Exploiting Intellectual Property

*connectedthinking
Asset management
Exploiting intellectual property
in a complex world*
Technology executive connections
Volume 4
The survey
The quantitative ndings 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 ve principal regions:
28% Asia-Pacic; 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 Avogados
Melanie 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 Limited
Jean-Pierre Laisne, Director, Open Source
Strategy, Bull
Jean Lehmann, EDS Fellow, Member of the IP
Governance Board, EDS
David Marston, Partner, PricewaterhouseCoopers
John Pironti, Chief Information Risk Strategist, Getronics
Matthew Szulik, CEO, Red Hat
Yo Takagi, Executive Director, Ofce of Strategic
Planning and Policy Development, World Intellectual
Property Organization (WIPO)
Kenneth White, Senior Media Advisor, National
Security Agency (NSA)
Not for attributionexecutives from:
Apple
BT
Cisco
HCL Technologies
Tata Consultancy
Intel
LG Group
Nokia
Philips
Qualcomm
Samsung
Siemens
Swisscom
Texas Instruments
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 todays 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 todays
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, were seeing
a shift in the corporate view of IP, moving away from being strictly a legal issue and towards inclusion
in the companys 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 rms 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 rst 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 inuence on M&A activity across the technology, telecommunications
and media sectors. The third explored the industrys struggle with nding 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
weve discussed herein as well as your ideas for future topics to explore. Please feel free to contact
me via email at tech.connect@us.pwc.com.
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 dont 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 reection
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*
20

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*
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*
44

50

51
Conclusion 52
Appendix
Survey methodology
Results of the survey
Prole of the survey respondents
Acknowledgments
PwC technology industry leaders
54
55
56
66
68
70
2 PricewaterhouseCoopers
Note de synthese Executive 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.
Linnovation, la recherche et le dveloppement,
les avances, les brevets, les droits dauteur,
les secrets commerciaux et la proprit in-
tellectuelle sont autant de concepts vitaux
dans le secteur de la technologie. Lenqute
suivante montre nanmoins que les dirigeants
dentreprises technologiques estiment ne pas
avoir encore acquis le niveau de comptences
requis dans la gestion de la proprit intellectu-
elle. Dans une re marque par lacclration de
linnovation et des dcouvertes, les dirigeants
dentreprises technologiques reconnaissent
quils doivent maximiser la valeur de leur por-
tefeuille de proprit intellectuelle. Pour aider
les dirigeants des entreprises technologiques
relever les ds et saisir les opportunits
inhrents cette situation, lEconomist Intel-
ligence Unit et PricewaterhouseCoopers ont
men, en mars 2007, une enqute lchelle
mondiale auprs de 197 chefs dentreprises ;
cette enqute a t complte par plus de 30
interviews approfondies de chefs dentreprises.
Les rsultats sont prsents ci-dessous.
3 Exploiting intellectual property in a complex world
Inhaltsbersicht
Innovation, Forschung und Entwicklung, Pat-
ente, Copyrights, Geschftsgeheimnisse und
geistiges Eigentum sind das Fundament fr
den nachhaltigen Erfolg von Technologieun-
ternehmen. Trotz ihrer zentralen Bedeutung sind
viele Fhrungskrfte der Meinung, dass sich
ihr Unternehmen in diesem Bereich bessern
muss, um im Zeitalter beschleunigten Innova-
tionsdrucks und steigender Entwicklungsak-
tivitten bestehen zu knnen. Fhrungskrfte
haben die Notwendigkeit der Wertmaximierung
ihres Portfolios an geistigem Eigentum fr ihr
Unternehmen erkannt. Um Technologier-
men bei der erfolgreichen Bewltigung die-
ser Herausforderungen zu untersttzen, hat
PricewaterhouseCoopers in Zusammenarbeit
mit der Economist Intelligence Unit (EIU) eine
Online-Umfrage durchgefhrt. Im Mrz 2007
wurden dafr weltweit 197 Manager befragt und
die Ergebnisse durch mehr als 30 vertiefende
Interviews mit Fhrungskrften ergnzt.
20073
19730
The four principal observations are:
Les quatre principales observations sont les suivantes:
Die vier wichtigsten Beobachtungen in diesem Zusammenhang waren:
1. Although IP is an ever-more important asset class, technology executives dont believe

