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Intellectual assets--Corporate value moves from top minds to bottom linesa price on (what's in) your head -

This article appears in the issue February 1999 [Volume 8, Issue 2]


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With more than half the value of U.S. corporations now considered intellectual assets, organizations are increasingly looking for ways to identify, quantify and capitalize on those intangibles. Over the last seven years, the value of intellectual assets has increased by 700%.

An organization's intellectual assets are computed a number of ways (none of them precise). The difference between a company's book value and the value of all its fixed assets is one measure. The Coca-Cola Company (www.thecoca-colacompany.com) is often cited as a reference model for evaluating intellectual assets. Discounting the extensive value of the sugar, water, bottling facilities and distribution system, the bulk of the company's value lies in the formula to make Coke and the brand awareness the company has established.

Last year Microsoft (www.microsoft .com) paid $425 million for WebTV (www.webtv.com), a company with few fixed assets and only modest revenue. However, WebTV held 35 patents for delivering the Internet over television. For that intellectual property and the expectation of revenue it could generate, Microsoft was willing to pay dearly.

Intellectual capital may be represented by documents, recordings or images--all different structured data types. Those data types embody the knowledge and a substantial portion of the value of a company.

Quantifying an organization's intellectual property begins by making it as tangible as possible. By converting ideas, processes, concepts and business intelligence into archived documents, CAD drawings, database entries, procedure manuals or even patents, organizations are much better able to count intellectual assets in their bottom line.

Patent management and product data tools have risen in stature as they have taken on the role of managing intellectual property. Likewise, document management products, once simply tools for organizing desktops and file drawers, are being recognized as tools that capture, quantify and increase a company's intellectual assets. Software systems now available and under development can help organizations better manage their intellectual assets.

One such system, the Intellectual Property Asset Management (IPAM) solution from Aurigin (www.aurigin.com) includes a set of analysis tools and databases for organizing and analyzing intellectual assets. The Windows NT-based analytical system gives insight into technology opportunities and threats against product lines or strategies and helps determine the most appropriate plan of action.

To help perform patent document analysis work, Aurigin offers fully indexed versions of patents available from the U.S. Patent and Trademark Office, and the SmartPatent WorkBench, a desktop client software that enables customers to view, print, search, organize and analyze patent documents. Aurigin's IPAM system automates the process of accessing, cross-referencing and analyzing patent data. It becomes a common repository of intellectual property and corporate data. The data is broken down so it can be searched, grouped and annotated.

A Cite Module identifies how often (and by which companies) selected patents have been cited in other patent applications. That can indicate enhanced value of a patent, as well as areas of research by competitors.

The Report Module uncovers trends within categories such as inventors, competitor patent grants, patent expiration, patent hierarchy and patent citations, and generates reports that can be exported into Microsoft Excel or PowerPoint. Illustrated data can help place a value on intellectual assets during a due diligence process related to mergers or acquisitions. Users access those modules through the Aurigin WorkBench.

For example, a search of "video+compression" will find all patents since 1976 with those words in their title (328 in fact). Further, the downloaded patent data, which is updated frequently, contains metadata of all U.S. and European patents. That serves as the data source for the Cite Module, and the Report Module gives access to the full text of each patent (including scanned images showing diagrams).

Solving problems

Dow Chemical (www.dow.com) is an early adopter of the Aurigin IPAM system.

"As we look into what kinds of problems our competitors are trying to solve, we are alerted to the existence of the problem," said Bruce Story, intellectual asset manager with Dow Chemical. "Since we have a different technology base, we may be able to better solve the problem. This in turn can lead us to a new market."

Lucent (www.lucent.com) uses the IPAM system to inventory not only its own patents, but the extensive intellectual assets inherited from Bell Labs.

"We can now make decisions based on where a category of patents is going," said Chris Malley, intellectual property organization division manager with Lucent. "This gives us the ability to keep our strategy and goals coordinated."

The benefits of patent analysis include:

  • making more informed decisions about whether to build a new technology or license existing technology from an outside source,
  • determining whether an idea warrants a patent or infringes on another patent,
  • visualizing competitive technology and conducting trend analysis to understand where competitors are going,
  • conducting technology benchmarking for leverage in negotiations,
  • mining intellectual asset portfolios to identify licensable technologies.
  • identifying licensed technologies no longer in use and terminating agreements,
  • determining the true value of an acquisition candidate's patents,
  • locating potential infringements,
  • discerning when a rival is attempting to "bracket" core technologies and developing a defensive strategy.

PDM as intellectual asset tool

John Deere Waterloo Operations, a unit of Deere's (www.deere.com) Agricultural Equipment Division, is using a product development management (PDM) solution in its product engineering department to organize, collect and share project data. Deere engineers consolidate and share information including graphics, spreadsheets, video clips and audio files across locations in the organization.

Matrix Global Advantage, a supply chain-centric PDM software and services tool from MatrixOne (www.matrix-one.com), integrates the business processes and intellectual capital that must be completed to conceive, develop and test a product and bring it to production. Delivering access to product information can shorten product life cycle times, reduce costs, improve design and quality.

Paul Gilmartin, VP of marketing with MatrixOne, said, "Companies the last 30 years have been focusing on optimization of transaction data to improve quality and get to market faster; MRP (manufacturing resource planning), accounts payable--those are transaction-oriented," he said. "Meanwhile there's been a proliferation of technology that allows people to amass knowledge--process knowledge--like how to put together a plant."

Draper Laboratory (www.draper.com) specializes in guidance systems for the defense industry. Draper realized the need for an electronic information management system as personnel decreased from 2,500 to 1,000. To manage the large number of ongoing projects with fewer people, Draper Lab is using the Matrix PDM system.

About 25% of those at Draper Lab who use the PDM system are responsible for the creation of such information as CAD drawings and product structures. The other 75% of users view and, in some cases, approve information. Because Matrix is Internet-enabled, those users are able to access the system through Internet browsers. Today, a group of 400 people use the system.

"What we find is companies like Draper Labs are implementing information management technology to tie together processes and structure and provide global access to information," said Gilmartin.

Once organizations have added technology that addresses the transaction side, they can focus on process improvements.

"Companies have reached a point where they have a handle on the transaction side and are now turning to documents and structure," Gilmartin said. "These companies are now saying, 'I have to get control over that element of my business.'"


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