Intellectual Property Ip Management example essay topic

Intellectual Property Management And IPR Audit Intellectual Property In the last 200 years, our society has progressed from the agriculture age to the industrial age to the information age. Today, the majority of a company's organisational value may be in the form of intangible assets and intellectual property (IP), which now constitute "the primary product of the Information Age". 1 The globalisation of business, accelerated product life cycles, advancing technology, and growth in mergers and acquisitions has helped to create an environment in which the intellectual property component of today's business is expanding rapidly. In real sense, intellectual property has become product unto itself, capable of producing revenue streams and competitive advantages for its owners. Intellectual property refers to those intangible assets that are legally protected in some manner and degree. Leading organisations are now beginning to re-evaluate their old ideas about intellectual property.

"More companies are realising that a company that only uses what could be called financial capital is only using part of its resources", notes Bengt Anderberg. "Skilled management will make IP a real force in their businesses". 2 In this context, a new model is emerging in which intellectual property decisions are increasingly influenced by marketers and strategic planners as well as financial executives. Concern over offering licences to competitors, for example, is characteristic of this broad disagreement between executives who advocate strict protections and those who seek to capitalise on any of the company's assets. If the goal is to improve the organisation's competitive position, however, the end may ultimately justify the means. "These new economic realities may demand significant shifts in strategy.

For example, [organisations] may have to ally their company with another-maybe even a competitor- in order to succeed. Matsushita did that when it virtually gave away to competitors its VHS technology for videocassette recorders. In so doing, of course, it shut Sony's Betamax right out of the market". [Journal of Management Consulting] 3 Improved co-ordination and information flow among intellectual property stakeholders is thus becoming critical.

Organisations are beginning to understand that they may not know what they have or what it is worth. This phenomenon is evident in many situations, including cases of companies spending money to license technologies they already own. 4 More likely, organizations may have patents or brands that could be more valuable licensed to others or sold altogether. In other cases, an entity may require a partner before it can properly derive full value from a particular asset. The need for improved information and greater oversight at the top levels of the organization points to an emerging desire and need for strategic management of intellectual property, driven by a strong understanding of how these assets are tied to a company's overall business strategy. The extent to which a business relies on its intellectual property rights ("IPRs") will inevitably depend on the nature of the business.

However, the increasing dependence of business on technology means that this is an area which must always be considered when a business is sold. In cases where the business enjoys substantial revenues from the exploitation of IPRs, the value of these intangible assets may well exceed that of the tangible assets. To be competitive, companies must extract maximum value from their intellectual property, as they would from any tangible asset. IP management and Audit is of paramount importance to entities that want to lead in their industries, and it is an effort that ranges from creating an inventory of assets to developing defined metrics for measuring returns on research and development.

Indeed, managing an Intellectual Property effectively requires a wide range of legal, engineering, economic, corporate finance, benchmarking, tax, and accounting capabilities, drawn together by a strategy that is aligned with the business's overall goals. Indeed, "IP is increasingly important both as a revenue generator and as a strategic tool", says Goran Roos, CEO of Intellectual Capital Services, a consulting firm. 5 "The cost of failing to manage IP is essentially revenue foregone", notes Martin Kelso, director of strategy at Intelligent Finance, a division of Halifax, the U.K. financial services provider. 6 What is an Intellectual Property Audit?

The common usage of Intellectual Property Audit in its most comprehensive sense means assessing the processes and procedures in place to generate and perfect intellectual property rights and to protect a business from the unauthorized use of the intellectual property rights of others, taking an inventory of the intellectual property rights of the business, judging the quality and usage of those rights, and inventorying and assessing existing and potential intellectual property disputes with others. An IPR audit can provide an invaluable mechanism for companies owning IPR assets, companies desiring to acquire IP assets from a third party, and creditors lending to technology-based companies to determine the ownership, scope and status of IPR. As IPR continue to grow in importance in the information age, IPR audits should become a more and more vital to any Business. Why Do an Intellectual Property Audit? IP assets have become an increasingly large part of the value of businesses. As per a recent study in the U. S often as high as 70% of a technology company's total assets might be intellectual property.