their companies are extracting its full value.
Bien que la proprit intellectuelle soit une catgorie dactifs plus importante que jamais,
les dirigeants des entreprises technologiques estiment quils nexploitent pas pleinement
sa valeur.
Obwohl geistiges Eigentum als Vermgenswert zunehmend an Bedeutung gewinnt, nutzen
Unternehmen sein Potenzial derzeit nicht in vollem Umfang
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 dont believe their companies
are extracting the full value from their rms intellectual capital.
Dans un contexte de mondialisation de lconomie, le capital de
connaissances reprsente aujourdhui une plus grande part de la
valorisation boursire des socits cotes que les actifs tangibles.
Si ceci sapplique particulirement aux entreprises technologiques,
les dirigeants de ces entreprises nestiment pourtant pas exploiter
pleinement la valeur du capital intellectuel de leurs socits.
Bei brsennotierten Unternehmen weltweit bersteigt mittlerweile
der Wert immaterieller Vermgensgegenstnde den der
materiellen. Dies gilt insbesondere fr die Technologiebranche.
Dennoch scheitern die betroffenen Firmen daran, den gesamten
Nutzen aus ihrem geistigen Eigentum abzuschpfen.

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 signicantly more
value from their intellectual
property by means of active
IP management.
Executives in general do not
express a high degree of
condence 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 proprit intellectuelle est un actif stratgique : lattention, jusquici centre sur les
litiges, se roriente 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
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 dentreprises dclarent que les litiges lis aux biens
de proprit intellectuelle sont une ralit incontournable. Mais
aujourdhui, lattention est davantage centre sur la gestion
stratgique des biens de proprit intellectuelle que sur les
batailles judiciaires.
Fr viele Manager sind Rechtsstreitigkeiten zur Durchsetzung
von Urheberrechts- und Patentansprchen nahezu unvermeidbar.
Doch allmhlich steigt das Bewusstsein, dass es sinnvoller ist, ihr
geistiges Eigentum strategisch einzusetzen anstatt Zeit und Geld
in langwierigen Prozessen zu vergeuden.
Over two-thirds of executives

today believe that IP manage-
ment is too often treated merely
as a legal issuea belief partic-
ularly prevalent among respon-
dents in North America and
Asia-Pacic. 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.
Labondance des talents, les cots oprationnels moins levs et le potentiel norme
que reprsentent les marchs domestiques continuent dattirer les investissements
technologiques vers les conomies mergentes, mais les dirigeants doivent lutter contre
les problmes endmiques de conformit et contre le piratage.
Emerging Markets locken durch qualizierte Fachkrfte, geringere Betriebskosten und
einen riesigen Heimatmarkt. Diesem Potenzial steht zunehmender Diebstahl von geistigem
Eigentum gegenber
Survey respondents say their companies have expanded their

research capabilities in emerging markets to the point where
signicant 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 inadequateand interviewees say critical IP
is almost impossible to protect completely in some countries.
Les participants lenqute dclarent que leurs entreprises
ont dvelopp leurs capacits de recherche sur les marchs
mergents, o une part non ngligeable des biens de proprit
intellectuelle est cre aujourdhui. Mais paralllement, prs de
deux-tiers des personnes interroges dclarent que la protection
de la proprit intellectuelle sur les marchs mergents est
insufsante, et les participants estiment que dans certains pays,
il est quasiment impossible dassurer une vritable protection des
biens de proprit intellectuelle critiques.
Technologieunternehmen dehnen ihre Forschungs- und
Entwicklungsaktivitten vermehrt auf Entwicklungslnder aus
und beginnen, auch dort geistiges Eigentum zu produzieren. Und
das, obwohl Urheberrechte und Patente unzureichend geschtzt
werden. Zwei Drittel der befragten Fhrungskrfte sind der
Meinung, dass wichtiges geistiges Eigentum in manchen Lndern
nicht effektiv geschtzt werden kann.
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 ralisent des progrs marginaux dans la gestion de leur proprit
intellectuelle; elles devront nanmoins mettre les bouches doubles.
Zgerlich verbessern Unternehmen das Management ihres geistigen Eigentums, doch
sie mssen schneller agieren
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 specic 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
edged IP strategy in order to
stay competitive.
Companies are endeavouring to introduce signicantly 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 sefforcent daccrotre la sophistication de leur
gestion des biens de proprit intellectuelle. Le processus
dvolution est lent, mais ira en sacclrant au cours des
annes venir.
Unternehmen bemhen sich, ihr geistiges Eigentum deutlich
besser einzusetzen. Noch sind ihre Fortschritte gering, werden
aber in den kommenden Jahren an Fahrt gewinnen.
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 its core technology, you dont ship it to an
offshore contract manufacturer or licensee
or partner of any kind. You just dont. 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 denition. According to
Horatio Gutierrez, a vice president and deputy
general counsel in Microsofts intellectual prop-
erty and licensing group, Were 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 youll 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 eld.
Observation one:

