalibrated?

Do you treat IP as a strategic asset class? Do you devote appropriate resources to IP manage-ment? Which elements of your IP management indicate a strategic approach?

At what point in the organisation are you mak-ing decisions relating to the use and protection of your most valuable IP? For example how are decisions being made regarding licensing, sale, copyrights, trademarks, trade secrets, patents or sharing your technologies?

Where does your company draw the line between an open-source environment and a proprietary environment? What is the justification? In light of customer needs and competitor actions, is the strategic course you’ve chosen likely to be sustainable?


Observation three:

Ample talent, lower operating costs and massive domestic market potential still lure technology investment to emerging markets, but executives must battle rampant noncompliance and piracy.


In the 1980s and 90s, technology companies valued emerging market economies primarily for their low-cost physical manufacturing capabilities. Technology goods were made in Taiwan and Southeast Asia and shipped back home for Western consumers.

India, China and Brazil, however, were also proving rich in their supplies of engineering and programming talent. Soon, technology companies began tapping these talent pools through outsourcing or limited offshoring. And as communications and collaboration technologies improved, technology companies began aggres-sively expanding their outsourcing or offshoring operations in emerging markets into full-blown software development facilities.

Today, in addition to their roles as suppliers of low-cost manufacturing and technology talent, emerging market economies are themselves

poised to become voracious consumers of technology products.

For these reasons, technology companies have been ramping up their research, manufacturing and sales strategies throughout a broad range of emerging markets.

But challenges remain. For example, what can be done to prevent or reduce patent infringe-ment or piracy in emerging markets? And how are emerging market operations being inte-grated within global programmes of IP creation, protection and utilisation?


Offshore IP creation accelerates

Technology companies have been expanding their emerging market research capabilities to a significant degree. So much investment has taken place that a full 43% of our respondents say that significant IP is now being created in emerging markets. North American executives in particular are relying on emerging market research centres for IP generation.

We asked executives in the survey to consider the following statement:

A significant degree of our IP value is now being created in our emerging market business entities.

Fifty-two percent (52%) of North American executives agree (31% agree and 21% strongly agree). By comparison, the figure falls to 33% for European executives, comprised of 6% who strongly agree and 27% who merely agree.

Similarly, 40% of executives agree that their companies are consciously shifting research from the developed world to emerging markets. Again, North America leads the way at 47%, with Europe lagging at 33%.

A good example of these trends is the Intel China Research Centre in Beijing. Intel has made significant investments in the Centre be-cause in Beijing, as an Intel executive explains, “we can tap the enormous, well-educated and well-prepared talent pool in China. And we also feel it’s important to be close to our markets.” Sophisticated R&D takes place at the Intel China Research Centre. “We have significant resources working on core technologies: appli-cations, processor design and manufacture, and intelligent computing—devices that can see, sense, hear, understand and respond.”

Offshoring and outsourcing are also important in IP creation. Holland’s IT integration giant Getronics (€2.6 billion annual revenues) recently announced that it would be outsourcing a signif-icant portion of its software application develop-ment to a much smaller India-based specialist company, MindTree Consulting ($100m annual revenues). According to John Pironti, Getronics chief information risk strategist, “it’s a strategic decision and a matter of focus, enabling us to reduce costs and at the same time focus more resources on consulting.”

Figure 8. Percentage of executives who strongly agree or agree that a significant degree of our IP value is now being created in our emerging market

43.0%

42.3%

51.6%

32.9%

75.0%

45.5%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa

Figure 9. Percentage of executives who agree that they are consciously shifting significant IP creation facilities/capabilities from developed to emerging markets

40.4%

34.6%

46.8%

32.8%

75.0%

63.6%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa


Inadequate protections

According to the survey, 63% of executives believe that IP protection in emerging markets is inadequate. Here, it is the Asia-Pacific-based executives (75%) who are the most critical of emerging cultural norms and market enforcement. Meanwhile North American executives weigh in at 65%, followed by Europe-based respondents who, at only 48%, are the least critical.

Still, even European companies can get burned by IP enforcement that isn’t yet up to international standards. As a London-based executive from a large IT-focused group explains, as far as certain emerging markets are concerned, currently there seems to be very little that can be done to prevent IP theft. “Our manufacturing teams tell us that within a month of bringing new equip-ment online,” in certain countries, often, “there’s an exact replica down the street able to produce identical quality with absolutely zero of the development cost.”

Things are significantly less troublesome in India, says the executive. “But even in India, nothing is safe.” Enforcement in India “is still

nowhere near up to the standard it needs to be.” Meanwhile, Eastern Europe, Brazil and Southeast Asia “are a bit of an IP no man’s land as well.” Overall, if companies want to take advantage of the “enormous labour cost arbitrage” as well as market access in emerging countries, “I guess we all have to take the bad with the good.”

But the fact remains, the state of IP protection in certain emerging market jurisdictions can be extremely difficult. As an executive for a large European technology engineering company explains, certain countries may be attractive for manufacturing, but they remain severe offenders in terms of IP rights (IPRs). “The rules are in place,” says the executive, but the problems [can] include “a corrupt judicial system, weak execution and a general cultural disregard for IPRs.”

Figure 10. Percentage of executives who agree that IP protection/enforcement is inadequate in emerging markets

63.0%

75.0%

64.5%

48.4%

75.0%

80.0%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa


The future of IP enforcement

Aren’t economies that fail to police IP shooting themselves in the foot? Thirty-seven percent (37%) of our surveyed executives say that even though emerging market investment in IP is accelerating, undeveloped regulatory environ-ments are a damper limiting investments. At 47%, the number of executives from North America sharing this view is significantly higher.

Meanwhile, 49% of executives—and 58% of European executives—say they expect the frequency and degree of worldwide patent infringement to increase considerably, and not merely in emerging markets.

Many executives say that what’s happening in certain emerging markets is a conscious and calculated effort by these nations to acquire capabilities. “Officials from these emerging markets aren’t oblivious to the fact that multi-national companies view their countries as cheap labour,” says an executive from a large European IT company. “So in return, these nations are turning a blind eye towards IP

enforcement. They’re trying to assimilate as much knowledge as possible as quickly as possible—and conserve hard currency in the process by avoiding a whole slew of licensing fees or royalties.”

Many executives believe, though, that the tide will eventually turn: as countries in Latin America, Eastern Europe and developing Asia begin to acquire their own portfolios of legitimate IP, it will give them an incentive to protect all IP.

A European IT executive points to India as an ex-ample. “Look at their software industry. It began as a low-cost centre for offshoring/outsourcing software development.” IP enforcement in India “was initially very, very bad.” Today, says the executive, there are a large number of indigenous consultants and integrators who got their start in outsourcing, learned their trade and built their capabilities and are now gathering higher value-added business…So now that they have their own portfolio of IP assets to protect, it’s not by coincidence that they are beginning to do a better job of IP enforcement.”

