Developments in the External Value of Intellectual Property in the Chemical Industry

Over the last decade, the once-obscure concept of intellectual property has become famous. It is now a frequent subject of articles in the general business press, conferences and new books. It is a pet topic of investor- and media-relations groups. Perhaps the main forces behind its ascent to fame were the ongoing growth of the software and entertainment industries (which basically sell intellectual property) and their reaction to what they call piracy, i.e. copying programs, musical performances and films without copyrights. The rise and fall of Napster - an Internet-based system of sharing music - generated attention far beyond the community of lawyers and inventors usually involved in patent and copyright disputes.

Intellectual property's renown has not stopped at the boundaries of software and entertainment; it has spread to other sectors, including chemicals (which basically sells tangible products). From the spate of popular coverage, two main messages emerge about intellectual property in the chemicals industry: it is more important than ever, and it has been ignored. Intellectual property is a buried treasure, just waiting to be uncovered.

Not so fast, we say. Chemical companies have a long, rich relationship with intellectual property - usually thought of and spoken of as process technology that is protected by patents, secrecy or both. As this study shows, its importance to and understanding by the industry are very high and very old, older than the software and entertainment industries themselves. Treasure, yes, but buried, no.

Still, there are new developments in intellectual property - namely with respect to its external value - that commercial and research managers of chemical companies should be aware of:

• Intellectual property's value has grown substantially as a proportion of total assets, i.e. its relative value is higher than ever
• Recent changes in US accounting rules now force companies to quantify the value of their acquired intellectual property
• A number of companies have launched programs for systematic review or exploitation of intellectual property and donation of unused intellectual property.