Intellectual property audit of an organization

AuthorQutbuddin Siddiquee,Chaitanya Wingkar,Gouri Gargate
DOIhttp://doi.org/10.1111/jwip.12112
Published date01 March 2019
Date01 March 2019
G
16 wileyonlinelibrary.com/journal/jwip J World Intellect Prop. 2019;22:16–35.
DOI: 10.1111/jwip.12112
ORIGINAL ARTICLE
Intellectual property audit of an organization
Gouri Gargate
1
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Qutbuddin Siddiquee
2
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Chaitanya Wingkar
3
1
IIT Kharagpur, Kolkota, West Bengal
721302, India
2
Crompton Greaves Pvt. Ltd., Mumbai,
Maharashtra 400042, India
3
General Electric, EPIP Zone, Bengaluru,
Karnataka 560066, India
Correspondence
Gouri Gargate, IIT Kharagpur, Kolkota, West
Bengal 721302, India.
Email: gouri@rgsoipl.iitkgp.ac.in
In this era of rapidly evolving Intellectual Property (IP)
regimes, it is the need of the time to identify and efficiently
utilize Intellectual Assets owned by an organization. It has
now become a prerequisite for organizations to develop a
expertise and capabilities not only to create IP through R&D,
but also to manage it efficiently. There are various tools
available for IP Management and IP audit is one such tool. In
this paper, authors share IP audit experience of two leading
Indian organizations operating in the electrical engineering
sector. The analysis of the data provided various interesting
observations and insights with reference to IP Management
which may be useful to other organizations working in
electrical engineering sector as well as organizations from
the other sectors.
KEYWORDS
developing countries, electrical engineering, India, intellectual
property management, intellectual property audit, organization
1
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INTRODUCTION
The challenge to today's organizations is competing in the knowledge based economy with an increased entrepreneurial
approach. Importance of Intellectual Property (IP) is appreciated by many organizations. Governments, academic institutes,
industries, and small and medium scale enterprises (SME) across the globe are acknowledging the indispensable role of IP in
economic development and have realized the need to integrate IP strategy with business strategy. Changing market trend is
forcing organizations to manage these assets more actively to identify alternate ways of extracting value from them (OECD,
2005). IP is a part of financial capital (FC) and intellectual capital (IC) and its position changes due to dynamics of IP Management
(IPM) (Gargate & Jain, 2013). An efficiently operating IPM system (IPMS) at organizational and national level is critical to spur
innovation and bring new services and products to the marketplace faster (Obama, 2011). Global acceptance and utilization of
IP tools confirm that in future there will be more innovation and economic growth of Nations (Bontis, 2001).
© 2018 The Authors. The Journal of World Intellectual Property © 2018 John Wiley & Sons Ltd
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GARGATE ET AL.
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Organizations are concentrating on effective utilization of IP through robust IPM. However, organizations are
struggling to manage IP efficiently. IPM is a multifaceted discipline and involves five key responsibilities such as IP
generation, portfolio management, IP valuation, competitive assessment and strategic decision (Sullivan, 2000). IPM
basically deals with the policy formulation followed by designing the strategies for acquiring, protecting, and
exploiting the technology developed. IPM isa challenge faced mainly by IP and technology managers. The objective of
IPM is to capture value from IP, compared to value invested. Organizations need to identify IP owned by an
organization to build strong IP portfolio which will strengthen the position of the organization in the market as well as
create wealth. The two major functions of IPM are creation and extraction of (1) Portfolio as a protective view and (2)
Portfolio as a business assets view. The first step for efficient IPM is IP audit. In this paper authors have shared: (i)
various IP audit practices followed by organizations and (ii) IP audit experience of two Indian organizations from
electrical engineering sector (WIPO technology classification). The objective of the case studies is to explore IPM
practices followed by the leading organizations in electrical engineering sector from developing countries.
2
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LITERATURE REVIEW
2.1
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Intangible assets
The following facts share the changing scenario of rapid recognition of Intangible Assets (IA). In 1982, some 62% of
corporate assets in the United States of America (USA) were physical assets, however by 2000, that figure had shrunk
to a mere 30% (WIPO, 2008). In Europe, at the beginning of the 1990, IA accounted for more than a third of total
assets and as early as 1992, in the Netherlands, they accounted for more than 35% of total public and private
investments (Idris, 2003).
IA forms the part of wealth of an organization along with working capital and fixed assets (Stewart & Ruckdeschel,
1998). Dynamic IA management will help in leveraging IA assets. Although IA may represent competitive advantage,
organizations do not understand their nature and value (Collis, 1994). IA has made its way in accounting book of an
organization. On the accounting front, two new accounting standards, Federal Accounting Standards Board (FASB)
141 and 142, were recently introduced in the USA. These new standards require all companies with USA Generally
Accepted Accounting Principles (GAAP) requirements to identify and value their IA and to include those valuations on
their balance sheets to provide investors with greater certainty regarding the value of those corporations (Chang,
2003). For this study, authors have followed classification of IA as shown in Figure 1.
IA are classified differently when viewed from law, finance, and business perspectives. Authors have focused on
IP classification according to law. IA are classified into two categories: IC and IP. IC is further classified into human
capital, organizational capital, and relational capital. IP is classified further as patent, copyright, trademark, industrial
design, layout design of integrated circuit, geographical indication, protection of plant varieties and farmer's rights,
and trade secrets. For each type of IP, separate Act is enacted in various countries, under Trade Related Aspects of
Intellectual Property Rights (TRIPs) guidelines. We have considered trade secret as an IP, although most of the
countries have no any specialized statutory provision for its protection. The common law provisions may be employed
but common law provides very little degree of protection, and hence confidentiality is the crux of the trade secret.
Trade secret plays crucial role when we consider IPM of an organization. Many organizations prefer to keep processes,
compositions etc. as trade secret instead of protecting the same using other suitable type of IP instrument like patent
or copyright. Table 1 shares IP asset percentage of various companies.
2.2
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Intellectual property management in India
Liberalization of economy in the year 1991 by Government of India and General Agreement on Tariffs and Trade
(GATT) signatory status of India resulted in realignment of functional departments of many Indian organizations in the
wake of the new business environment. The setting up of global R&D centers by many large multinational companies

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