Figure 11. Percentage of executives who agree they have withheld significant investments in specific emerging markets owing to an undeveloped regulatory environment

36.8%

30.8%

46.8%

29.7%

75.0%

36.4%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa

Figure 12. Percentage of executives who agree that over the next 3-5 years, both the frequency and degree of patent infringement will rise considerably

49.2%

44.4%

48.4%

57.8%

75.0%

18.2%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa


Slow and costly in Brazil

Here is an example of a nation where the law generally favours IP protection, yet there is still a considerable amount of deficiency in the imple-mentation of effective systems for IP infringe-ment control, especially for preventing outright piracy. “Although the Brazilian legal environment can be considered as protective towards the enforcement of IP rights and the government has taken several actions in order to improve enforcement, there still exists a significant num-ber of IP infringement cases in Brazil, mainly with respect to knock-off products (CDs, DVDs, software and so forth),” says Richard Blanchet, a partner at the Loeser e Portela law firm in Sao Paulo who focuses on assisting foreign clients in their investments in Brazil.

Still, Blanchet advises, “You need to proceed with caution.” In the event of a dispute or infringement, the courts “may issue an injunc-tion and probably will ultimately decide in favour of the rights holders.” But the process is both expensive and painfully slow: “It may be four or five years before your case is decided.”

So Blanchet says that in Brazil, step one is being careful in choosing licensees or engaging in any form of partnership involving intellectual property. Upon sharing any significant IP or signing any significant contracts, it is vital to keep an accu-rate track of the licensee’s records (a regular due diligence is always recommended).

In addition, Blanchet cautions that “although in Brazil underreporting is not an issue, when drafting any IP agreement, make sure it spells out some procedures which will allow you to sometimes visit the plant floor, observe the production, audit the books—and see for yourself whether or not the numbers are correct.” In a surprising number of cases, common-sense provisions like these are not included in IP-related agreements.


China: a special case

The attractiveness of China’s low-cost manufac-turing prowess and its massive market opportu-nities need to be carefully balanced with the risk of IP infringement and loss.

IP protection may be getting better in India and Brazil, but don’t count on the same pace of evolution in China. With a long history of collective good favoured over private benefit, IP protection is a relatively new concept for the country. As a result, its nascent intellectual property legislative environment offers inconsistent relief. Add to that a number of highly autonomous provincial governments where national policies are enforced at a variety of levels and you have an extremely complicated situation.

Foreign technology companies also need to be sensitive to the reality that seeking protection only through litigation in China can be seen as harassment. Aggressive litigation in China creates a public backlash among potential partners and employees and can alienate government officials.

An executive for a large European technology engineering company agrees.

“Today, China is both an attractive manufactur-ing hub as well as the world’s worst offender of IP rights (IPRs).” The IP rules are in place, but the problems “are a weak judicial system and poor enforcement—although the judicial system will improve over time, due to an increasingly open society and to increasing demand from its citizens.”

The executive maintains that “India is already improving in terms of its IPR enforcement. But that’s because India is proving an effective innovator on its own.”

Not so China. People may point to the soaring number of patents being developed by Chinese companies, but to this executive, these patents are not important.

“From what I see, Chinese companies have not proven that they are great innovators. So they will continue to excel as optimisers—i.e., pro-viding excellent price/performance ratios—but they will also continue to disregard intangibles, including intellectual property.”


Competing against yourself

According to one senior executive, the global economy “has a dirty little secret: emerging markets are stealing the West’s intellectual property, and there’s very little we can do about it.” This executive, from a large European technology component manufacturer, has a jaundiced view about manufacturing in emerg-ing markets. “Strike a contract manufacturing deal in ‘you name’ the developing country, and you’re doing very well if a quarter of the pro-duction run winds up in your own warehouse.” It is even worse, he maintains, with regard to licensing agreements. “You’re fortunate if you’re receiving 10% of the revenue due to you.”

What this all means, says the executive, is simple. “If you use contract manufacture, yes, you will achieve low-cost production for sale in the West.” But “in the emerging market itself, and in the surrounding region, you will be competing against your own products.” Even worse, “they will be selling at a fraction of the price they should be, further cannibalising your own business.”

A partner with PricewaterhouseCoopers licensing management services, Melanie Butler, has a similar view. When it comes to licensing or contract manufacture in emerging markets, “it’s not uncommon for licensees to report only about 10% of their production.”

The primary strategy for dealing with these issues is “to be very careful about what IP you make available in an emerging market” says a senior executive from a large US technology company. “If it’s core technology, you don’t ship it to an offshore contract manufacturer or licensee or partner of any kind. You just don’t. It will be stolen.”


The audit clause

Once a licensing decision is made, companies must try to protect themselves. In particular, says Butler, “you need to include an audit clause in all of your contracts.” Such a clause “should spell out your right to bring in a third party to examine the books and facilities of your licensee.” More-over, “we recommend language that states if there is underreporting of a certain percentage, maybe 5%, the licensee not only pays a correct-ed amount, they also bear the cost of the audit.”

But even an audit clause isn’t enough to stop piracy in certain jurisdictions. For example, as an executive for a large European technology engineering company explains, “we use our intellectual property to differentiate our products and solutions in the market—we put together complete packages of products and technologies that can’t be matched by our competitors.”

To meet demand, the company has had to expand its use of China-based contract manu-facturing. Consequently, in China, says the executive, “it has become a daily struggle to protect ourselves from intellectual property theft.”

The executive says that nothing can eliminate IP theft or attrition entirely. However, there are steps that can help. First and foremost, the

company does everything it can to select “only trusted partners” for licensing agreements. The company always makes provision for occasional audits of the relationship. Finally, “we mark our products with code identifiers so that we can tell the fake from the genuine. Then we employ a law firm to go after illegitimate products.”

Other interviewees suggested a higher level of due diligence in terms of choosing licensees. In particular, although license agreements are typically entered in to with subsidiaries, it is im-portant to understand a company’s ownership structure as it may be possible to derive influ-ence from above. Yet another approach: if upon terminating a licensing agreement a licensee still is not in compliance, then go and speak with the licensee’s customers. Once the licensee begins losing business, cooperation often improves.

But in spite of such efforts, the above executive explains, companies need to understand a single truth about today’s technology markets. Essen-tially, no technology is safe from theft, reverse-engineering or technological leapfrogging. The executive maintains that in the end, “constant innovation is the only real and effective remedy.”

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WIPO’s World IP Academy

The World Intellectual Property Organisation (WIPO) is the division of the United Nations charged with promoting the global protection of IP rights. Yo Takagi is an executive director at WIPO in the office of strategic planning and policy development. In addition, he spearheads one of the organisation’s principal vehicles for promoting IP rights, the WIPO World Academy.

Fostering IP awareness

The Academy’s original mission, says Takagi, “was to provide training and education on intellectual property to policy makers.” The focus was on helping nations understand the role that international property protection can play in improving their economies.

But about a year ago, Takagi relates, the programme was expanded “to focus on industry and business people…Today, we’re working with universities in emerging markets like Brazil and China to develop appropriate curricula for different audiences.” For business people, “we would focus on the economics of IP protection.” For engineering students, “we’d avoid a lot of the legal issues and focus on the general concepts.”

In general, says Takagi, “knowledge in emerg-ing markets in these areas is very limited.” By providing instruction, the WIPO World Academy is helping companies in emerging markets find workers who understand IP.

