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Uncovering buried treasure

This article appears in the issue January 2004 [Volume 13, Issue 1]

Intellectual capital management systems identify licensing opportunities and misuse of patents.

By Kim Ann Zimmermann

Why are the Microsofts of the world often considered more valuable than the General Motors? The answer: because knowledge is king when it comes to a company's assets.

While most companies identify intellectual assets as patents, copyrights and trademarks, a company's intellectual capital is far broader, according to a recent Deloitte & Touche study entitled "The Intellectual Asset Management Revolution." The study identifies assets such as trade secrets, contracts, internally developed processes and procedures, licenses and non-compete agreements. A company's assets can also include its branding, skilled work force and relationships with customers, suppliers and distributors.

When all of your company's assets are tied up in intellectual capital, how do you make the most of it? Do you have licensing opportunities to exploit? Are your patents and trademarks being infringed on? Until recently, there was little structure to the way in which companies managed and evaluated their intellectual capital. And, in some cases, when key staffers walked out the door, all of that information went with them.

"If you own a building, you do the upkeep. The same has to be done with your knowledge assets," says Brian Napper, global partner in charge of intellectual property services for Deloitte & Touche. "Companies are becoming more sophisticated in understanding the value of their knowledge assets, and they are looking for more sophisticated tools to make the most of their knowledge—which is really what sets the value of companies these days."

Many companies have traditionally built their own intellectual asset management systems, which can range from sophisticated software that is integrated with other enterprise systems to something as simple as a spreadsheet. Most have leaned toward the simpler approach, according to Napper, who adds, "But the people responsible for managing a company's intellectual property need more information at their fingertips. They need to be linked to other systems in the organization."

The fact that enterprise resource management vendors such as SAP are rolling out intellectual capital management modules as part of their solutions validates the intellectual asset management (IAM) market, Napper says. While the initial SAP offering is aimed at media and entertainment companies—-which have huge IAM needs—the company also plans to target industries such as automotive, chemicals, pharmaceuticals and high-tech. Deloitte estimates that between now and 2005, more than half of companies in the pharmaceutical, aerospace, information technology, consumer goods and biomedical sectors will implement systems to better manage their intellectual assets.

"In tough times, you've got to look at all business opportunities, such as increasing licensing opportunities," Napper says. "If asset management is not part of the company's overall knowledge management initiative, those opportunities don't get followed up."

According to the Deloitte & Touche study, worldwide patent licensing grew to more than $100 billion in 1998 and is expected to reach half a trillion dollars annually by 2005. The Deloitte study points to such companies as Rambus and Texas Instruments, which have turned a profit on their portfolios of licenses and patents. IBM reportedly generates annual revenues in excess of $1.4 billion from licensing.

While knowing what you have is important, an IAM system can also help a company identify areas where they might want to acquire intellectual capital from outside the organization. "Once you realize the value of what you have and where your expertise is," Napper says, "it makes it easier to see that it might be in the best interest of the company to go outside for something."

IAM systems can help knowledge workers identify ways to boost revenue, and they can also identify when patents are being infringed on. Millions of dollars can be lost, not to mention market share, when a company's intellectual capital is being used by another firm without proper reimbursement. Although intellectual capital management has long been thought of as a big repository of static information, every day that a company's logo or other intellectual property are misused can cost an organization dearly.

"Intellectual capital management is certainly moving into real-time mode," says Andrew Feit, senior VP of marketing for Verity. "In a situation such as financial management and stock trading, information is your asset and you need to get that information out there as quickly as possible. You might be acquiring 10,000 documents an hour and you need to manage that information and get it to the right people right away. They're making decisions on trades. You can't say, ‘Oh, we'll get that information indexed overnight, and it will be available to you in the morning.' "

Identifying the intellectual assets that might not be worth holding onto is also important, according to Napper, because it can be expensive to maintain those rights. A company will spend between $250,000 and $1 million per patent on prosecution and maintenance expenses. Napper says that Dow estimates that it saved more than $40 million in maintenance costs (filing fees, taxes, etc.) over a five-year period by getting rid of patents that were not core to its business.

Making sense of all of the intellectual capital out there requires some automated categorization, according to Verity's Feit. "This is how you make your intellectual assets more valuable. You can have all of this great information, but you need to put it in context. That way you uncover assets you didn't know existed," he says.

Since much of the intellectual capital of any company rests with individual knowledge workers, some IAM systems are incorporating expertise locators.

"There is a lot of value in the documents, but sometimes, as in the case of a consulting company, you can't reuse those documents to protect confidentiality," Feit says. "But while you can't reuse the documents, you can tap into the knowledge of the people who created them. We're seeing a lot of interest in expertise locator capabilities. The trick is identifying experts on particular topics in a sea of thousands of employees."

One of the difficulties is getting knowledge workers to realize the value of sharing their expertise as part of the company's intellectual assets, says Patrick Boylan, CEO of Intellilink Solutions. "It really requires a change in work habits. Most people have been trained that if they keep the information to themselves, they increase their own value," he says.

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Kim Ann Zimmermann is a free-lance writer, 732-636-3612, e-mail kimzimmermann@comcast.net


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