27 October 2004 LAWFUEL – Law, law firm, attorney, legal newsAn…

27 October 2004 LAWFUEL – Law, law firm, attorney, legal newsAn independent survey of 300 companies across Europe, commissioned by international law firm DLA, shows that European businesses are failing in the management of their intellectual property (“IP”) and continue to underestimate its importance. As a result, they are squandering the competitive advantage that IP can give and are potentially losing out on £billions of revenue.

The findings should be of serious concern as the survey only questioned those businesses which own or use intellectual property. Of those respondents, less than 40 per cent know the value of their IP, only half (52 per cent) have a documented IP strategy and only 57 per cent have a formal system in place for identifying infringements of their IP. These findings illustrate that European businesses have an incoherent approach to exploiting the competitive advantage that IP can give them.

Alarmingly, the survey also found that only half (53 per cent) have board-level representation for matters relating to brand, intellectual property or research and development and only 38 per cent of businesses questioned have ever done a valuation of their IP, with only 19 per cent conducting one in the last year.

Furthermore, although a properly managed strategy for the exploitation of IP can generate a substantial boost to revenues, the survey found that only half of all respondents (56 per cent) deploy their IP commercially. Where businesses do commercialise their IP rights, the findings reveal that the exploitation methods used most often are among the least successful, such as licensing, selling IP or selling off a business unit, alliances and joint ventures.

Commenting on the findings, Jeremy Dickerson, Head of Intellectual Property at DLA, said, “Our survey shows that European businesses are failing to recognise how valuable an asset their intellectual property is and are not thinking about how they can use it effectively to generate additional revenue. Businesses are making a mistake if they think IP management is only a legal issue: patents, trade marks and copyright are a big source of value for organisations that manage IP effectively. This needs to be recognised by senior management by making IP a board-level issue. The old adage “use it or lose it “could not be truer when it comes to IP management: by not using it, organisations risk losing their competitive advantage.”

Ian Harvey, Chairman of the UK Government’s Intellectual Property Advisory Committee (IPAC), who has given his support to the survey commented, “This IP survey by DLA shows that many of our larger European companies do not take the management of their IP seriously, despite it being a huge source of competitive advantage for them. In my experience, companies that do it well are usually the global leaders in their fields. However, this will not be achieved unless IP becomes part of corporate strategy and there is board commitment. I urge business leaders to take the findings of this survey seriously and consider it a matter of survival – they must realise that intellectual property is a competitive advantage to die for.”

As experts in the field of IP management, DLA has identified seven key steps that businesses must follow to start managing their intellectual property effectively:

1. Have a documented IP strategy
To maximise the competitive advantage that IP can give to a business a documented IP strategy is vital.

The survey shows that those businesses with a documented IP strategy rate their success in managing their IP more highly than those that do not. The IP strategy should cover all of the following:
• registration of IP
• enforcement of IP
• identification and creation of new IP
• commercial exploitation of IP
• identification of relevant third-party IP
• valuation of IP
• communicating to employees the importance of IP
• measurement of the performance of the IP strategy

2. Conduct an IP audit
To have a clear IP strategy a business needs to understand:
• the IP existing in that business
• the IP that is not owned by the business, including, crucially, IP which it wrongly believes it owns
• whether IP created is being captured and used properly

3. Ensure board-level involvement in the management of IP
It is vital that IP issues are factored into commercial decisions.
There should be one person on the board (at least) with specific responsibility for IP management and issues.

4. Conduct a valuation of IP
By not valuing its IP, a business is undervaluing itself as a whole. Not many businesses would dream of failing to value other assets, such as buildings and machinery. IP should be no different.

5. Have a clear procedure for reporting IP infringements
All IP rights are rights to prevent others doing certain acts. As such, they can give a great
competitive advantage. If businesses do not use their IP rights to restrain others, then that
potential competitive advantage will be lost.

It is therefore vital that everyone is aware of the importance of IP and that all infringements
are identified, reported and acted upon.

6. Consider all the available commercial options for exploitation of IP
It might be possible to realise revenue from unused IP by selling it to third parties.

BAE, Britain’s leading aircraft manufacturer, is one example that is increasing its revenues by
licensing images of its aircraft to computer game software firms. The company receives
hundreds of thousands of pounds for doing almost nothing.

7. Measure the performance of the IP strategy
Valuations of IP will, over time, show the success or otherwise of the IP strategy.
Different metrics can also be used for different businesses. They include, for example, the
percentage of the business’s income from products sold under registered trade marks or the
percentage of income generated by the licensing of IP to third parties.

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