101 and up

While many of the courses focus on fundamentals, the level of sophistication advances rapidly. “We start with the basics

of why intellectual property exists and how it impacts innovation and an economy,” says Takagi. From there, the studies tackle specific corporate challenges “such as how to align IP to business needs or how to manage a development project from start to finish.” Additionally, “We cover the financial, accounting and taxation aspects of IP management.”

Where and when the courses are offered is largely a product of demand. For example, the group recently expanded its offerings in Brazil because Brazil produces many thousands of Ph.D.s in science and engineering annually, yet its IP protection statistics are poor. So Takagi’s group spoke to the Brazilian government about improving their IP system. Those discussions led to the establishment of IP education at the university level in Brazil, along with opportunities for professional networking.

School for seniors

The Academy and WIPO itself are always looking for ways to advance global IP protection and management through policy or managerial improvements.

For example, Takagi cites education for senior executives as one of WIPO’s initiatives. According to Takagi, “a lot of executives and CEOs aren’t as familiar with IP protection and strategy as they should be.”

In another initiative, WIPO is “talking to various organisations about how to create specialised financing and lending for IP.” Takagi says that the more liquidity and visibility there is in IP valuation, “the more value there is for innovation.”

Exploiting intellectual property in a complex world


Case study:

EDS: Introducing discipline to IP management

According to Jean Lehmann, an EDS Fellow as well as a member of the company’s IP governance board, “though we’ve always generated IP, we haven’t always brought a disciplined approach to the matter. That is, we don’t really have a long history of harvesting IP.”

But all that is changing. Today, the group is in the midst of a multi-year targeted investment in infrastructure upgrades and applications development. So in addition to the company’s existing stores of IP, these technology investments are undoubtedly leading to the cre-ation of even more IP. With the stakes rising, says Lehmann, it becomes “vital that we have a defined strategy and process-es for identifying, valuing—and protecting—IP.”

The new strategies

Like many other groups in this report, EDS is taking a hard look at its IP processes. The technology services company is seeking to both improve its IP-related decision-making as well as develop a more IP-focused culture. Here, Lehmann defines three steps:

1. Identify/Inventory

EDS is undertaking a systematic evaluation and inventory of its existing and evolving intellectual property. But a first step here, says Lehmann, is helping to bring the organisation up to speed relating to the origin and value of IP. So, as Lehmann explains, “we now have a course we offer to all of our chief software architects and all of the subject matter experts (SMEs) working under them.” This course, says Lehmann, “is designed to help people understand what IP is, how it is created, where it has value and what we need to do to protect that value.”

From there, Lehmann is helping the company take stock of its stores of IP. One way this is accomplished is through direct interaction. According to Lehmann, EDS is in many ways organised as a grouping of core competencies. For example, one concentration of expertise is in data storage.

So to take inventory, explains Lehmann, “we find who has ownership of storage technology, we discuss with them the criterion and develop a targeted list” of likely stores of IP value. Next, “we talk to all of the SMEs and in this way, we learn all we can, and we make sure we get all the good [IP] gems out of every section.”

However, the process is not always so neat and tidy. For example, as Lehmann explains, “we also have a lot of situations where we have a percentage stake in other companies.” Here, says Lehmann, “we have to do a determination of who owns the IP.”

2. Protect

Next, the company needs to decide which pieces of IP need protection—as well as the best form of protection in each case. Here, explains Lehmann, “we need to work through the valuation of the various pieces of IP and review the way we use this IP.” Only then, says Lehmann, “can we make the best decision about the best way to protect it.”

Sometimes protection means the pursuit of patents. But “patents can take years and they’re expensive” says Lehmann. Moreover, in software, “because technology moves


so fast, a patent’s lifespan is limited.”

So in most cases, less intensive steps are pursued, such as the IP’s designation as a “copyright or trade secret” says Lehmann. Distinctions are important says Lehmann, because they require very different organisational treatment. For example, “once something becomes a trade secret,” says Lehmann, “we have to start sharing it only on a need-to-know basis. We log who wanted to see it and why. We say ‘this’ has value, and we start to protect it ourselves.”

This particular aspect of protection is already having an impact on operations. For example, says Lehmann, “we need to be clear when something is a trade secret—and we need to control access.” Again, says Lehmann, “this is why it’s important to provide training—because so much of IP protection and management requires a change in behaviour.”

3. Leverage

Finally, says Lehmann, you need to extract optimum value from your IP, an ongoing exercise that requires looking at and continuously re-evaluating a number of variables.

For example, who should pay for the development of IP and

for how long? As Lehmann explains, “we’re in the business of designing something once and then using it multiple times. We want to take more of a life cycle approach for our IP.”

Closely related, it is important, says Lehmann, to “make sure clients understand the value of the IP they’re accessing” through their relationship with EDS. In many cases, “clients don’t realise what they have with us—so it’s important for us to be specific.”

Additionally, EDS has to make decisions relating to which pieces of IP distinguish the company as an innovator or thought leader. “It is important that our clients recognise or perceive us as leaders with the very best technology,” says Lehmann. “So sometimes we protect a piece of IP because it shows the market that we have best-of-breed processes.”

EDS also needs to continually evaluate the degree to which it shares its IP in open-source environments. So ultimately, decisions on where to draw the line become, as Lehmann describes them, “very situ-ational. It’s not a brick wall, it’s a wobbly line with holes in it and it moves all the time.”

The new IP discipline

There are additional elements to EDS’s new IP discipline. For example, the company now has an executive level IP board (of which Lehmann is a member) for evaluating strategies and effectiveness as well as a patent board charged with decision-making on a more tactical level. But the most important thing of all, says Lehmann, is that her company is now approaching IP systematically and critically. “We weren’t doing that as proactively in the past,” says Lehmann. But going forward, “we’re going to do much more—culturally and organisationally—to generate and capture all the IP value we can.”


PwC connections

How to manage IP value in China*

As the previous pages in our report point out, attempts to protect IP in China pose a considerable challenge. The source of this challenge is complex and includes many factors such as:

The ability of Chinese manufacturers to bring derivative products to the global market at significantly lower price points.

The insistence of the Chinese government on transference of IP intangibles to local manufacturing plants.

Uncertain outcomes to the rights of IP owners that occur in Chinese courts and among law enforcement entities.

High levels of IP transference occurring through employee movement from other geographies followed by redeployment in China.

Taking a fatalistic approach, many foreign technology companies treat these IP obstacles as the cost of doing business in China. But PricewaterhouseCoopers recommends shifting away from an emphasis on protection and moving towards a strategy of value management. Key IP value management recommendations include:

Assume that the IP challenges in China and other emerging low-cost markets will not be significantly mitigated for many years. This is not going to go away.

Reduce dependence on conventional IP protection mechanisms. Position your IP strategy within the broader context of value management and overall business strategy.

Create and preserve IP using a value management approach that attunes core operations to the task. Recognise that IP value can be preserved using a number of non-merchandise activities such as service adjuncts and distribution controls.

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Maximise manufacturing flexibility to preserve the value of innovation. Rapid versioning, agility in increasing or reducing capacity of product lines and supply chain responsiveness can all enable your company to introduce products with new features and higher quality than the competition.

Tailor pricing and marketing to fit accelerated versioning capabilities. Aggressive pricing can complement rapid versioning, making it difficult for less capable manufacturers to keep pace.