Although IP is an
ever-more important
asset class, technology
executives dont 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 lions share of market valuation. This is
particularly true for technology companies.
Consider Microsoft. We are an IP company by
denition, 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, Were a company that moves
forward based on big ideas. Our core compe-
tence and market valuation doesnt 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 Ill 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 thats not
including the R&D thats inside much of the
technology we rely on to make these games.
Games are so sophisticated today that in
nearly every waydirection, actors, artists,
scores, scripts, motion capture, we havent
even mentioned programming or game design
toolstheyre 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, thats
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-
Pacic (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
Indias 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 ve years. Eighty-ve
percent (85%) of our respondents expect IP
management to increase in importance. At 89%
agreement, executives in Asia-Pacic 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 signicantly 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, thats 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 condence 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 signicantly 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
Dont 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 partnershipsa signicant
element in the pursuit of digital convergence.
According to an earlier report in this series
1
,
alliances/partnerships will be the number two
2

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%
werent 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
External
licensing 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]
portfolioand if the value is great enough on
both sides, we agree we wont charge each
other, well 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 its worth
and why and both companies evaluate one
anothers 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 cant 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,
its 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. Its not easy.
Case study:
Hewlett Packard: Four in one
In terms of IP management,
Hewlett Packards 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 rst 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 benet to
the company? Does it help
us do more for our customers
or does it deliver a direct
nancial benet?
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
signicant 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
dont 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 sourceto do that you
need to be able to see where
the industry is heading ve,
ten or fteen 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 thats 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 HPs IP management
structure is its dened 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 specic
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.
18 *connectedthinking
Excess operating protsDetermines the
value of IP by determining the companys
additional prots as a result of owning the IP
compared to competitors who do not have
the benet of the IP.
Premium pricing methodCalculates the
price difference between a branded product
and an unbranded equivalent, net the
marketing and other support costs to achieve
this revenue.
Cost savings methodValues 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 methodBased 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 approachValues the asset based on
comparison with sales of similar assets. This
is the preferred approach of the accounting
standard setters.
Cost approachValues an intangible asset
by accumulating the costs that would be
required to replace the asset.
If this sounds difcult, well it isbut certainly
not impossible. Many technology companies
entrust the valuation of intangible assets to
valuation specialists who are able to reect 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.
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 difcult. Its 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 classied within goodwill
under acquisition accountingif at all.
This is beginning to change.
The strategic acquisition of IP as a competitive
tool is heating up much of todays 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 theyre getting their fair share of
taxable prots from a companys 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 nancial statement purposes:
PwC connections
How to value intellectual property*
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 customersor 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 issuea gure that rises to 74% among North American
companies and 71% for companies based in Asia-Pacic. This is a particularly
noteworthy statistic, say interviewees, because it indicates a legacy approach to IP
management that will not work in todays technology markets.
For example, Jean-Pierre Laisne, director of
open-source strategy for Frances 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-productiveToo
many patents tend to stie innovation within
an industry. Laisne maintains that without a
signicant degree of cooperation and collabora-
tion, the entire industry suffers.
In any event, patent ling 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 worldyou 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 doesnt 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 Bulls. So many companies are prolic in
patenting, but we ask ourselves, what is the
value of that? To obtain a multi-jurisdictional
international patentthe 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 cant 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 arent 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 specics 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 dont always see eye to eye. Where
there is a difference of opinionsay the
R&D unit sees promise but the business unit
doesntthe R&D group is free, within reason,
to continue pursuing a given technology even
without business unit backing. Theres no set
go/no-go point, says the executive. Moreover,
the expertise and intuition of the R&D execu-
tives carry considerable weight. Its our job and
our focus to see whats comingnext month,
next year, in the next ve years. If we say its a
viable technology, its something worth pursu-
ing, we usually are allowed to keep going.
Any discussion of specic 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. Were not mysterious to one an-
other. Were 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 elds,
Collaboration is becoming an essentialif not
the dominantmeans to value creation.
Look at todays 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
eld today, and youll see a striking difference
between now and ten or fteen years ago.
Engineers of both today and yesterday have
absolutely outstanding critical thinking skills,
says Szulik. But the difference is that todays
crop didnt gain their experience working in
a proprietary, solitary way. Instead, theyre
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 elds of technological endeavour that do not
embrace open collaboration are doomed to sub-
optimal performance. Whether its a new line of
code or a new process, we benet from having
thousands or millions of reviewers looking at a
challenge, with each one having an opportunity
to add something of value. Its the Wikipedia
model, with hundreds of readers weighing in
about any one item. Companies that dont
embrace this level of collaboration, says Szulik,
will nd 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 elses
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, Its good to
have a broad portfolio, even if its not something
that you yourself are commercialising in your
own products. While the executive insists his
company is not litigious, he adds, lets just
say that if you have your competitors products
covered, theyre 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 signicant
percentage of lawsuits are spurious, intended
to harass the competition or extract an unde-
served toll. The gure is signicantly higher
among North American executives (63%) than
among executives in Asia-Pacic 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, thats not
to say were not suing or being sued or havent
been sued or havent sued or arent taking steps
to reduce the chances of being sued in the
future. Naturally, its your preference to avoid
litigation in the rst 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 signicant 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 stie 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. Specically, on April 30,
2007, the US Supreme Court issued a ruling
in the matter of KSR v. Teleex that will make
it more difcult to both obtain a new patent or
defend an existing one. Essentially, the court
greatly expanded its denition 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 signicant
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 signicant 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 le, 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 theres something thats absolutely
fundamental to a product or service concept,
you have to do your best to protect it. Id be
laughed out of any conference room if I was to
indicate otherwiseand rightly so. But funda-
mentally, the direction were 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 ironywe maintain a portfolio
of defensive patents. These are technologies
weve developed or acquired that arent neces-
sary for anything were specically engaged in
pursuing. But they are essential and theyre right
in the path of strategies our competitors are
pursuing. So if they decide they want to sue us,
weve got a deterrent.
Were not there yet. The marketplace isnt there
yet. But thats 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. Thats 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, wont acknowledge
the security aspect of the programme,
but acknowledges that the executive is
fundamentally correct. The Trusted Access
Program Ofce (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, theyve
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.
Its an acknowledgement that theres 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, Japans 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 companys
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-
panys 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.
Specic IP challenges
In terms of the most critical IP
challenges facing the company,
Katohs 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 stie 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
Fujitsus approach is that
its IP portfolio is centrally
managed. As Katoh explains,
Our IP-related activities
are globaland my group
directly les and manages
the global IP portfolio of

