PHILIPS: Leading the World in Intellectual Property

Issue 27 By Harry Yang, China IP,[Comprehensive Reports]

Founded in 1891, Royal Philips Electronics of the Netherlands has 128,000 employees in more than 60 countries, covering business fields such as electrical appliances, semiconductors, lighting, and clinical and personal healthcare. Its sales reached USD 37 billion in 2008, ranking 197th among the world’s top 500 companies.

Philips entered the Chinese market as early as 1920, and set up its first joint venture in 1985. Today, it boasts 23 joint ventures or exclusively-funded companies in China, with a staff of 15,000. Philips’ accumulated investment in the country has totaled more than USD 4 billion.

In an interview with China IP, Mr. Ruud J. Peters, CEO of Philips Intellectual Property & Standards, discussed Philips’ intellectual property strategy and the importance of intellectual property trade to the company.

The value of intellectual property to Philips

According to Mr. Peters, Philips has owned more than 60,000 registered patents, including 16,300 obtained in China. The company also pays close attention to research and development in China, and its 460 China-based inventions have earned it 1,950 patents globally. In addition to inventions, Philips also possesses 29,000 trademarks, 43,000 design patents, and 2,000 domain names.

As invisible assets, intellectual property plays a considerable role, according to Mr. Peters. Some can be measured by cash, such as the income from a patent license, but others cannot. For example, a cross license saves the company, in part or in whole, the payment for using another’s patented technology; effective crackdown on forgery ensures the company’s market share and brands; patent searches and market analysis help R&D workers focus on promising technologies and avoid repetition; key technologies purchased at relatively low prices enable the company to cut R&D cost or gain a competitive edge by putting out a new product earlier.

Philips uses intellectual property in many effective ways. This includes exclusive use of patents, exclusive licenses, sole or non-exclusive licenses, cross licenses, patent pool licenses, technology licenses, the sale and purchase of intellectual property, using intellectual property as assets in a company merger and acquisition, setting up joint ventures, peeling off some divisions or creating new ones, and the establishment and restraint of standards.

Philips’ Intellectual Property & Standards

Philips Intellectual Property & Standards (Philips IP&S) is in charge of the company’s global protection of intellectual property. For different countries and regions, local teams are usually employed for the sake of convenience. Philips also has a special team in its China division, responsible for mainland and Hong Kong affairs.

The Chinese staff of Philips IP&S work to protect trademark, design, and domain names. There is also staff for the protection and communication of different categories of Philips products. “In China, these people serve another function, that is, to assist local authorities of industry and commerce, customs or public security in forgery investigation and rights protection,” said Peters.

When discussing the focus of work in China, Mr. Peters said: “most of our Chinese cases involve trademarks, so we focus on fighting fake goods to safeguard our brand and consumer’s legal rights. We cooperate with departments of industry and commerce, and also quality supervision, to crack down on all kinds of forgeries and infringements. We also work together with customs to check and confiscate fake products and stop them from flowing abroad. For serious cases, we bring them to court, asking for infringement stop and compensation. If necessary, we would also assist public security, procuratorate and court to punish those who make and sell fake goods at a larger extent.”

Philips intellectual property strategy

Philips attaches great importance to the role of intellectual property in keeping its core competitiveness. The Board of Management entrusted IP&S to coordinate with other business departments to formulate related policies and strategies. IP&S aims at keeping Philips’ global leading position in intellectual property, providing first-rate solutions to other departments and supporting their business and competitiveness. More specifically, IP&S tasks include building powerful intellectual property integrations for the company and giving full play to their value; providing consultation to other departments, setting up standards in related technological fields on its own or in cooperation with a third party; tapping business opportunities using its IP advantage; and taking part in the formulation of general and public regulations and standards to qualify Philips for market access.

For various countries and regions, said Mr. Peters, the difference only lies in concrete tasks, in an effort to give full play to local advantages according to conditions of local markets, to serve the overall strategy.

Mr. Peters also talked about the company’s IP strategy in China: “In the principle of long-term development and mutual benefit, we join hands with other departments for overall intellectual property work. Our job touches the consultation, protection, development, license and market analysis of intellectual property.  We assist China in developing intellectual property.  Through internal and external coordination, we ensure that Philips products are in line with Chinese laws, regulations, standards, qualifications, and market supervision demands, and assist in the implementation of sustainable development.  We actively take part in standardization by Chinese government institutions and trade organizations, and promote new technological standards of future prospects on international markets.”

IP trade “moving from old to new world”

As CEO of Philips Intellectual Property & Standards, Mr. Peters watches closely the emerging intellectual property trade, and gave his insight into the theory of this aspect of business. He believes that the rise of the intellectual property trade has caused corporate change in IP management in what Philips described as “moving from old to new world.” “In the old world, a company owns what it develops on its own, but how to use them? There are two ways. One is to cross license with companies with related intellectual property; the other is to license patent technologies of market prospects to others and earn a fee from it.”
“When we entered the ‘new world’, however, the entire source of intellectual property diversified. On top of our company’s own R&D, in a state of open innovations, the technological fruits of joint R&D or intellectual property generated by technological fruits can be shared, and also, all rights of ownership and use can be shared. That’s what we call shared intellectual property. A company watches and tracks markets closely, looking for intellectual property it needs and considering obtaining it through purchase. As everybody knows, corporations in today’s world obtain fast growth more through merger and acquisition, and for a company, more IP reserve gives it more confidence for future growth. That is to say, intellectual property would play a vital role in merger and acquisition.”

“Looking into the role of intellectual property for today’s business, it’s easy for us to reach this conclusion: IP trade is a core factor in commercial activities. We do find that more and more participants have appeared in this fast-moving market. A few years ago, some companies were only selling intellectual property, and some others are buying. However, now they are sellers and buyers at the same time. They can sell patents they own and buy others’. Of course, the market is far from maturity and subject to uncertainty, but no matter how it changes, R&D remains the foundation, without which IP trade would become dead water.”

 (Translated by Li Heng)


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