Increase service capabilities to preserve product value. Don’t overlook the fact that value-added services and brand attributes can turn a desirable product into an essential one.

Consider merger and acquisition and partnering activities that can take IP infringing capability out of the market. Deeper, more definitive and exclusive equity relationships along the supply chain can align the interests of participants around protecting core IP value.

Engage with various levels of government, business and academic leaders in China to encourage positive legal developments and policies that protect IP rights.

The above was excerpted from PricewaterhouseCoopers’ Redefining Intellectual Property Value: The Case of China, a Technology Centre Publication. To order a hard copy or download the full report, visit www.pwc.com/techconnect and click on the publication title in the right column.

For more information on how PwC can help your company manage IP value in China, visit us at www.pwc.com/techconnect for links to ideas and solutions on how to exploit the value of IP in a complex world.

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Emerging markets are a source of low-cost pro-duction and market access over the short term. But by placing your IP at risk, what might your company be jeopardising over the long run?

What is the interplay between IP protection and human resources management in emerging markets? Does your company consider which workers are in a position to acquire IP knowledge in tandem with its employee retention and development efforts?

What steps is your company taking to encour-age emerging market governments to step up enforcement of IP regulations? What steps are you taking to encourage government officials from your home country to apply pressure to emerging market regulators?

With more and more research and production facilities being located in emerging markets and with these and related teams collaborating globally: what additional steps are necessary to protect your most vital IP?


Observation four: Companies are making incremental improvements to their IP management, but they will need to move faster.


There is no question that companies are improving their IP management. The survey provides significant detail relating to current and evolving practices and also hints at a coming era of dramatic transformation.

Management structures: Who is currently in charge of IP at technology firms?

The leading approach is to rely on C-suite executives for IP management. This is the practice at 38% of companies. Another 36% of respondents say that responsibility lies with line or business-unit executives. Finally, 21% of companies rely on a separate, specialist unit for the management of IP.

Anecdotally, the number of special purpose organisations appears to be on the rise. For example, as HP’s Beyer explains, “Over the past few years, we seem to have noticed a lot of companies taking steps to reorganise their IP management.”

But it is important to note that the definition of a special-purpose organisation varies widely from company to company. At some firms, the scope of these organisations is very narrowly focused. Some concentrate solely on generating licensing agreements. At HP, by contrast, the IP unit is involved in all aspects of IP from strategy to operations.

However their companies are structured to man-age IP, 71% of our respondents say that a focus on short-term results inhibits the development of more sophisticated processes for managing IP, and 66% of executives say that current ac-counting practices understate the value of IP.

Technology companies that undervalue IP and do not focus on its management are undermin-ing their own efforts because IP is their key driver of value. But there is hope. Executives are slowly realising that IP is increasingly essential to their businesses, and they are becoming more active in its management.

Figure 13. Which one of the following best describes where responsibility/oversight for IP management lies at your company?

20.7%

38.3%

35.8%

5.2%

0.0%

A separate IP R&Dmanagement unit

or committee

Senior C-suite executives

Line or business unit management

Regional management

Other

Figure 15. Percentage of executives who agree that current accounting practices understate the value of IP

65.6%

65.4%

64.5%

61.0%

100.0%

90.0%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa

Figure 14. Percentage of executives who agree that a focus on short-term results inhibits the development of sophisticated processes for managing IP

70.9%

75.0%

66.1%

70.3%

75.0%

81.9%

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa


Enhanced reporting

Certainly one area destined for change is the reporting of strategy and performance in IP management. As the value of IP grows, inves-tors and regulators can be expected to grow commensurately curious. As things stand today, most reporting is optional. For example, a com-pany in the US or Europe might report a small degree of its IP valuation in order to qualify for a specialised investment tax credit—but overall, very little of material value is shared with the public. Generally speaking, “that means companies can be as transparent as they like,” says PricewaterhouseCoopers partner David Marston.

Most companies today don’t seem especially interested in transparency. As the survey reveals, only 16% indicate that they provide supplementary reporting. However, the survey also shows that over the next three years the number of executives saying their companies will add IP-related information to their reporting more than doubles, reaching 35%.

In this regard, companies in North America (38%) and Asia-Pacific (37%) are the ones leading the way. Meanwhile, with only 23% anticipating that they will be providing supplementary reporting in the near future, European companies lag. “Which is not entirely surprising,” says Bull’s Laisne. “I believe in general, US companies, and maybe Japanese companies, are ahead of most of Europe in this kind of thinking.”

Other forces may accelerate the trend toward greater reporting—even beyond the rate of change predicted by this survey. A senior executive for a major US technology company reports that “a number of Wall Street analysts are starting to ask a lot more questions in this area.”

He continues: “This past year, we were in a meet-ing and we were suddenly bombarded with ques-tions about our portfolio of patents. What value were we placing on our patents? How come our licensing revenue wasn’t more visible? What were we doing to make sure we were getting all the licensing revenue we should be from a com-pliance point of view. Then, how did we know we were licensing everything we should be licensing? How were we aligning our R&D spend with our business model and our customer base?”

When the EIU then asked the executive how his company answered these questions, the reply was “no comment.” He explains: “That’s not necessarily what was said to the analyst, but that’s all I’m going to say here today.”

What this highlights, says PwC’s Marston, “is how close to the vest executives like to hold this sort of information…IP is about as strategic as it gets.”

Figure 16. As a supplement to financial reporting, does your company now—or will it in the next 3-5 years—voluntarily issue additional information in the form of supplementary IP reports?

34.9%

36.5%

37.7%

23.4%

75.0%

63.6%

16.4%

22.0%

17.7%

6.3%

66.7%

27.3%

Now 3-5 years

Total

Asia-Pacific

North America

Europe

Latin America

Middle East& Africa


Opaque by design

Of course, another reason executives may resist IP management reporting is because they’re not cer-tain how they stack up relative to the competition.

Marston says: “We see a lot of portfolios of IP just waiting around with nothing being done.” What companies should be doing, “is valuing their IP, embedding new technology in their own products, licensing what they can, or selling what that should.” In short, “one of the reasons people may not want to be transparent is because they aren’t being as effective as they could be.”

An executive for a large Japanese technology company suggests other reasons for secrecy. “There is also a case to be made that there is enough reporting as it is…Any partners with whom we are working and whom we trust are aware of what we are working on together, so reporting would not be of any use in this case.” Ultimately, says the executive, “you must also understand that we don’t want to signal to our competitors the directions we are considering.” Too much reporting too soon “could limit our success.”

The evolving role of valuation

To understand the future of IP management, it is useful to consider where companies themselves see a need for improvement. A comparison of what companies say is important with what com-panies say they do best reveals a critical gap in the practice of IP management. Specifically, the survey shows that companies need to do much more in the valuation of IP assets. Overall, both the survey and interviewees show that this is an area on the verge of profound change.

First consider how companies prioritise activi-ties associated with IP management. According to the survey, the most important IP manage-ment activities are:

Developing new IP assets (67%)Maximising the value of existing IP assets (50%)Valuing IP assets (40%)

Furthermore, 44% of North American and 42% of European respondents include valuing IP among their top three priorities, compared to only 31% of Asia-Pacific respondents.