IP assets have also been licensed and sold to generate substantial income. Since acquiring technology-based assets much more complicated than acquiring more traditional tangible assets, the value of a technology-based asset is often more a function of how well protected it is by IPR and how well it functions. Texas Instruments and Lucent are well known for their licensing programs that have generated hundreds of millions in revenue. IBM alone earns over a billion dollars a year from licensing patents.

The Pharmaceutical Industry is another example. Leading multinationals like Novartis license their production in third world countries. Companies acquiring IPR must therefore ensure that they can acquire good and unencumbered title to IPR and that such title is perfected and priority established vis a vis subsequent transferees. Many organisational leaders, however, do not know enough about what they have or what their portfolios are worth, especially when potential applications fall outside a company's core business.

Moreover, they may not perceive the organisational benefits to be derived from intellectual property management. Thus, for any particular business it is important to know the scope and content of the IP assets of the business in order to make full use of those assets. It is also important to assure that the business has effective processes and procedures in place for generating and protecting its IP assets. Thus an IPR Audit is required. Advantage to a Business That Manages Intellectual Property "In every business, not just "knowledge intensive" ones, intangibles present real challenges to people who allocate resources internally-that is, managers-and their external counterparts-investors. In both cases, says [Harvard's] Michael Porter, "capital is more likely to be dedicated to physical assets than to intangible assets whose returns are more difficult to measure".

[Fortune] 7 Intellectual property management enables a company to lower its overall cost of capital, manage its innovation stream more efficiently, improve time-to-market, and reap financial rewards from underutilised intangible assets. Essentially, "With competitive pressures increasing constantly", says Goran Roos of Intellectual Capital Services, "very few executives will be able to afford to ignore areas that can contribute to shareholder value". 8 Armed with knowledge and hard data, organisations are better able to determine potential applications, understand the IP cost structure, and know and understand the sources of value attributable to each intellectual property asset. Better decisions regarding research and development, the source of intellectual property products, and enhanced return on R&D investment are important results. Valuation Issues "IP is a growing proportion of most businesses, and one of the difficulties is how to value it", says Martin Kelso of the Halifax Group's Intelligent Finance division. 9 One challenge is that the value of an intangible is not fixed: in fact, that value is constantly changing, based on market conditions and in concert with business strategy.

"Valuation is still more of an art than a science", says Theo Grigoriou, president of Allied Signal Technologies, Inc. 10 "Formulas are good accounting and financial tools, but in the real world there are many unknown and subjective hypotheses, based on each application and each licencee. As in an endgame, you proceed by removing or resolving obstacles as they appear in each case". A valuation based solely on current use fails to account for future applications outside the business or its industry. Consequently, organisations must consider what the asset could be worth, both by application and by market. "How any one company approaches valuation, let's say of a patent for the purpose of licensing, is grounded in the company's licensing strategy", says Bob Gruetzmacher, licensing business director at DuPont.

11 "In any given instance, the 'how,' the 'why,' and the availability of reliable information will dictate the level of scrutiny applied to the valuation effort. For some companies, given their licensing volume and the markets they serve, the economics point to a 'fixed rate' licensing policy, rather than case-by-case pricing, which is resource- and time-consuming. In any case, the value of the patent, through a licence, rests with the economic benefit it affords the licencee. Having that knowledge enhances the negotiating position of both patentee and licencee". To arrive at a valuation of a particular intangible, organisations consider issues including the fair market value of the asset, their own licensing strategy, marketplace conditions, and potential licencee. Fair market value will be influenced by factors including the risk involved, for example, in licensing a patent for a technology that is not yet commercially viable or a patent covering an invention whose value has never been demonstrated A proper approach to intellectual property management will help enable organisations to make better decisions regarding the best use of each asset, potentially creating a revenue stream in an industry in which it has no marketing interest.

In a recent example, a nuclear power company was seeking new applications for the proprietary technology that shuts its reactor down in an emergency. The company ultimately licensed out that technology for a theme park, to quickly shut it down if the need should arise. 12 Leaders need to know the technology and understand how it might work in another business or even another industry. To do that they need to grasp the essence of the technology, and not just consider its current use. Ultimately, IP management is impossible without committed leadership and a team of seasoned professionals devoted to the task.