almost all Fujitsu-afliated
companies. According
to Katoh, having a single,
centralised patent portfolio
for all Fujitsu companies
gives us more exibility
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 worlds 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
companys 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 companys 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-
sations 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 prot 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 ll new product pipelines.
A separate PwC study, Licensing Competitiveness
Study, shows that 50% of tech companies
1.
2.
3.
4.
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 isnt usually deliberate
by the licensor. Rather, multiple and complex
agreements can make monitoring and enforce-
ment difcult 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
prots, 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.
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 justication 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 justication? In light
of customer needs and competitor actions, is
the strategic course youve 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 signicant degree. So much investment has
taken place that a full 43% of our respondents
say that signicant 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 signicant 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 gure 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 signicant 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 its important to be close to our markets.
Sophisticated R&D takes place at the Intel
China Research Centre. We have signicant
resources working on core technologies: appli-
cations, processor design and manufacture, and
intelligent computingdevices that can see,
sense, hear, understand and respond.
Offshoring and outsourcing are also important
in IP creation. Hollands 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, its 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 signicant 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 signicant 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-Pacic-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 isnt 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, theres
an exact replica down the street able to produce
identical quality with absolutely zero of the
development cost.
Things are signicantly 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 mans
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 difcult. 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
Arent 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 signicantly higher.
Meanwhile, 49% of executivesand 58% of
European executivessay they expect the
frequency and degree of worldwide patent
infringement to increase considerably, and not
merely in emerging markets.
Many executives say that whats happening in
certain emerging markets is a conscious and
calculated effort by these nations to acquire
capabilities. Ofcials from these emerging
markets arent 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. Theyre trying to assimilate as
much knowledge as possible as quickly as
possibleand 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 businessSo now that they have their
own portfolio of IP assets to protect, its 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 signicant investments in specic 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 deciency 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 signicant 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 rm 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
ve 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 signicant IP or signing any
signicant contracts, it is vital to keep an accu-
rate track of the licensees 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 oor, observe the
production, audit the booksand 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 Chinas 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 dont count on the same pace
of evolution in China. With a long history of
collective good favoured over private benet,
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 ofcials.
An executive for a large European technology
engineering company agrees.
Today, China is both an attractive manufactur-
ing hub as well as the worlds worst offender of
IP rights (IPRs). The IP rules are in place, but
the problems are a weak judicial system and
poor enforcementalthough 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
thats 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 optimisersi.e., pro-
viding excellent price/performance ratiosbut
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 Wests intellectual
property, and theres 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
youre 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. Youre fortunate if youre
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,
its 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 its core technology, you dont
ship it to an offshore contract manufacturer or
licensee or partner of any kind. You just dont. 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 isnt 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 marketwe put together
complete packages of products and technologies
that cant 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 identiers so that we can tell
the fake from the genuine. Then we employ a
law rm 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 companys ownership
structure as it may be possible to derive inu-
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
licensees 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 todays 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.
39
WIPOs 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 ofce of strategic planning and
policy development. In addition, he spearheads
one of the organisations principal vehicles for
promoting IP rights, the WIPO World Academy.
Fostering IP awareness
The Academys 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 peopleToday, were 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, wed 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 nd
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 specic
corporate challenges such as how to align
IP to business needs or how to manage a
development project from start to nish.
Additionally, We cover the nancial, 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 Takagis
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 WIPOs initiatives. According
to Takagi, a lot of executives and CEOs arent
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
nancing 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 companys IP
governance board, though
weve always generated IP,
we havent always brought
a disciplined approach to
the matter. That is, we dont
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 companys
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
dened strategy and process-
es for identifying, valuingand
protectingIP.
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 denes three steps:
1. Identify/Inventory
EDS is undertaking a
systematic evaluation and
inventory of its existing and
evolving intellectual property.
But a rst 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 nd 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
protectionas 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
theyre expensive says
Lehmann. Moreover, in software,
because technology moves
so fast, a patents lifespan
is limited.
So in most cases, less intensive
steps are pursued, such as the
IPs 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 its important to
provide trainingbecause
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, were 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 theyre accessing
through their relationship with
EDS. In many cases, clients
dont realise what they have
with usso its important for
us to be specic.
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. Its not a brick wall, its
a wobbly line with holes in it
and it moves all the time.
The new IP discipline
There are additional elements
to EDSs 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 werent doing that as
proactively in the past,
says Lehmann. But going
forward, were going to do
much moreculturally and
organisationallyto 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
signicantly 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 signicantly 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.
Maximise manufacturing exibility 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 t accelerated
versioning capabilities. Aggressive pricing can
complement rapid versioning, making it difcult
for less capable manufacturers to keep pace.
Increase service capabilities to preserve
product value. Dont 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 denitive 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 Redening
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.
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.