Less frequently cited activities include patent registration (32%), purchasing or otherwise acquiring additional IP assets (26%) and pro-tecting IP rights through litigation (11%).

Next, the survey asked which activities respon-dents felt their companies performed most capably. Here the top three answers are:

Developing new IP assets (63%)Maximising the value of existing IP assets (36%)Acquiring new IP assets (29%)

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The number three priority in terms of impor-tance, valuing IP assets, falls to fifth place, at 18%, in terms of capability. In other words, companies know that the ability to place a value on specific IP is essential, yet they realise their companies aren’t getting it right.

The power to place a value on IP assets is criti-cal. As an executive from Siemens explains, “if you cannot value your IP, you cannot prioritise your research and development.” This is one of the primary reasons his company is attempting to create more interaction between business units and R&D: “The business units know their marketplace; the R&D units know technology. It is only by working together that you can begin to place an accurate value on your IP.”

Developing new IP assets in-houseAcquiring IP assetsMaximising existing IP assetsPatenting/registering IP assetsValuing IP assetsManaging IP portfolio risksStructuring tax-efficient IP ownershipStructuring IP ownership from an optimal legal perspectiveProtecting IP through litigationOther

A.B.C.D.E.F.G.H.I.J.

Figure 17. Which of the following IP-related challenges are the most important for your company? Select up to three.

67.0% 25.9% 49.7% 32.5% 40.6% 22.3% 6.6% 11.7% 11.2% 1.0%

ABCDEFGHIJ

Figure 18. Which of the following IP-related challenges do you think your company performs best? Select up to three.

62.4% 28.9% 35.5% 27.4% 18.3% 18.3% 7.1% 12.2% 8.6% 0.5%

ABCDEFGHIJ


The patent exchange

An executive from a large US IT company thinks that help may be on the way. “One of the things that’s being considered—a large number of players are discussing it—is the development of a formalised, global marketplace for IP.” He feels that the advantages of such a system, described below, would be enormous.

The executive says that one way such a system could develop is through the idea of a patent tax: an annual tax assessment based on the implied valuation of any IP and then paid by the owner to a central IP market-making body. This payment, says the executive, “would be at a rate designed to meet the costs of administering a marketplace—and no more.”

In practice, a third party could challenge the valu-ation of IP “by issuing a good-faith binder and then stating a new, higher value for the IP.” If the owner of the IP is willing “to pay the patent tax at the higher level, then he gets to retain the IP.” If not, says the executive, then the company is-suing the challenge would be obliged to execute a purchase of the IP at the higher valuation. As the executive explains, “the company issuing the challenge would post the IP tax based on the higher price of the IP,” and then purchase the IP from the prior owner at the new, higher valuation.

What such a marketplace would deliver, says the executive, “is an objective, market-based means of promoting efficiency in IP manage-ment…a great thing for companies, for regula-tors, for investors—everyone benefits from transparency, liquidity and standardisation.”

An IP market may be years away, but the impor-tant thing, the executive maintains, “is that a lot of very serious-minded and involved parties—academics, corporations, law firms—are taking part in the early discussions.” What he believes will happen is that IP exchanges will form on a very small scale, “developing slowly at first but then gaining critical mass, creating exponential growth.” Liquidity and transparency, says the executive, are “the future of intellectual property.”

Rush to market

A final theme addressed by many of our in-terviewees is the growing need for speed. As an executive from a large European consumer electronics company explains, “the rate of decay on any product today is just brutal.” Consequently, says the executive, “companies today have to learn to accelerate every aspect of their businesses.”

For example, in the “old days” of consumer electronics, “you could, over many months, take your time to create a handful of prototypes… You could test-market what you’d created to see how consumers responded in Tokyo before tweaking your idea then bringing it to Europe or America.” But today, “five minutes after you release your product on the streets somewhere, anywhere in the world, someone’s already trying to create a knockoff, reverse engineer what they’ve seen or just steal your product.”

So now, continues the executive, “you don’t have six months to plan your marketing campaign, your production and your distribu-tion—you have six weeks…The value of an innovation today decays very fast—and advan-tage belongs to the first to innovate. It’s only the most extraordinary IP that has a shelf-life that’s worth the effort of a regional or global patent.” Increasingly, says the executive, “it’s all about speed, innovation and IP protection. But if we had to choose only two of the three, we would choose speed and innovation.”


Throughout this report we examine the desire for a more strategic exploitation of the value of IP, moving beyond legal protection. Already we see the shift. According to a separate PwC study, awards in patent cases have levelled off and patent holders win only about 35% of the time. The number of patent and trademark disputes filed in the US recently fell for the first time in 16 years.

The best IP management programmes efficiently integrate the legal department along with the R&D and business unit functions. To transform to this structure is neither simple nor quick. It can take years, especially if the organisation is large with numerous information silos. Technology companies that have made the shift can attest to increased revenues, strengthened investor confi-dence and longer-term competitive advantage.

To transform

Start by getting top-level executive support and buy-in for the transformation. IP management touches multiple functions—many of which are new to IP management. The transformation must be proactive and led by a clear IP champion—the Chief IP Officer.

Create an interim steering committee composed of business unit leaders. Engage these leaders so that a sense of ownership is created and a culture of IP takes root. Use the steering committee to:

Perform an IP assessment. The first step in getting there is knowing where you are. Figure out where IP is created and maintained. Demonstrate immediate value by identifying specific risks and opportunities.

Create the transformation roadmap. This multi-phased project timeline captures the goals, controls & processes, ownership, and IT systems needed to transform the company’s IP strategy.

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PwC connections

How to transform into a strategically driven IP company*

Establish a comprehensive IP governance structure. This governance avoids derailing the transformation as complex cross-border systems are developed and implemented.

The smell of success

You’ll know you’ve transformed to a fully functioning IP management system that’s light years ahead of the competition when you can:

Assess whether you have the right patents

Acquire patents that add value to your R&D

Know how your IP stacks up against your competitors’

Easily make IP protect vs. sell decisions

Calculate the value of the IP in R&D pipeline

Recognise a culture of IP throughout the company

Know that the right IP controls are in place

Determine the return on your IP investment

Manage change through your people

The biggest hurdle to change into a strategically-driven IP company is the company itself. In separate studies, PwC has found that 9 out of the 10 top barriers to change are people related.

To manage change successfully, companies need people-driven principles and processes that can guide the organisation from its current to its desired state.

For more information on how PwC can help your company transform into an IP powerhouse, visit us at www.pwc.com/techconnect for links to ideas and solutions on how to exploit the value of IP in a complex world.

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If the financial-disclosure rules changed suddenly and you were required to report on intellectual property, what story would you have to share? Would your shareholders be pleased?

What internal mechanisms are you using to value your intellectual property? Are you confident they are providing accurate insights?

Are you achieving optimal returns from your IP assets? Are your patents earning all the revenue they should be?

Have you considered the formation of a special purpose entity or board level committee for managing your intellectual property? What would be the relative advantages of one approach versus another?

What is the background of the executives who would serve in a special purpose entity? How would you select executives to serve on an intel-lectual property board or committee?

Patents, copyrights and related protections are one avenue for obtaining value from IP. But in what ways could your company increasingly de-ploy speed as a means of exploiting the value of its innovations?