"Unless enforcement of intellectual property rights is made a strategic consideration and is tied in with business goals, IP management can sink to defensive monitoring and prosecution, rather than creative initiatives to boost return on investment". [Chief Executive] 13 IP management requires a focus on the "upstream" activities that drive value creation. "The key is to increase R&D", says Theo Grigoriou of Allied Signal Technologies, Inc. "Many organisations' R&D investment is flat, and that will deplete the inventory of IP assets at some point". 14 IP inventories and technology assessments are also crucial.

Unless organisations have linked IP goals with the goals of the overall business, they may not know what they have or what it is worth and as a result, they may be mis allocating resources. In the same way, if organisations have not sufficiently protected IP assets, they are certainly wasting money. With any IP strategy, the key is to take a systematic approach, with centralised responsibilities, accountability, and performance requirements. Management must have a defined means of measuring the value of the IP strategy, the revenue stream generated by the portfolio, and the cost reductions achieved through good management. "Unfortunately, too many CEOs still fail to view IP assets... as corporate resources that confer competitive advantage and revenues.

In fact, many companies, especially non high- tech firms, leave IP assets inadequately protected. Perhaps one of the biggest mistakes that CEOs make is to vest responsibility for intellectual property issues in others and then assume they are being managed. Without a CEO who understands IP issues and can focus and motivate vigorous defense of intellectual property, management of an IP portfolio can easily falter". [Chief Executive] 15 As Goran Roos, CEO of Intellectual Capital Services says, "If I walk into any big technology-intensive firm and ask, 'What are the fundamental patents or brand developments that have taken place in your organisation in the past year that will have major impact on your value creation in the coming two to three years,' in most cases I doubt I would get a very eloquent answer. My expectation for the medium-term future is that this perspective has to change. Markets and investors expect organisations to get a good return on all their resources.

They won't be satisfied with someone displaying a balance sheet and saying that we have an excellent return on plant & equipment. On the contrary, they would expect to see an excellent return on investment in brands, in patents, in the costs of R&D, and on any other comparable resources. Indeed, if you have a resource, why should you not have an objective for getting the most value out of it?" 16 Options for IP Management Given a particular Intellectual Property, a company has the following options to leverage and safeguard it - o Keep it a Secret and use it for competitive advantage - This is done if the Intellectual Property is an invention that can be kept secret. o Acquire Legal Protection for a specific number of years - This method is adopted if the Intellectual Property is something that cannot be kept a secret. o Sell the Idea - The Intellectual Property is sold if the benefits from selling are more than those from using the property in the companies core business. Steps involved in IP Management IP Management involved the following steps - o Valuation of Intellectual Property - Here we essentially find out what the Intellectual Property is worth. o Protecting Intellectual Property - This stage involves applying for and acquiring the rights for the Intellectual Property. o Utilising and exploiting Intellectual Property - IP Management also ensures that the Intellectual Property is utilized in the most efficient way. o Enforcing Intellectual Property - This is the most important function of IP Management. It must be ensured that competitors or other entities do not benefit from the Intellectual Property of the organization without authorization. Industries for which IP Management is crucial Patents: Chemicals, Drugs, Plastics, Electronics and Instruments.

Trademarks: All Industries. Copyrights: Printing, Entertainment, Software and Broadcasting. Trade Secrets: All organizations functioning in a competitive environment. Designs: Microelectronics, Automobiles, Fashion Industry, etc. Forms of Intellectual Property Protection Patents Copyrights Trademarks Design rights Know how / Trade secrets Prerequisites for Patentability It must be novel i.e. different from that which is already known. "The invention must be non-obvious to a person having ordinary skill in the field to which the invention relates at the time the invention was made.

Not patented or published outside for more than one year prior to application. A patent grants the owner exclusive rights for 17 years in exchange for public disclosure of the invention. Types of Patents o Utility Patents o Design Patent o Plant Patents Copyright A copyright protects original works of authorship from unlawful copying. Works of authorship include the following categories: literary works, including computer programs musical works dramatic works pantomimes and choreographic works pictorial, graphic, and sculptural works motion pictures and other audiovisual works sound recording architectural works A copyright limits the number of copies one can make of a document or work of art without permission. o Copyrights held by individuals last 50 years beyond owner's lifetime. o Ideas cannot be copyrighted. o Only particular expressions of ideas are subject to copyright. Trademarks Trademark protection may be obtained for distinctive words, phrases or symbols which serve to identify a particular source of goods. Service Marks may be obtained for distinctive words, phrases or symbols which serve to identify a particular source of services.