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 ofcials
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 signicant 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 rms?
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 HPs 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 denition of
a special-purpose organisation varies widely
from company to company. At some rms, 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&D
management 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 creditbut
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 dont 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-Pacic (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 Bulls 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 reportingeven 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 wasnt 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: Thats not
necessarily what was said to the analyst, but
thats all Im going to say here today.
What this highlights, says PwCs Marston, is how
close to the vest executives like to hold this sort of
informationIP is about as strategic as it gets.
Figure 16. As a supplement to nancial reporting, does
your company nowor 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 theyre 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
arent 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 isAny 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 dont 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. Specically, 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-Pacic 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%)
The number three priority in terms of impor-
tance, valuing IP assets, falls to fth place, at
18%, in terms of capability. In other words,
companies know that the ability to place a value
on specic IP is essential, yet they realise their
companies arent 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-house
Acquiring IP assets
Maximising existing IP assets
Patenting/registering IP assets
Valuing IP assets
Managing IP portfolio risks
Structuring tax-efcient IP ownership
Structuring IP ownership from an optimal legal perspective
Protecting IP through litigation
Other
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%
A
B
C
D
E
F
G
H
I
J
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%
A
B
C
D
E
F
G
H
I
J
The patent exchange
An executive from a large US IT company thinks
that help may be on the way. One of the things
thats being considereda large number of
players are discussing itis 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 marketplaceand 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 efciency in IP manage-
menta great thing for companies, for regula-
tors, for investorseveryone benets 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 rmsare 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 rst but
then gaining critical mass, creating exponential
growth. Liquidity and transparency, says the
executive, are the future of intellectual property.
Rush to market
A nal 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 youd created to
see how consumers responded in Tokyo before
tweaking your idea then bringing it to Europe
or America. But today, ve minutes after you
release your product on the streets somewhere,
anywhere in the world, someones already trying
to create a knockoff, reverse engineer what
theyve seen or just steal your product.
So now, continues the executive, you dont
have six months to plan your marketing
campaign, your production and your distribu-
tionyou have six weeksThe value of an
innovation today decays very fastand advan-
tage belongs to the rst to innovate. Its only the
most extraordinary IP that has a shelf-life thats
worth the effort of a regional or global patent.
Increasingly, says the executive, its 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 led in the US recently fell for the rst
time in 16 years.
The best IP management programmes efciently
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 con-
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 functionsmany of which are
new to IP management. The transformation
must be proactive and led by a clear IP
championthe Chief IP Ofcer.
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 rst
step in getting there is knowing where you
are. Figure out where IP is created and
maintained. Demonstrate immediate value by
identifying specic 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
companys IP strategy.
1.
2.
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
Youll know youve transformed to a fully
functioning IP management system thats 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.
3.