Conclusion


Technology is synonymous with innovation. In-tellectual property management is essential for protecting and sustaining competitive advan-tage in any technology endeavour. However, our report demonstrates that technology executives are not confident that they are getting the most from their IP strategies.

While a worldwide IP market is a promising idea, it is many years from becoming a reality. What should be done in the meantime? This report has a number of recommendations.

First, it is vital to create closer links between business units and R&D activities. This leads to a more accurate valuation of existing IP assets as well as a tighter alignment of fundamental research with the realities of customers and markets.

Companies also need to treat their IP as a portfolio. Business units, IP professionals and R&D can then collaboratively and continually review the portfolio for potential gaps. While these portfolios will be primarily focused on emerging opportunities, they might also contain defensive IP to thwart litigation from competitors.

Furthermore, companies need to do more with their portfolios of protected technology. Centralised inventories of IP can be marketed

•

•

•

to others, resulting in significant incremental income streams. Any such “found money” only serves to increase the value of innovation.

Companies also need to revisit their processes for determining which, when, where and how they will protect their technologies. Is a patent the correct approach or is a copyright all that’s needed? (A copyright gives one the exclusive right to license or make copies of a work, while a patent, granted by a government, gives one the exclusive right to manufacture or sell an invention.) Should patent protection be global in nature or will a regional patent be sufficient?

Companies should also review their approach to emerging markets. Is IP being created in offshore research centres and, if so, how is it being protected? Are your licensees paying their fair share or do you need to increase your compliance activities? Are you exposing sensitive IP to emerging markets and, if so, do commercial reasons justify your risk?

Finally, each company needs to ask itself: are we moving as fast as we can? Many executives believe that while patents are important, any company that looks exclusively to patents to preserve its value will soon have little of value to preserve.

•

•

•

The key to technology success is continuous innovation.


Appendix

Survey methodology 55

Results of the survey 56

Profile of the survey respondents 66

Acknowledgments 68

PwC technology industry leaders by country 70


Survey methodology

The analysis in this report is based on the results of a survey conducted in March 2007 by the Economist Intelligence Unit.

Analysis

The survey relies on a variety of question formats. For example, on a number of questions, respon-dents were asked to respond on a scale of 1 to 5 with 1 being ‘strongly agree’ and 5 being ‘strongly disagree.’ In other cases, comparison phrases such as ‘highly accurate/not accurate’ or ‘very exten-sively/not extensively’ were used within a similar five-point scale to capture attitudes and practices. In still other cases, respondents were asked to choose their top three answers or select all that apply. The report itself uses actual percentages from the survey in every case. But in many situa-tions, the analysis may combine two similar categories of answers (such as all those respondents who chose 1 or 2) to draw its conclusions. While such combinations are referenced in all cases, the tables themselves (appearing on the following pages) are often useful for a more detailed view of the responses.

Industry sectors

The survey results come from executives in the technology, telecom and digital media sectors. In order of frequency, the specific sectors include software developers (40%), business information content developers (23%), B2B hardware manufacturers (9%), consumer electronics/device makers (9%), wireless distribution service providers (6%), hard-wired distribution service providers, e.g., cable providers (5%), semiconductors and other component makers (4%), and entertainment content developers (4%).

Seniority of respondents

A cross-section of executives responded to the survey. The specific titles include manager (24% of the total responses), CEO/president/managing director (20%), SVP/VP/Director (15%), head of business unit/department (12%), CIO/Technology director (10%), board member (6%), other C-level executive (3%), CFO/treasurer/comptroller (3%) and ‘other’ title (7%).

Geography

The respondent profiles are also well dispersed geographically. Approximately 31% come from North America, 30% from Western Europe, and 28% from Asia-Pacific. Other regions represented in the survey include Middle East and Africa (6%), Eastern Europe (3%), and Latin America (2%).


3a. A focus on short-term results inhibits the development of sophisticated processes for managing IP.

2. Over the next 3-5 years, do you expect that the importance of intellectual capital to the value of your company will increase, decrease or remain about the same?

3b. Current accounting practices understate the value of IP.

1. How important do you think IP management is to the success of your company?

1

2

3

4

5

6

52.0%

30.6%

8.7%

7.7%

1.0%

0.0%

27.2%

44.1%

21.0%

4.6%

2.1%

1.0%

1

2

3

4

5

6

20.1%

45.9%

21.1%

6.2%

3.1%

3.6%

1

2

3

4

5

6

DecreaseIncrease

Remain the same

84.7%

13.3%

2.0%

Strongly agree

Strongly disagree Don’t know

1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

3. How strongly do you agree or disagree with the following statements:

Results of the survey

In March 2007 the Economist Intelligence Unit conducted an online survey of 197 technology company executives globally on the intellectual property challenges faced by their companies. Our sincere thanks go to all those who took part in the survey.

Responses to survey questions (in the order asked) are provided on the pages that follow as the share of respondents giving the particular answer. Please note that not all answers add up to 100%, because of rounding or because respondents were able to provide multiple answers.


3c. Our company could extract significantly more value from existing IP and IP formation if it devoted more assets and attention to relevant processes.

3d. Our board is sufficiently informed and pays adequate attention to the management of IP.

3e. IP management is too often treated as a legal, not a strategic issue.

4. Which of the following are the greatest sources of IP-delivered value for your company? Select up to three.

72.6% 37.1% 30.5% 14.7% 53.3% 19.8% 11.7% 16.2% 11.7% 1.0%

ABCDEFGHIJ

26.7%

42.1%

22.1%

5.1%

3.1%

1.0%

1

2

3

4

5

6

20.0%

41.5%

26.2%

7.2%

2.6%

2.6%

1

2

3

4

5

6

14.9%

26.2%

32.8%

19.5%

3.6%

3.1%

1

2

3

4

5

6

Internal R&DPartnerships/alliancesLicensing (our technology to other companies)Licensing (the technology of others)Using IP in our own products or servicesJoint ventures Defensive IP (acquiring or developing IP to discourage competitors)Use of open source IPPartnership with universities/public sector institutionsOther


Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.


6. As a supplement to financial reporting, does your company now—or will it in the next 3–5 years—voluntarily issue additional information in the form of supplementary IP reports?

7. Which of the following IP-related challenges are the most important for your company? Select up to three.

8. Which of the following IP-related challenges do you think your company performs best? Select up to three.

5. Which of the following trends/issues are of critical importance to your company’s IP strategies/practices? Select up to three.

29.4%

43.7%

28.4%

52.3%

41.1%

43.1%

0.5%

A

B

C

D

E

F

G

Extending supply chains to emerging marketsRemote/offshore R&D in emerging marketsGoods and services outsourcingPartnerships/alliances IP compliance (ensuring our company does not infringe on others IP rights) IP compliance (ensuring others do not infringe on our IP rights)Other

A.B.C.D.E.F.G.