Trade Secrets / Know how Trade secrecy is basically a 'do-it-yourself" form of protection: Registration with the government is not required to secure a trade secret; The information is simply kept confidential. Trade secret protection lasts for as long as the secret is kept confidential. Once a trade secret is made available to the public, trade secret protection ends. A trade secret is a secret formula, pattern or device that is used in a business and provides a commercial advantage. A trade secret lasts forever (not just 17 years) or until the secret gets out. e.g. Coca-Cola formula. While the law prohibits others from using a patented invention (without permission), it only prohibits others from stealing a trade secret.

The IPR Laws in India The main Intellectual Property related laws in India are as follows o The Trade and Merchandise Act, 1958. o Trademarks Act, 1999. o New Trademark Law, 2002. o The Copyright Act, 1957. o The Indian Patents Act, 1970. Importance of Intellectual Property Right Laws The priority any particular company places on intellectual property largely depends upon that company's industry and culture. Many industries regard intellectual property as their "lifeblood" because competitive, legal, and regulatory conditions that support continued production and marketing are critical to organisational operations. In such organisations, the rights to a particular patent or licence can drive key decisions along the entire value chain, including investments in R&D, manufacturing, information systems, distribution, marketing, sales, and human resources. These IP assets thus generate specific revenue streams, which the entity must seek to leverage strategically. In the pharmaceutical industry, for example, exclusive 20-year patent rights 6 define the terms under which a particular IP asset can generate value for the organisation.

Patent continuations through product modifications, and the timing of brand development through a move from prescription to over-the-counter products, are important strategic goals for pharmaceutical companies, as are licensing arrangements, which these organisations use extensively to build shareholder value. Examples: In a typical example, Synaptic Pharmaceutical Corporation recently granted licences to Eli Lilly, Merck, and others for technologies targeted at afflictions as diverse as obesity and migraine headache; a licence sold to Glaxo Group Limited generated $2 million alone. 17 IBM generated lb 5.3 billion of income from licensing IP rights between 1994 and 1999.18 Due to a licence granted by Raytheon Systems Co., which developed the technology with Delphi's Delco Electronics group, the infrared night-vision the U.S. Army used to spot Iraqi tanks during the Gulf War was offered as a safety option on one of Cadillac's vehicles in the U.S. 19 Consumer goods companies as diverse as Nestl'e and Nike depend upon trademarked brand names and distinct product features to achieve their goals. For these companies, a technology or other IP asset may help differentiate the organisation by granting marketplace exclusivity, helping to guide pricing strategy or prevent undercutting by competitors. Niche companies competing against major brands regard intellectual property as particularly important because the exclusive rights to particular IP assets allow these entities to compete effectively with more powerful organisations.

In contrast, companies that produce parity components or "commodity" products have tended to de-emphasise intellectual property. Some such commodities, however, financial products among them, are increasingly building value with brands that differentiate intangibles. Direct Line, for example, has become a big player in the U.K. insurance market precisely because it has built a strong brand through marketing communications, the Internet, and public relations. Furthermore, companies are beginning to understand (and tap) the inherent value in their own proprietary know-how and reputation. Intellectual property also creates a variety of costs, which must be balanced against the many opportunities it presents for revenue generation. Aside from the regulatory and legal fees associated with protecting IP, infringement litigation can also dramatically alter business activities.

"The widely reported Digital Equipment (DEC) lawsuit against Intel also involved allegations of infringement by both companies. It ended in an unusual settlement in which Intel and DEC entered into a 10-year patent cross-license agreement and Intel purchased DEC's semiconductor operations". [Chief Executive] 20 Preventive strategies to avoid infringement can help organisations avoid such costs. In some situations companies may choose not to apply for legal protection for a particular invention, perhaps to avoid the consequences of ultimate patent expiration or to avoid the costs required to maintain that protection.

