The Philips Formula
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Feature Philips IP&S The Philips formula Intellectual property has always been important to Philips, the Dutch electronics multinational. But under the inspirational leadership of Ruud Peters, the company’s IP & Standards business group has scaled new heights adapt it as necessary, have been vital By Joff Wild attributes throughout his career and perhaps explain why he has been so successful. It Ruud Peters always wanted to work for was Peters who conceived of Philips IP & Philips. But it was never his intention to get Standards; Peters who persuaded the involved in intellectual property. As a student company’s board to set it up; and Peters he attended university in the Dutch town of who has galvanised his team to deliver ever Delft, where he majored in physics. His plan since. In so doing, Peters has established was to get a job in the Philips labs and make his business as a global IP leader. Not every a career in research and development. company will choose to follow the path The second oil crisis of the 1970s put chosen by Philips IP & Standards in seeking an end to all that, however. Cutbacks at the to maximise IP value, but none should ignore company meant there were no research jobs its story. It is one that involves taking a cost available. Still determined to make his centre at the periphery of corporate thinking career in science, however, Peters decided and turning it into a profit-generating to take the one post at Philips that was on powerhouse at the centre of the action. offer. This was working in the company’s IP department. Safely ensconced, he figured, Welcome to Philips town he could bide his time and put in for a European corporations do not get much bigger transfer to the labs when the economic than Koninklijke Philips Electronics NV. conditions were right. Founded in 1891, by Gerard Philips (a All that was back in 1977. Twenty-two maternal cousin of Karl Marx, no less), the years later, Peters had long since forgotten company now employs over 128,000 people his R&D dreams. Instead, he had been worldwide and in 2006 generated revenues promoted through the IP department all the well in excess of Euros 25 billion (US$37 way to the top, becoming the head of what billion). The business is centred on electronics was then called Corporate Patents and and is divided into three main sectors: Trademarks in 1999. Nine years down the Healthcare, Consumer Lifestyle and Lighting. line, he is still there. The title he now holds The company was founded in Eindhoven, is CEO of Philips IP & Standards. It is one of a city with a population of some 200,000 the world’s biggest and most successful about an hour and a half to the south of company IP management and exploitation Amsterdam by train. Aside from Philips, the organisations: an independent business unit city is probably best known for its football inside Philips which is central to shaping team, PSV Eindhoven, a frequent winner of R&D strategy, negotiating M&A deals and the Dutch league championship and also developing the Dutch multinational’s European champion in 1988. PSV began its business vision as it seeks to meet the life as a sports club for Philips employees challenges of the 21st century. (PSV standing for Philips Sport Vereniging, or The patience and determination that Philips Sports Union in English). PSV play in Peters displayed 30 years ago, not to the Philips Stadium, which is located in the mention his ability to devise a plan and Philipsdorp – or Philips Village – www.iam-magazine.com Intellectual Asset Management February/March 2008 27 Philips IP&S neighbourhood of town. All of which probably for companies and it was something that we tells you what you need to know about the had to prepare for. The way we had been central role Philips plays in the city where it operating was not going to work in this new was born. environment. We had to completely change Although a 2001 relocation means that the organisation.” the main company board may now be located Although his department was a large one 65 miles to the north in Amsterdam, the in 1999, with offices in six countries, Peters financial centre of the Netherlands, the Philips believed that the limited responsibilities it heartbeat – its R&D function – remains had meant that the potential value IP could centred on its home town. And it is here, too, bring to Philips was not being realised. The that you will find Philips IP & Standards: in its problem, as Peters saw it, was that while his own newly constructed building in the middle group was responsible for the creation and of what is termed the High Tech Campus. management of IP rights, it had very little While the group’s new name is just six years input into the business decisions being old, the IP function at Philips is long- made around these rights. On top of this, established. The company obtained its first both domain name management and anti- patent in 1906 and a specific IP department counterfeiting strategy were being dealt with was established in 1924. By 1999, when outside the group, as were formal standards- Peters took the helm, Corporate Patents and setting issues; while the financial aspects of Trademarks had 250 employees. licensing agreements were the responsibility of the corporate accounting department. “To New era, new strategy create real value it was clear to me that we Peters is the first to admit that Philips has had to bring everything to do with IP at never been ignorant of the importance of IP Philips together under one roof. It was to its business plans – not just as a important that we stopped being reactive defensive tool, but also as a means of and started being proactive,” Peters says. generating cash. He points out that the Having convinced himself of all of this, company has been involved in lucrative Peters’ next job was to convince the licensing deals since the mid-1970s at least. company’s board of directors. He says that However, that does not mean that it was this was not too hard a task. “It was a making the most of what it owned. “The relatively simple job – it was a case of being world was changing and it was important for transparent and not promising too much. We us to look at developments and work out were not starting from scratch as Philips had Gerard Philips which ones were going to have a long-term a long history in both IP and licensing. The Founded the company that bears his name impact,” Peters explains. “What was clear board was familiar with that,” Peters says. in the Dutch town of Eindhoven in the late was that IP was going to have a growing role So, in 2000, Philips IP & Standards – or 19th century 28 Intellectual Asset Management February/March 2008 www.iam-magazine.com Philips IP&S IP&S, as it is known inside the company - then, when it is completed, the group will was born and established as an independent break up.” But even in the quiet times, business unit within the Philips organisation. people do not return to a specific department within the group; everyone works Putting the vision into practice together. “They’re all in the same business, Since then, Peters’ task has been to make after all,” says Peters. IP&S as close as possible to what he And it’s that idea of IP as a business describes as “the IP trading house of that Peters returns to time and again. “IP Philips”. This means, he says, “generating IP knowledge is important, but it is not the be and packaging it for potential customers, so all and end all,” Peters explains. “We need helping our business units”. In order to do people here who have broad horizons and a this as effectively as possible, Peters large number of capabilities. In addition to explains, it is vital that members of the IP&S IP, they have to understand finance, team do not work in silos. “We look at IP business and business development.” IP&S rights in combinations, not in isolation. We exists, he continues, to provide IP solutions ensure that people with different to Philips’ business units and to support backgrounds work together on projects as their growth and competitiveness. “You this helps us find the best ways both of cannot see IP as a goal in itself. It is an protecting products and also of ensuring they intermediate step in creating value for the provide solutions for their markets.” company; it is something that creates a It’s an approach that makes sense, business opportunity.” given that the value underpinning all Philips To get the staff members that it needs, offerings will include a combination of IP&S has to do a lot of training because, as patents, trademarks, domain names, yet, Peters has not found a programme or copyrights and know-how. That same university course externally that provides intermingling of rights will be a feature of what he needs. “Yes, we put a lot of effort most M&As the company gets involved in, as into training. Our people need to be skilled in well as licensing deals, collaborations and IP, finance and business, and we find that joint ventures. “During a transaction, we can we have to broaden skill-sets when people have patent people working alongside join us,” Peters says.