If the nancial-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 condent 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 condent 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 signicant 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 thats 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 sufcient?
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
Prole 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 ve-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 specic 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 specic 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 proles are also well dispersed geographically. Approximately 31% come from
North America, 30% from Western Europe, and 28% from Asia-Pacic. 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
Decrease
Increase
Remain the same
84.7%
13.3%
2.0%
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
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 signicantly more
value from existing IP and IP formation if it devoted
more assets and attention to relevant processes.
3d. Our board is sufciently 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%
A
B
C
D
E
F
G
H
I
J
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&D
Partnerships/alliances
Licensing (our technology to other companies)
Licensing (the technology of others)
Using IP in our own products or services
Joint ventures
Defensive IP (acquiring or developing IP to discourage competitors)
Use of open source IP
Partnership with universities/public sector institutions
Other
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
6. As a supplement to nancial reporting, does your
company nowor will it in the next 35 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 companys 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 markets
Remote/offshore R&D in emerging markets
Goods and services outsourcing
Partnerships/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.
No
Yes
Dont know
16.2%
17.8%
66.0%
34.5%
47.9%
17.5%
Now Next 3-5 years
Acquiring IP assets
Valuing IP assets
Structuring tax-efcient IP ownership
Other
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
67.0%
25.9%
49.7%
32.5%
40.6%
22.3%
6.6%
11.7%
11.2%
1.0%
A
B
C
D
E
F
G
H
I
J
62.4%
28.9%
35.5%
27.4%
18.3%
18.3%
7.1%
12.2%
8.6%
0.5%
A
B
C
D
E
F
G
H
I
J
Acquiring IP assets
Valuing IP assets
Structuring tax-efcient IP-ownership
Other
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
12a. Offshore development of our companys IP
assets is accelerating signicantly.
9. Which one of the following best describes where
responsibility/oversight for IP management lies at
your company?
11. Approximately what percentage of your companys
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 companys
IP is protected by the following mechanisms?
A separate IP R&D management unit or committee
Senior C-suite executives
Line or business unit management
Regional management
Other
A.
B.
C.
D.
E.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
A
B
C
D
E
20.7%
38.3%
35.8%
5.2%
0.0%
External licensing/sale
Internal product development
65.3%
17.8%
32.9%
62.3%
47.9%
37.0%
Now Next 3-5 years
Design/copyright
Registration (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 insignicant
element of our business strategy.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
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 signicant degree of our IP value is now being
created in our emerging market business entities.
14b. We are consciously shifting signicant IP
creation facilities/capabilities from developed to
emerging markets.
14c. IP protection/enforcement is inadequate in
emerging markets.
13. Which of the following are signicant 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 IP
Forming JVs with domestic companies to share and develop IP