For example, an entity may choose to publish a paper or article on a technology and thus, by placing information about it in the public domain, preclude someone else from patenting the technology (as long as other criteria are met). DuPont, for example, uses partnerships with government laboratories and universities to this end. "In a heated global economy, no one company has the time or resources to invent everything", says Bob Gruetzmacher, licensing business director of DuPont. 21 " Strategic acquisition of technology to complement one's own resources has become a necessary component of the R&D function". Deployment alternatives are designed to yield incremental revenue as well as, ultimately, increased earnings per share. Points considered during Intellectual Property Management and Audit Technical Assessment IP Damage Assessment IP Strategies Licensing Tax Strategy Strategic Alliances Royalty Recovery Market Research Legal Analysis Economic Analysis Valuation Resource Sharing Why an Intellectual Property Rights Audit is Necessary Companies that own Intellectual Property assets, companies that desire to acquire such assets, and creditors lending to technology-based companies all have a need for a reliable mechanism to determine the ownership, scope and status of IPR.

An "IPR Audit" of the company provides such a mechanism and enables the detection of defects in IPR that may affect the value of the company's assets so that corrective measures may be taken. In general terms, an IPR Audit is undertaken: o To determine the origin of intangible assets o To determine the scope of rights of third parties. o To institute systematic procedures for protecting and perfecting IPR. o To detect defects in existing Intellectual Property assets and the mechanisms and procedures for protecting and perfecting the same o To determine, in contemplation of IPR litigation, whether all filings necessary for jurisdictional requirements have been satisfied. o To avoid liability for third party claims of infringement resulting from the development of new products Intellectual Property Issues to be considered Matters which need to be established on the acquisition of a business include: o What IPRs are used in the business? o Which of these are critical to the business? o Who owns those IPRs? o Are there any restrictions on the use of any IPRs in the business? o Which IPRs are registered and which are unregistered? o Are the unregistered IPRs registrable? Organisational leaders should ask themselves these questions: o Do I know what IP my organisation owns? o Have the items on the IP inventory been evaluated for highest and best deployment opportunities? o What is the perspective of the person (s) /department (s) overseeing the IP- that is, is it protective, opportunistic, market-driven, or other? o Are we managing IP in a way that helps us maximise shareholder value? o What effect do my organisation's incentive systems have on the management and production of IP? o Do we regularly look for new markets, partnering opportunities, and other IP strategies? o Do we have systems in place that promote proper IP management? o Are we willing to dispose of IP that we know we cannot use? What about IP that we are currently using? o What internal policy guides our review of existing patents? o Do we have patents drafted for other uses with broad claims or claims that are specific to the business generally? A Strategic Checklist for Benefits of IP Audit o Protect new or valuable intellectual property for internal use o Sell or license intellectual property o Re-deploy existing intellectual property in new internal use or in another part of the company o Erects barriers to competition; o can allow for property for internal use premium pricing; o helps sustain marketplace identity o Creates new cash flow; o can create new markets for existing products / processes ; o may reduce maintenance costs; o optimists value and return for unused or underutilised assets o Leverages existing asset for new cash flow or property in new internal use or market opportunities in another part of the company Who benefits from IPR Audit: Buyers Who Are: o Acquiring a high-technology manufacturing or service organization or high-technology assets. o Purchasing a company primarily to get rights to its technology o Purchasing licensing or distribution rights o Purchasing a license to make, use or sell a product or process o Purchasing rights to a product under development Owners Who Are: o Depending upon IPR as a principal component of their company's value. o Facing possible litigation involving their IPR. o Experiencing market share erosion from knockoffs or pirated copies. o Selling a high-technology manufacturing or service organization or assets. o Managing the IPR of a subsidiary or affiliate. o Engaging in domestic or international commerce involving high technology products. o Considering changing the tax status or accounting method for their technology. o Parties to ambiguous licensing or distribution agreements. Investors Who Are: o Considering funding a start-up company o Financing an existing technology-based business o Considering accepting a security interest in intangible assets o Entering a joint venture with a technology partner o Underwriting a public offering of a high-technology company When an Intellectual Property Rights Audit should be undertaken o Before a significant acquisition of technology. o In the early stages of a technology company's formation to institute systematic procedures for protecting and perfecting IPR, and at critical junctures in a company's life cycle to ensure the continuing adequacy of such procedures and to detect defects therein. o In conjunction with development of, or acquisition of, a major new product, particularly if such product carries with it a demonstrable risk of infringement of the IPR of others. o In response to a change or new development in the law.