NoYes

Don’t know

16.2%17.8%

66.0%

34.5%

47.9%

17.5%

Now Next 3-5 years

Developing new IP assets in-houseAcquiring IP assetsMaximising existing IP assetsPatenting/registering IP assetsValuing IP assetsManaging IP portfolio risksStructuring tax-efficient IP ownershipStructuring IP ownership from an optimal legal perspectiveProtecting IP through litigationOther


67.0% 25.9% 49.7% 32.5% 40.6% 22.3% 6.6% 11.7% 11.2% 1.0%

ABCDEFGHIJ

62.4% 28.9% 35.5% 27.4% 18.3% 18.3% 7.1% 12.2% 8.6% 0.5%

ABCDEFGHIJ

Developing new IP assets in-houseAcquiring IP assetsMaximising existing IP assetsPatenting/registering IP assetsValuing IP assetsManaging IP portfolio risksStructuring tax-efficient IP-ownershipStructuring IP ownership from an optimal legal perspectiveProtecting IP through litigationOther



12a. Offshore development of our company’s IP assets is accelerating significantly.

9. Which one of the following best describes where responsibility/oversight for IP management lies at your company?

11. Approximately what percentage of your company’s IP-related income stems from external licensing/sale (versus internal product development) now, and what do you think the proportion will be in 3-5 years?

10. Approximately what percentage of your company’s IP is protected by the following mechanisms?

A separate IP R&D management unit or committeeSenior C-suite executivesLine or business unit managementRegional managementOther

A.B.C.D.E.

Strongly agree


1.2.3.4.5.6.

A

B

C

D

E

20.7%

38.3%

35.8%

5.2%

0.0%

External licensing/saleInternal product development

65.3%

17.8%

32.9%

62.3%

47.9%

37.0%

Now Next 3-5 years

Design/copyrightRegistration (e.g., registered patents)

Other (e.g., trade secrets or specified as “confidential” in employee and supplier contracts)

34.3%37.4%

39.4%

20.0%

27.7%

20.0%

13.3%

17.4%

1.5%

1

2

3

4

5

6


Average of the percentages provided by the respondents.

Average of the percentages provided by the respondents.


12b. We are highly capable in terms of managing IP on a global basis.

12c. We actively use digital rights management, employing technology to control access and/or usage of our protected/proprietary digital data or hardware.

12d. We are increasingly collaborative, sharing and developing IP through partnerships, JVs and alliances.

12e. Open source cooperation is an insignificant element of our business strategy.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

12.3%

28.2%

28.7%

20.5%

8.2%

2.1%

1

2

3

4

5

6

11.8%

28.7%

23.6%

19.0%

12.8%

4.1%

1

2

3

4

5

6

11.3 %

35.6 %

33.0 %

10.8 %

7.7 %

1.5 %

1

2

3

4

5

6

15.5%

23.7%

32.0%

16.0%

10.8%

2.1%

1

2

3

4

5

6


14a. A significant degree of our IP value is now being created in our emerging market business entities.

14b. We are consciously shifting significant IP creation facilities/capabilities from developed to emerging markets.

14c. IP protection/enforcement is inadequate in emerging markets.

13. Which of the following are significant practices in emerging markets for your company? Select all that apply.

Licensing our IP to domestically domiciled (emerging market) companies Forming partnerships/collaborations with domestic companies to share and develop IPForming JVs with domestic companies to share and develop IP Entering into contract R&D arrangements with third-party companies in emerging marketsEstablishing wholly-owned R&D facilities in emerging marketsLicensing IP from domestically domiciled companiesNot applicable/Don’t know

A.

B.

C.D.

E.F.G.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

31.5%

47.2%

26.4%

36.0%

25.9%

14.2%

19.3%

A

B

C

D

E

F

G

13.3%

29.7%

19.5%

18.5%

13.3%

5.6%

1

2

3

4

5

6

10.8 %

29.2 %

21.5 %

20.0 %

15.4 %

3.1 %

1

2

3

4

5

6

27.3%

35.1%

22.2%

8.2%

2.6%

4.6%

1

2

3

4

5

6



15. In which of the following markets does your company “host” (own, use or create) significant IP assets? Which markets do you expect these will be in 3-5 years? Select all that apply.

14d. In terms of IP management, our emerging market operations are fully coordinated with our global efforts.

14f. We have withheld significant investments in specific emerging markets owing to an undeveloped regulatory environment.

14e. Tax regulations relating to IP transfer in emerging markets inhibit our ability to optimise global IP.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

Strongly agree


1.2.3.4.5.6.

11.3%

28.7%

31.8%

14.9%

6.7%

6.7%

1

2

3

4

5

6

5.6%

23.1%

31.3%

9.2%

8.2%

22.6%

1

2

3

4

5

6

9.7%

27.7%

27.7%

14.4%

9.7%

10.8%

1

2

3

4

5

6

55.8%

61.4%

38.6%

54.8%

40.1%

27.4%

62.9%

54.8%

14.7%

29.9%

35.5%

8.1%

A

B

C

D

E

F

Now

3-5 years

United StatesWestern EuropeEastern Europe Emerging Asia (includes China, India and Vietnam)Developed AsiaLatin America

A.B.C.D.E.F.


16. Which of the following markets do you think have the most effective laws regarding IP? Select up to three.

17. Over the next 3-5 years, do you expect your company’s use of the following approaches to capitalising on IP to increase, decrease or remain about the same?

17a. Internal R&D

17b. Partnerships/alliances

17c. Licensing (your technology to other companies)

United StatesWestern EuropeEastern Europe Emerging Asia (includes China, India and Vietnam)Developed AsiaLatin America

A.B.C.D.E.F.

90.4%

73.6%

4.6%

7.1%

28.9%

0.0%

A

B

C

D

E

F

DecreaseIncrease

Remain the same

65.6%

24.1%

8.2%

Don’t know

2.1%

Next 3-5 years

DecreaseIncrease

Remain the same

68.7%

22.6%

6.7%

Don’t know

2.1%

Next 3-5 years

DecreaseIncrease

Remain the same

54.9%

30.3%

7.7%

Don’t know

7.2%

Next 3-5 years


17d. Licensing (the technology of others)

17e. Joint ventures

17f. Acquiring IP

17g. Use of open source IP

DecreaseIncrease

Remain the same

42.4%

37.7%

11.0%

Don’t know

8.9%

Next 3-5 years

DecreaseIncrease

Remain the same

45.0%

35.1%

8.9%

Don’t know

11.0%

Next 3-5 years

DecreaseIncrease

Remain the same

46.6%

34.2%

10.9%

Don’t know

8.3%

Next 3-5 years

DecreaseIncrease

Remain the same

53.4%

25.7%

7.9%

Don’t know

13.1%

Next 3-5 years


17h. Partnership with universities/public sector institutions

18. Which of the following statements do you agree with? Select all that apply.



Today, a significant and growing percentage of IP lawsuits are spurious, intended to harass competition. Over the next 3-5 years, countries that fail to adequately enforce IP regulations will suffer economically. Over the next 3-5 years, both the frequency and degree of patent infringement will rise considerably. In 10 years time, IP will become the primary driver of value creation in technology. In 10 years time, investors and regulators will require reporting on IP valuation.

A.

B.

C.

D.

E.

Over the next 3-5 years, legislation and court decisions will increasingly favour users more than owners. In spite of rapid technological advance, global patent authorities and regulators continue to demonstrate the necessary skills, resources and knowledge to capably rule on IP issues. Over the next 3-5 years, differences in recognition and harmonisation of global patents among differing patent authorities will become increasingly contentious. Quality in emerging-market authorities’ IP administration and enforcement is severely lacking.

