IBM generates in excess of $1.5 billion annually in highly profitable licensing revenues for its intangible assets, all without generating a single product. With intangibles now comprising more than 70 percent of US market capitalization, many leading corporations are increasingly leveraging their intellectual capital portfolios to boost revenues, drive capital formation, and reduce risk. But even as US patent license revenues have reached $150 billion annually (up from $18 billion in 1990), a majority of corporations are only starting to comprehensively address how to derive more systematic value from these assets. Those firms are discovering that IP has evolved into a highly proactive, opportunistic field that requires coordinated management across a number of functions within an organization. This article provides a framework for managers to better understand how best to profit from this most significant driver of business value. Why the recent surge of interest in intangible assets? The percentage of company value attributable to intellectual capital has in fact been increasing dramatically for more than two decades. According to a Brookings study, in 1978 just 17 percent of firms' value was associated with intangible assets. Fueled by new technologies and a changing legal environment making patent-holder rights more enforceable (and therefore more profitable), that number had more than quadrupled to 69 percent by 1998.
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