Who Should Perform the Audit o A company's own personnel may have sufficient familiarity with the facts and issues involved to perform an audit. Generally it is the company's in house legal counsel. o In complex situations, where further expertise is required, outside legal counsel should probably conduct the audit. o It is also desirable that the auditors have litigation skills When to do an Intellectual Property Audit An IP audit is appropriate any time someone in authority wants to know the extent and quality of the intellectual property rights of a company. The breadth and depth with which the audit will be conducted will depend on the purpose. Companies conduct annual audits of their financial status and public companies include the auditor's statement of their financial condition in their annual report to shareholders. In light of the overall importance of intellectual property, an annual intellectual property audit should form a part of the best practices for a company. Additionally, intellectual property audits are typically conducted for the following purposes: o Evaluation of a new or existing business (a business unit or the entire company) for its management.

This may be done for an existing business because of a change in management, a change in the law, a change in the business direction or as a review of the profitability and potential of the business. o Evaluation of a business in support of an IPO or other stock offering. o Evaluation of a company for possible acquisition, merger, investment or lending. o Evaluation of a business unit or product line of a company for possible acquisition. o Evaluation of an intellectual property portfolio for possible acquisition or licensing. o Defects in title to Intellectual Property Rights may have to be cured. o Assignments of ownership from consultants may need to be secured and recorded with the appropriate federal agencies. o In some instances an employee may have developed an invention incorporated into a company product on his or her own time, and rights to the invention may need to be secured. o The audit may reveal third parties who may be able to claim joint ownership with the company of the property. The joint owner's rights may need to be bought out. o Potential defects discovered in patents may need to be remedied by additional disclosures to the patent office, requests for reexamination or reissue of a patent, amendments to pending applications, or a certificate of correction. o Errors in copyright registration certificates and trademark applications may need to be corrected by filing supplementary copyright registrations. The audit may reveal the need to cure omissions of copyright, trademark or patent notices Steps Are Undertaken in an IP Audit o The first step is to determine what technology the company has rights to, either from creation of the technology by its employees or from acquisition from others. This step entails determining those inventions that might be patentable, works having original expression which are copyrightable, marks and logos used by the company, and information that has been maintained in confidence and qualifies as a trade secret. o The second step is to determine whether there have been any non-confidential disclosures of inventions or other material that would effectively preclude the protection of that technology. o Next, documents are reviewed to determine whether proper agreements have been entered with employees, consultants or others who have developed technology using the company's assets or funds e.g. in the U.S., the intellectual property rights in patents and copyrights initially reside with the individual inventors and authors.

Assignments of (or exclusive licensing of) inventions and creations to the company from its employees and consultants are of critical importance in providing the company protectable rights. Agreements to assign present and future inventions and creations also serve as evidence of the company's right to technology developed in the future. o For assessment of trade secret protection, the company's policy and actual procedures for maintaining the secrecy of the information and confidentiality agreements are reviewed. o Another step in an IP audit is to determine what information and technology have actually been protected. This process includes a review of the actions taken to secure patents for inventions and to register copyrights and trademarks. o A review of agreements evidencing transfers of rights to the company from individuals or from other entities is also done. o Agreements for protecting trade secrets and maintaining those secrets are reviewed. o Checking registrations of registered IPRs and that all renewal fees have been paid. o Reviewing all assignment documentation. o Reviewing all licensing / registered user documentation. o In the case of trade and service marks, checking that the Sellers have continued to use the marks, without which the mark may lapse. o Making enquiries as to whether proceedings have been issued for infringement of any IPRs, either by or against the target business. The "strength" of the protected intellectual property assets, including the scope and enforceability of existing patents, as well as prospects for achieving meaningful patent protection from existing and anticipated patent applications, is ascertained. Recommendations may be made regarding what further actions are necessary to protect technology and information which is protectable, but for which no action has yet taken place. How else are Audits Used Determining the company's right to use the technology it has developed is another function of the audit.