Entering into contract R&D arrangements with third-party companies
in emerging markets
Establishing wholly-owned R&D facilities in emerging markets
Licensing IP from domestically domiciled companies
Not applicable/Dont know
A.
B.
C.
D.
E.
F.
G.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
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) signicant 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 signicant investments in
specic 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
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
1.
2.
3.
4.
5.
6.
Strongly agree
Strongly disagree
Dont know
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 States
Western Europe
Eastern Europe
Emerging Asia (includes China, India and Vietnam)
Developed Asia
Latin 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
companys 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 States
Western Europe
Eastern Europe
Emerging Asia (includes China, India and Vietnam)
Developed Asia
Latin 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
Decrease
Increase
Remain the same
65.6%
24.1%
8.2%
Dont know
2.1%
Next 3-5 years
Decrease
Increase
Remain the same
68.7%
22.6%
6.7%
Dont know
2.1%
Next 3-5 years
Decrease
Increase
Remain the same
54.9%
30.3%
7.7%
Dont 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
Decrease
Increase
Remain the same
42.4%
37.7%
11.0%
Dont know
8.9%
Next 3-5 years
Decrease
Increase
Remain the same
45.0%
35.1%
8.9%
Dont know
11.0%
Next 3-5 years
Decrease
Increase
Remain the same
46.6%
34.2%
10.9%
Dont know
8.3%
Next 3-5 years
Decrease
Increase
Remain the same
53.4%
25.7%
7.9%
Dont 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 signicant 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
Decrease
Increase
Remain the same
42.0%
36.8%
6.7%
Dont know
14.5%
Next 3-5 years
Prole 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 organisations 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-Pacic 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
rm 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
andrew.n.bell@uk.pwc.com
Melanie Butler
PwC Partner, London
+44 20 7804 5158
melanie.butler@uk.pwc.com
Chris S. Cooper
PwC Partner, Beijing
+86 0 10 6533 2108
chris.s.cooper@cn.pwc.com
Ken DeWoskin
PwC Partner, China
+86 1370 1234 181
ken.j.dewoskin@us.pwc.com
Mark Haller
PwC Partner, Chicago
+1 312 298 2550
mark.haller@us.pwc.com
David Marston
PwC Partner, San Francisco
+1 415 498 6585
david.l.marston@us.pwc.com
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
richard.blanchet@lpadv.com.br
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 signicant 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 fulll the promise of great ideas.
Argentina
Jorge Carballeira
+54 11 4850 6802
jorge.l.carballeira@ar.pwc.com
Australia
Paul McNab
+61 2 8266 5640
paul.mcnab@au.pwc.com
Austria
Aslan Milla
+43 1 501 88 1700
aslan.milla@at.pwc.com
Belgium
Koen Hens
+32 2 710 7228
koen.hens@be.pwc.com
Bermuda
George Holmes
+1 441 299 7109
george.holmes@bm.pwc.com
Bolivia
Cesar Lora Moretto
+591 2 240 8181
cesar.lora@bo.pwc.com
Brazil
Estela Vieira
+55 11 3674 3802
estela.vieira@br.pwc.com
Brunei
Suresh Marimuthu
+67 3 2223341
suresh.marimuthu@bn.pwc.com
Bulgaria
Borislava Nalbantova
+359 2 9355 200
borislava.nalbantova@bg.pwc.com
Canada
Ben Kaak
+1 416 365 8858
ben.kaak@ca.pwc.com
Chile
Rafael Ruano
+56 2 940 0160
rafael.ruano@cl.pwc.com
China/Hong Kong
William Molloie
+86 21 6123 2777
william.molloie@cn.pwc.com
Colombia
Diego Henao
+57 1 635 5016
diego.henao@co.pwc.com
Czech Republic
Petr Sobotnik
+420 251 152 016
petr.sobotnik@cz.pwc.com
Denmark
Allan Vestergaard Andersen
+45 39 45 91 12
ava@pwc.dk
Ecuador
Luciano Almeida
+593 2 256 4142
luciano.almeida@ec.pwc-ag.com
Finland
Marko Korkiakoski
+358 9 2280 1220