A.

B.

C.

D.

In 10 years time, IP theft in emerging markets will no longer be a problem because these nations will have their own home-grown IP to protect. In 10 years time, global IP theft will have become so pervasive that the pace of innovation will markedly decline. In 10 years time, companies domiciled in emerging markets will catch up to or overtake those from developed nations in terms of generating IP. In 10 years time, the pace of technological advancement will be so accelerated that the value of process or technology patents will diminish.

A.

B.

C.

D.

39.1%

36.5%

56.3%

43.1%

A

B

C

D

46.2%

55.8%

49.2%

43.1%

39.1%

A

B

C

D

E

38.1%

24.9%

46.2%

32.5%

A

B

C

D

DecreaseIncrease

Remain the same

42.0%

36.8%6.7%

Don’t know

14.5%

Next 3-5 years


Profile of the survey respondents

Which of the following best describes your title?

Manager 24.4%

CEO/President/Managing director 20.3%

SVP/VP/Director 14.7%

CIO/Technology director 10.7%

Other 7.6%

Head of department 6.1%

Board member 5.6%

Head of business unit 5.6%

CFO/Treasurer/Comptroller 2.5%

Other C-level executive 2.5%

What are your main functional roles? Choose no more than three.

IT 41.6%

Strategy and business development 34.0%

General management 32.5%

Marketing and sales 24.9%

R&D 18.8%

Information and research 13.2%

Finance 9.6%

Customer service 6.6%

Risk 6.6%

Operations and production 5.6%

Other 3.0%

Human resources 2.0%

Supply-chain management 1.5%

Legal 1.0%

Procurement 1.0%


What type of company do you work for?

Software developer 39.6%

Content developers (business information) 22.8%

Nonconsumer hardware manufacturer 10.2%

Consumer electronics/device manufacturer 8.6%

Wireless distribution service provider 5.6%

Hard-wired distribution service provider (e.g., cable TV operator) 4.6%

Semiconductors and other components maker 4.6%

Content developers (entertainment) 4.1%

Other 0.0%

What are your organisation’s global annual revenues in US dollars?Over $10bn 13.7%

$5bn to $10bn 4.6%

$1bn to $5bn 11.7%

$500m to $1bn 13.2%

$250m to $500m 8.1%

Under $250m 48.7%

In which region are you personally based? North America 31.8%

Western Europe 29.7%

Asia-Pacific 27.7%

Middle East & Africa 5.6%

Eastern Europe 3.1%

Latin America 2.1%


Acknowledgments

PricewaterhouseCoopers prides itself on the concept of Connected Thinking. For this study we drew support and expertise from staff members with varied experience and knowledge from around our firm and from around the world. A core group of PricewaterhouseCoopers staff worked diligently to produce this publication. These team members include:

Intellectual property management

Andrew Bell PwC Partner, London +44 207 804 8040 [email protected]

Melanie Butler PwC Partner, London +44 20 7804 5158 [email protected]

Chris S. Cooper PwC Partner, Beijing +86 0 10 6533 2108 [email protected]

Ken DeWoskin PwC Partner, China +86 1370 1234 181 [email protected]

Mark Haller PwC Partner, Chicago +1 312 298 2550 [email protected]

David Marston PwC Partner, San Francisco +1 415 498 6585 [email protected]

Technology executive connections project team

From PricewaterhouseCoopers: Teresa Perlstein Ann Marie Rosa Fiona Scholes

From the Economist Intelligence Unit: Nigel Holloway Bill Millar

Further acknowledgment to:

Richard Blanchet Partner, Loeser e Portela Advogados +55 11 3674 2814 [email protected]


About us

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 140,000 people in 149 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

The depth of our industry expertise, like our international perspective, is an attribute that our clients value highly. We invest significant resources in building and sharing such expertise. As a result, the people of PricewaterhouseCoopers have the scope, depth and expertise to advise technology companies on the issues facing their business in a converging world. We work with these companies to help them achieve success and fulfill the promise of great ideas.


Argentina Jorge Carballeira +54 11 4850 6802 [email protected]

Australia Paul McNab +61 2 8266 5640 [email protected]

Austria Aslan Milla +43 1 501 88 1700 [email protected]

Belgium Koen Hens +32 2 710 7228 [email protected]

Bermuda George Holmes +1 441 299 7109 [email protected]

Bolivia Cesar Lora Moretto +591 2 240 8181 [email protected]

Brazil Estela Vieira +55 11 3674 3802 [email protected]

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Canada Ben Kaak +1 416 365 8858 [email protected]

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Colombia Diego Henao +57 1 635 5016 [email protected]

Czech Republic Petr Sobotnik +420 251 152 016 [email protected]

Denmark Allan Vestergaard Andersen +45 39 45 91 12 [email protected]

Ecuador Luciano Almeida +593 2 256 4142 [email protected]

Finland Marko Korkiakoski +358 9 2280 1220 [email protected]

France Xavier Cauchois +33 1 56 57 10 33 [email protected]

Germany Kerstin Müller +49 69 9585 5700 [email protected]

Gibraltar Colin Vaughan +350 73520 [email protected]

Greece George Naoum +30 210 6874 030 [email protected]

Guatemala Luis Valdez +502 2 420 7800 [email protected]

Hungary Nick Kós +36 1 461 9335 [email protected]

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Israel Joseph Fellus +972 3 795 4683 [email protected]

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PwC technology industry leaders

PwC can help

PricewaterhouseCoopers delivers value with a global perspective through local implementation. Please contact the technology industry leader nearest you to discuss the challenges facing your company and how we can help you.


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Malaysia Uthaya Kumar +60 3 2693 3957 [email protected]

Mexico Enrique Bertran +52 55 5263 6000 [email protected]

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Norway Bjorn Leiknes +47 02316 [email protected]

Paraguay Ruben Taboada +595 21 445 003 [email protected]

Peru Orlando Marchesi +511 211 6500 [email protected]

Philippines Wilfredo Madarang +63 2 459 3011 [email protected]

Poland Adam Krason +48 22 523 4475 [email protected]

Portugal Luis Ferreira +351 213 599 300 [email protected]

Russia Natalia Milchakova +7 495 967 62 40 [email protected]

Singapore Greg Unsworth +65 6236 3738 [email protected]

Spain Antonio Vázquez +34 91 568 4674 [email protected]

Sweden Magnus Brändström +46 8 555 333 66 [email protected]

Switzerland Franco Monti +41 58 792 16 21 [email protected]

Taiwan Wilson Wang +886 3 5780 205 [email protected]

Thailand Prasan Chuaphanich +66 2 344 1121 [email protected]

Turkey Haluk Yalcin +90 212 326 6065 [email protected]

United Arab Emirates Douglas Mahony +971 4 3043151 [email protected]

United Kingdom Stephen Mount +44 20 7213 3606 [email protected]

United States of America William Cobourn +1 646 471 5750 [email protected]

Uruguay Javier Becchio +598 2 916 0463 ext. 1352 [email protected]

TEC4-0607

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© 2007 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP. BS-BS-07-0424-A.0607.KKW

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