Although a company may have certain rights in preventing others from using information it has developed, its own use of that technology and information may infringe on the rights of others. For example, a company's patented device may infringe upon another broader patent. Manufacturing companies have been hit hard by patent infringement judgments. One of the biggest - Polaroid vs. Kodak- involved $900 M in damages - worse yet, an injunction was issued putting Kodak out of the instant film business. Most recently Litton vs. Honeywell, Litton awarded $1.2 Billion in damages The review may include evaluation of the likelihood of suits for infringement against the company and the likelihood of success in such suits.

The IP audit process should also include consideration of current and future needs to enforce the company's intellectual property rights in order to protect those assets against infringement or misappropriation. Role of Intellectual Property in Competitive Advantage Vigilant protection of inventions, copyrighted works, trademarks and trade secrets protect a company's competitive advantage by preventing others from copying successful elements of the business. At the same time it also prevents an Intellectual property from abandonment. For example, ASPIRIN and CELLOPHANE both were trademarks that became generic and lost their trademark status. At the same time Intellectual Property Audit plays a crucial role in maintaining competitive advantage by ensuring that the firm has the ability to generate, obtain, and utilize IP in time. IP audit also need not be restricted to technological processes like in Computers or Bio Technology; it can also be in business methods, systems and processes.

The following is a sampling of the patent activity of several companies in the software and business method area. Microsoft... 1,500 patents in force IBM... 3,000 patents in force Citibank... 77 patents in force since first filing in 1995 Chase Manhattan... 15 patents in force since first filing in 1997 Leading organizations in their fields are looking at IP through a different strategic lens, with an eye toward maximising revenue, minimising costs, and using IP for competitive advantage.

This new focus is causing them to: o question the need to protect intellectual property in traditional ways as well as to inquire about the actual value of specific assets to the business; o formulate a specific intellectual property strategy; o perceive the need for a stronger link between intellectual property strategy and the organisation's business strategy; o respond to the challenges of an increasingly litigious environment, one in which protecting or defending intangible assets is exponentially expensive; o seek to establish consistency and communication among global subsidiaries o responsible for various intellectual assets; o devise ways to cope with the growing influence of independent product developers on their companies' IP; o respond to accelerating product life cycles, which, in turn, require finely tuned R&D investment strategies (which ultimately fuel intellectual property deployment); and o consider the potential effects of merger and acquisition activity on IP strategy. Protection and Remedial Action Although it is an integral component of intellectual capital, the IP Assets are legally protected in some manner and degree. Protection can take varying forms, depending on the jurisdiction, including patents, copyrights, trademarks, and registered designs. Product design and brands are also perceived as assets in need of protection and management. Customer lists are guarded, with many companies requiring sales employees to agree not to approach their customers or work for a competitor should they leave the company's employ.

"Know-how" is proprietary and is often perceived as IP, but licensing it is difficult because, except in the case of confidential information, legal protection is rarely available for it. The audit may reveal the need for any of a number of forms of remedial action to cure deficiencies in Intellectual Property Rights ownership or protection procedures Infringement Issues o If the audit reveals potential infringement of third party rights, licenses may be sought or the product at issue may be redesigned, if possible, to "invent around" a patent that covers the product, to remove technology that may be the trade secret of another, or to eliminate substantial similarity to the copyrighted work of another. o If it appears likely from the audit that consummation of a proposed acquisition will precipitate a lawsuit, it may be possible to obtain a partial or complete indemnification from the present owner or a third party. Purchaser control of any potential lawsuit might also be sought during the negotiations. Other Issues If the future value of a product depends heavily on retaining certain key personnel, some potential problems can be avoided by developing contractual or other incentives for such personnel to stay on. If the principals or key employees will not remain with the company after an acquisition, then consulting agreements, nondisclosure agreements or covenants not to compete may lessen the severity of their departure. If there are important contracts preventing the assignment of key rights, it may be possible to secure the consent of all involved.

Prospective legal, marketing and R&D strategies can be designed to minimize the exposure from defects discovered in the audit. Enforcement Problems In spite of there being laws to protect the Intellectual Property of Companies, the enforcement of the same is highly inefficient even in the developed countries. Therefore a Corporate cannot depend solely upon the law to safeguard its Intellectual Property. Also, the rights holder often does not know it is a victim until a defendant's activities are specifically identified and investigated. It is therefore very important that a company manages its Intellectual Property effectively so as to maximize the return from it and safeguard against infringement on its rights. Conclusion Organisations are striving for competitive advantage in an increasingly complex world.

