Bruce W. Burton

Bruce W. Burton

Bruce W. Burton, CPA, CMA, CFE - Bruce is a Partner at Deloitte & Touche and is the national leader of the firm´s Intellectual Asset Management Consulting practice. Bruce focuses on helping organizations identify, protect, manage, and extract value from their intellectual assets. Bruce consults on issues involving intellectual asset strategy, management, valuation, licensing, and process design for a variety of purposes including corporate transactions, strategic decision-making, tax planning, litigation, and bankruptcy. His industry experience ranges from aerospace and automotive to telecommunications and waste treatment. Bruce has a BA in Economics from the University of Washington and an MBA from the University of Chicago. He is a member of several professional organizations and has written and lectured on the valuation and management of intellectual assets.

Brian W. Napper

Brian W. Napper

Brian W. Napper - Brian is a Partner at Deloitte & Touche, providing economic, financial and accounting consulting services to clients and counsel. Brian is Deloitte´s National Director of Intellectual Property Litigation and is based in San Francisco. Brian has over 15 years of experience advising clients on the economic and business aspects of intellectual property for a wide variety of uses, including royalty rates, valuations, economic damages related to infringement and equity assessments. He consults with clients regarding intellectual property management processes and systems, creating a structure for maximum exploitation of a client´s intellectual assets. Brian has assisted clients in exploiting additional value from their intellectual property through strategic partnering, creation of business plans, commercialization activities and assistance in negotiations. Brian earned a business degree (accounting and finance) from the University of California-Berkeley and has completed and taught U.C. Berkeley´s Technology Transfer and Commercialization study program.

Recently, yet2.com sat down with Bruce Burton and Brian Napper from Deloitte & Touche´s Intellectual Asset Management Consulting practice to discuss trends in the ways in which organizations manage their technology and other knowledge-based assets.

Trends in Intellectual Asset Management

yet2.com: The management of technology and other intellectual assets is a hot topic. What are some of the trends in the overall business environment that have driven companies to improve the management of their intellectual assets?

Brian Napper: For companies today, the prevalent trend is to move away from functions that offer a lower return on investment, and companies have made efforts to rid themselves of such functions through divestitures and spin-offs. As an example, many companies are taking their manufacturing concerns and spinning those off. In the place of those functions, companies are focusing on higher return on investment projects, such as research and development activities, thereby concentrating on creating cutting edge technologies and developing the next generation product or service. These are higher margin activities, and companies have recognized the need to focus on them, because they add the most value to the marketplace, both in terms of returns for shareholders and overall company value.

What is truly driving companies to focus on R&D activities and higher ROI projects is that these activities are fulfilling the promise of eventually lowered costs to reach customers as well as increasing efficiencies within their supply chain. A transformation in company practices has been driven through the emergence of the Internet. With the advent of the Internet, companies can become less concerned about distribution, marketing, and advertising, because the general acceptance of the Internet as a form of mass communication means that the cost of those activities has effectively decreased. Therefore, companies now need to focus on other ways in which they can create relatively higher-margin, higher-cachet products in the marketplace -- the cutting-edge type of stuff that will ultimately drive the profitability of the company upwards, thereby driving the company´s market value and creating a return on the shareholder´s investment.

Bruce Burton: Another factor that is driving the focus on managing intellectual assets is simply the obvious and very visible successes that a number of companies are having with managing their assets. In addition, companies are making huge investments in R&D in order to keep up with an ever-increasing rate of change. Companies are seeking new and innovative ways to make these R&D investments pay off. The direct way of realizing returns is obviously through implementation in core products, but licensing activities are becoming accepted as a less direct way to earn returns on these investments.

In terms of examples of effective intellectual asset management, you certainly would have to lead the list with IBM as the most often mentioned success story. They´ve brought in huge licensing revenue, and have entered into all sorts of licensing and reciprocal licensing arrangements, often for hundreds of millions of dollars. For other examples, you´ve got companies like Texas Instruments, whose successes are often mentioned; Zenith took a portfolio and harvested hundreds of millions of dollars from it. In addition to these three conspicuous examples, there are dozens and dozens of others like Procter & Gamble, Ford, and lesser-known companies that are making active efforts to realize value from their portfolios.

Brian Napper: While we´ve talked mainly about larger corporations, there are smaller companies and even startups, who primarily rely on licensing their IP portfolio; these companies don´t manufacture product, but are simply investing in R&D, and taking the resulting IP and licensing it. A good example of this type of company is Rambus in Silicon Valley.

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yet2.com: The global technology transfer market is estimated to be 100 billion US dollars annually. How do you see this market growing in the future?

Brian Napper: I think that the technology transfer market will certainly grow, based on the business conditions that we mentioned previously. Also, as more companies look outside their own R&D activities to license-in technology, the whole licensing market will continue to grow, because companies who save money by licensing-in will likely use the freed-up funds to invest in new R&D activity, which will in turn give rise to more opportunities for licensing.

But, to a certain extent, valuing the market at $100 billion is a little misleading, in that it only scratches the surface of the importance of licensing and technology transfer. The $100 billion accounts only for the licensing revenues that flow back and forth between companies. However, companies also license for other reasons, such as attracting strategic partners. A site like yet2.com is ideal for companies not only to license technology, but to discover other opportunities such as joint development. You can envision situations like that which add tremendous value, but will not be reflected in the $100 billion number.

yet2.com: What sort of roles do you see universities and government labs having in the technology transfer market?