marko.korkiakoski@.pwc.com
France
Xavier Cauchois
+33 1 56 57 10 33
xavier.cauchois@fr.pwc.com
Germany
Kerstin Mller
+49 69 9585 5700
kerstin.mueller@de.pwc.com
Gibraltar
Colin Vaughan
+350 73520
colin.p.vaughan@gi.pwc.com
Greece
George Naoum
+30 210 6874 030
george.naoum@gr.pwc.com
Guatemala
Luis Valdez
+502 2 420 7800
luis.a.valdez@gt.pwc.com
Hungary
Nick Ks
+36 1 461 9335
nick.kos@hu.pwc.com
India
Jairaj Purandare
+91 22 5669 1400
jairaj.purandare@in.pwc.com
Indonesia
Irhoan Tanudiredja
+62 21 528 90500
irhoan.tanudiredja@id.pwc.com
Ireland
Joe Tynan
+353 1 792 6399
joe.tynan@ie.pwc.com
Israel
Joseph Fellus
+972 3 795 4683
joseph.fellus@il.pwc.com
Italy
Andrea Martinelli
+390 2 7785 519
andrea.martinelli@it.pwc.com
Japan
Toshio Kinoshita
+81 3 5532 3195
toshio.kinoshita@jp.pwc.com
Korea
Yong-Won Kim
+82 2 709 0471
yong-won.kim@kr.pwc.com
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.
Lithuania
Chris Butler
+370 5 239 2303
chris.butler@lt.pwc.com
Luxembourg
Mervyn Martins
+352 49 48 48 2053
mervyn.martins@lu.pwc.com
Malaysia
Uthaya Kumar
+60 3 2693 3957
uthaya.kumar@my.pwc.com
Mexico
Enrique Bertran
+52 55 5263 6000
enrique.bertran@mx.pwc.com
Netherlands
Camiel van Zelst
+31 20 568 4768
camiel.van.zelst@nl.pwc.com
New Zealand
Owen Gibson
+64 4 462 7230
owen.d.gibson@nz.pwc.com
Nigeria
Osere Alakhume
+234 1 2711 700
osere.alakhume@ng.pwc.com
Norway
Bjorn Leiknes
+47 02316
bjorn.leiknes@no.pwc.com
Paraguay
Ruben Taboada
+595 21 445 003
ruben.taboada@py.pwc.com
Peru
Orlando Marchesi
+511 211 6500
orlando.marchesi@pe.pwc.com
Philippines
Wilfredo Madarang
+63 2 459 3011
wilfredo.s.madarang@ph.pwc.com
Poland
Adam Krason
+48 22 523 4475
adam.krason@pl.pwc.com
Portugal
Luis Ferreira
+351 213 599 300
luis.s.ferreira@pt.pwc.com
Russia
Natalia Milchakova
+7 495 967 62 40
natalia.milchakova@ru.pwc.com
Singapore
Greg Unsworth
+65 6236 3738
greg.unsworth@sg.pwc.com
Spain
Antonio Vzquez
+34 91 568 4674
antonio.vazquez@es.pwc.com
Sweden
Magnus Brndstrm
+46 8 555 333 66
magnus.brandstrom@se.pwc.com
Switzerland
Franco Monti
+41 58 792 16 21
franco.monti@ch.pwc.com
Taiwan
Wilson Wang
+886 3 5780 205
wilson.wang@tw.pwc.com
Thailand
Prasan Chuaphanich
+66 2 344 1121
prasan.chuaphanich@th.pwc.com
Turkey
Haluk Yalcin
+90 212 326 6065
haluk.yalcin@tr.pwc.com
United Arab Emirates
Douglas Mahony
+971 4 3043151
douglas.mahony@ae.pwc.com
United Kingdom
Stephen Mount
+44 20 7213 3606
stephen.g.mount@uk.pwc.com
United States of America
William Cobourn
+1 646 471 5750
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Uruguay
Javier Becchio
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TEC4-0607
Published in the U.S.A. for member rms of PricewaterhouseCoopers.
2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member rms 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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Exploiting Intellectual Property

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Exploiting Intellectual Property

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*connectedthinking

1. Although IP is an ever-more important asset class, technology executives dont believe

In the global economy, knowledge assets now comprise a greater

Executives say that litigation is a fact of life with respect to

Over two-thirds of executives

Survey respondents say their companies have expanded their

As for the future, executives

The interviews and statistics

Many technology companies admit that though

the global IP portfolio of

Maximise manufacturing exibility to

43 Exploiting intellectual property in a complex world

51 Exploiting intellectual property in a complex world

to others, resulting in signicant incremental

The key to technology success is continuous innovation.

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