Achieving such advantage is increasingly tied to knowledge, know-how, and other intangibles. The economic and social conditions that have driven the development and growing importance of intellectual property will likely continue to accelerate. Organisations that intend to lead their industries must take the steps necessary to identify their assets and use them to best advantage. "Tying IP management to the goals of the business is certainly an issue for the board of directors-not on a case-by-case basis, but in terms of their philosophy and goals for the organisation", notes Bengt Anderberg of the Swedish Defence Research Establishment.

22 The cost of failing to manage intellectual property strategically? Nothing less than organisational success is at stake: "Knowledge will provide the competitive edge for the future", says Bob Gruetzmacher of DuPont. "Many companies may have similar fixed assets, but for a given firm, the combination of tangibles with its own unique, knowledge-based assets will be the key differentiator". 23 It is a great thing to ensure that the person coming up with the innovative idea benefits from it. But to what extent?

How ethical is it for a pharmaceutical company to price its drugs at a very high amount, when millions of needy people die in various countries of Africa and Asia, because they cannot afford the drug? Such exploitation of IP rights by companies has led to a lot of opposition to the granting of IP rights. IP rights are meant, only to ensure that a person owning some intangible property such as an idea is not deprived of the benefits of it. These IP rights should not be used as a tool to exploit the markets on the basis of the temporary monopoly. It is acceptable that a company manages its IP assets well and maintains a competitive edge in the market. However, it is very unethical for the company to derive undue advantage of the rights that it acquires.

Bibliography

1. Charles C. Mann. "Who Will Own Your Next Good Idea?" The Atlantic Monthly, Sept. 1998, pp.
57-82.2. Telephone interview with Bengt Anderberg, Director General of the Swedish Defence Research Establishment, Aug. 25, 2000.
3. Curt Kamp meier. "Intellectual Capital: The New Wealth of Organisations", Journal of Management Consulting, Vol. 10, No. 1, May 1998, pp.
61-63.4. EIU Newswire. "USA Company: Managing Intellectual Property to Make Money", (from CFO Magazine), May 9, 1997.
5. Telephone interview with Goran Roos, CEO of Intellectual Capital Services, Aug. 10, 2000.
6. Telephone interview with Martin Kelso, Director of Strategy, Intelligent Finance, Sept. 8, 2000.
7. Thomas A. Stewart. "Trying to Grasp the Intangible", Fortune, Oct. 2, 1995, p.
157.8. Telephone interview with Goran Roos, CEO of Intellectual Capital Services, Aug. 10, 2000.
9. 8, 2000.
10. Telephone interview with Theo Grigoriou, President, Allied Signal Technologies, Inc., Nov. 2, 1998.
11. Telephone interview with Bob Gruetzmacher, Licensing Business Director, DuPont, Nov. 3, 1998.
12. KPMG work papers. 13. Jan M. Conlin; Ronald J. Schutz. "The patent files", Chief Executive, No. 135, June 1998, p.
44.14. Telephone interview with Theo Grigoriou, President, Allied Signal Technologies, Inc., Nov. 2, 1998.
15. "The patent files", Chief Executive, No. 135, June 1998, p.
44.16. Telephone interview with Goran Roos, CEO of Intellectual Capital Services, Aug. 10, 2000.
17. PR Newswire. "Synaptic Pharmaceutical Reports Second Quarter and Six Months Results". Aug. 10, 1998.
18. Walter Willi gan, IBM, in a speech for the Licensing Executives Society's Annual U.K. conference, Jul. 6-7, 2000.
19. Nina Padgett. "Night Vision Comes to Cadillac", Automotive Industries, No. 9, Vol. 178, Sept. 1998, p.
98.20. "The patent files", Chief Executive, No. 135, June, 1998, p.
44.21. Telephone interview with Bob Gruetzmacher, Licensing Business Director, DuPont, Nov. 3, 1998.
22. Telephone interview with Bengt Anderberg, Director General of the Swedish Defence Research 23. Telephone interview with Bob Gruetzmacher, Licensing Business Director, DuPont, Nov. 3, 1998.