Brian Napper: A couple of thoughts on that topic. I personally see universities and government labs continuing to serve as a "blue-sky" source of investment in R&D products -- investing in potentially longer term research when compared with public companies, who are forced to balance long- and short-term activities due to a watchful stock market. Having said that, universities and government labs are becoming more active in finding ways to license out their ongoing R&D projects. I see many more collaborations between the public and private sectors occurring, and taking on new forms.

Bruce Burton: You are already seeing a lot of joint development projects between corporations and government labs or universities. From universities and government labs, we´ve been noticing a lot more product-related research, as these organizations have begun projects that could contribute to an opportunity ready for commercialization. There has certainly been much more interest on the part of educational institutions in commercial possibilities.

yet2.com: Moving from discussing market conditions to talking about specific practices, could you describe some of the ways in which companies have successfully revamped their organizations to more efficiently manage their intellectual property?

Brian Napper: We have seen situations where the entire existing structure for managing intellectual property and linking it with the overall business has been completely turned on its ear. For example, a corporation might spin off and set up an intellectual property organization that helps to manage that strategy more effectively and link it back into the overall business. Ford is one example of a company that has implemented its strategy in this manner.

Another method of implementation is to set up a core corporate function devoted to licensing and to have that core function operate across various business units and reach into the arena where the IP is created. The key is not just to set up that function, but to give it real bite, authority, and responsibility. If you build it they may not come, so you need to have some kind of system of authority established where the CEO or CTO are able to step in to push the project forward and set goals. It is important for these high-ranking executives to make sure that not meeting goals is recognized as a collective failure, and not just the failing of the IP group. High-level buy-in is absolutely important, and often dictates the success of the endeavor.

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yet2.com: How is licensing revenue commonly booked? How do different methods affect behavior?

Brian Napper: Methods of booking ultimately depend on the company. We´ve seen multiple examples, such as where the majority of the revenue flows directly back to the business units, with a cut for the licensing office; we´ve seen other cases where essentially all of the revenue flows back to the business units with a little or no overhead charge by licensing; and then we´ve occasionally seen, in certain discreet examples, where the licensing office retains the bulk of the revenues, because it´s a core function that´s been blessed by the CEO or other management. So, practices tend to run the gamut. I´ve also seen what I call double counting, which is when the business unit gets the money, but the licensing unit gets to pound its chest and point to the fact that it drove that revenue, highlighting that they´ve played an important part in generating this revenue stream.

Bruce Burton: Attributing the revenue stream to the business unit is a remarkably important incentive in getting cooperation and active participation for these units by allowing them to directly benefit from the proceeds of a successful licensing program.

yet2.com: What are some of the factors that enable a company to migrate from a defensive to a visionary position in regards to technology licensing?

Bruce Burton: One of the factors in a company´s success is a widespread understanding of the successes that can be yielded from an effective intellectual asset management program. By way of reference, five years ago we had to introduce people to these concepts associated with better management of intellectual assets. Now, the world knows. The ability to increase the value of companies through licensing technology has been recognized, and the companies that are most successful with their programs are those that recognized the importance of intellectual asset management early on. These companies have started to put the communications and incentives in place, and have realigned R&D with corporate strategies while putting in place a lot of the constituent parts necessary for a successful program, and are now just starting to reap the financial benefits from that vision. The companies that have been less successful by and large were later to recognize the benefits. Due to this initial delay, they haven´t yet been able to make the organizational and structural changes that are conducive to a successful program.

Brian Napper: In terms of how companies have to operate, migrating to a visionary type of intellectual asset management strategy is a longer-term goal. Starting with implementation, you´re looking at a year or two years down the road before you realize results. Many companies can´t afford the luxury of looking that far ahead, or at least need to have a mixture of short term goals and long term visions, due to the necessity of driving revenue and profits. This requirement can drive a defensive intellectual asset strategy, making it difficult to think that little bit ahead and attempt to be out on the forefront.

Bruce Burton: One of the other things that will really contribute to successful intellectual asset management is the development of businesses like yet2.com, which provide a marketplace and an exchange of information about the capabilities of various technologies. Historically, a huge hindrance has been lack of the ability to quickly access beneficial technologies and use them effectively as part of your product development process. The increased use of tools and availability of information will greatly enhance the overall efficiency of the technology market.

yet2.com: Describe Deloitte and Touche´s Intellectual Asset Management practice.

Brian Napper: Deloitte & Touche´s intellectual asset management (IAM) practice is global, providing a full array of services to clients; we meet clients´ needs either directly through our own professionals that practice in IAM or through and with our many strategic partners such as yet2.com. Deloitte & Touche truly has created a seamless team of IAM professionals, combining people with economic, licensing, finance, tax expertise and other types of backgrounds to completely serve our clients in this field. We also have access to world-class technical expertise within many industries through our strategic alliances, such as our alliance with the Research Triangle Institute.

The intellectual asset management business is a good fit within the overall corporate strategy of Deloitte & Touche. Deloitte & Touche clients range from large global enterprises to small startups, even sometimes individuals creating companies. All of these clients invest heavily in their intellectual assets. These investments could range from large investments in patents and trade secrets to investment in trademarks and brand strategy and copyrights. For both large and small companies, the intellectual assets that these companies are investing in typically provide the foundation to ultimately drive value to their customers, and therefore create value for their own shareholders or owners. So, in today´s business environment, where companies are facing the move from a tangible asset world, in which they´ve focused for the last 150 years on hard assets -- Property, Plant, and Equipment, to a structure depending on intellectual assets, Deloitte & Touche believes that its Intellectual Asset Management group is absolutely critical to further its efforts to continue to provide its clients with quality professional services across the entire spectrum.