NEW YORK, February 9, 2000—When it comes to developing new products, America’s fastest growing companies aren’t solitary innovators: most seek speed and synergies by acquiring intellectual property (IP) from others.  But there’s an irony here: only half have a formal process in place for identifying and managing their own IP assets.  Consequently, only one in four of those holding intellectual property assets in turn leverages them by licensing out to others.  These are highlights from PricewaterhouseCoopers’ latest “Trendsetter Barometer,” released today.  For New Products, Most Tap the Intellectual Property of Others CEOs from most of America’s fastest growing companies (81 percent) say their business has IP assets – proprietary ideas or innovations that have present or potential commercial value in the marketplace. When developing new products or services, 80 percent of these “Trendsetter” companies also looks outside, seeking synergies through acquisition of IP from others.  For this, they follow several preferred strategies: 49 percent licenses technologies or intellectual assets from others.  This includes 57 percent of service businesses and 38 percent of product sector companies. 27 percent is involved in joint ventures where the partners share the risks, costs and profits from development of new intellectual assets.  Of these, 74 percent say this is a growing part of their business. 15 percent invests in smaller, independent businesses as an extension of their own R&D.  Of these, 61 percent expect to increase their involvement in this kind of activity over the next 12 months. “When developing new products, few of these ‘Trendsetter’ companies are exclusively do-it-yourselfers,” said Steve Hamm, managing partner of PricewaterhouseCoopers’ middle market advisory services.  “Their leaders are very practical, hard-headed people who are comfortable going outside to license a complementary technology or process.  Likewise, joint ventures and investing in others are well accepted.  They see little reason to expend limited resources to develop something from scratch, when key elements may be available from others.” Additionally, 38 percent say it is more attractive for them to acquire strategic businesses rather than rely strictly on internal development or licensing as a source of new products.  The main attraction of strategic acquisitions is speed – 62 percent within this group say it’s faster to buy than make.  And an almost equal number, 57 percent, says that when acquiring they can be more certain of what they are getting.  An additional 34 percent finds it is less costly to buy than make. How important is speed to market for these businesses?  More than half (55 percent) of “Trendsetter” CEOs say their business brings new ideas to market faster than competitors; 29 percent say their timing is comparable to others, and only 12 percent rate their business as slower.  Those that are faster expect significantly stronger revenue growth over the next 12 months, 27.5 percent versus 19.6 percent for all others, a 40 percent advantage. “Who can argue with speed, efficiency and savings when it comes to developing new products or services?” said Mr. Hamm. A Missed Opportunity at Home? Over the next 12 months, “Trendsetter” companies with their own intellectual property are projecting twice the revenue growth of those without: a 26.3 percent gain, versus 13.1 percent.  Given the importance of IP to growth and competitive advantage, it may come as a surprise that only half (51 percent) of those with IP assets has a formal internal process in place for identifying and managing them.  Service companies are more active in this regard (54 percent, versus 47 percent of product sector businesses). “Intellectual property can make the difference between a Derby winner and an also-ran,” said Mr. Hamm.  “I can’t think of a high growth, high potential business that wouldn’t benefit from having a process for identifying and managing their IP.” One of the benefits of such a process is the proactive designation of patents, copyrights and trademarks that could profitably be licensed to others.  Currently only 24 percent of “Trendsetter” companies with IP assets are licensing out.  Those that do enjoy an income stream that is not insignificant: 23.9 percent of their total revenues, and this is expected to grow to 26.5 percent over the next 12-18 months, an 11 percent increase in revenue share. But as large a revenue contributor as IP is, major money is still being left on the table.  Only 25 percent of those with IP assets say theirs are fully utilized.  “The typical utilization level is 64 percent,” said Mr. Hamm.  “This leaves considerable opportunity for further exploitation, particularly for companies that fall below the 64 percent benchmark.  All businesses need to analyze their intellectual property portfolio regularly, to ensure they’re getting the maximum benefit.” Further Study Highlights One-third of “Trendsetter” companies reports having a great many IP assets, another 31 percent says they have some, and 17 percent has very few.  Only 19 percent admit to having none.  Slightly more service than product companies have a great many IP assets – 41 percent versus 25 percent, respectively. “Trendsetter” CEOs report that, on average, 41 percent of revenues may be attributed to their IP assets… slightly more for service businesses (42 percent) than for product companies (40 percent). Most (52 percent) say they have IP assets that are both tangible and intangible.  Another 38 percent, more often smaller service businesses, has intangible IP assets only; nine percent has only tangible ones; and one percent isn’t sure. Slightly more service businesses are involved in joint development of IP with others, 28 percent, versus 26 percent of product companies.  Service businesses are also a bit more active in investing in smaller independent businesses as an extension of their own R&D  (16 percent versus 14 percent). “TRENDSETTER BAROMETER” INTELLECTUAL ASSETS

		Industry Sector
	Total	Product	Service
Have Intellectual Property Assets [Net]	81%	77%	85%
Own IP Assets [Net]	62%	56%	67%
Have patents, copyrights or Trademarks	57%	52%	61%
Actively license IP assets to other businesses	24%	18%	30%
Do not license out	38%	38%	37%
Develop IP Assets With/From Others [Net]	80%	77%	82%
License IP assets from others	49%	38%	57%
Do IP joint ventures:  Share costs & profits	27%	26%	28%
Invest in smaller independent businesses to extend own R&D	15%	14%	16%
Acquire strategic businesses for R&D /IP	38%	38%	37%
Have Formal Process for Identifying & Managing	51%	47%	54%
Believe it is:       More effective than that of competitors	36%	39%	35%
Less effective	6%	5%	7%
About the same	42%	41%	42%
Don’t know	16%	15%	16%
% Revenues Accounted for by licensing IP assets:
This year	23.9%	18.0%	27.0%
Next 12-18 months	26.5%	21.2%	29.5%
IP Asset Utilization
% Assets Fully Utilized	25%	22%	28%
Mean Utilization Level	64%	66%	63%

*Universe is the 81% having IP assets PricewaterhouseCoopers’ “Trendsetter Barometer” is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc. PricewaterhouseCoopers (www.pwcglobal.com) is the world's largest professional services organization.  Drawing on the knowledge and skills of more than 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance in an Internet-enabled world. If you have a question about this “Trendsetter Barometer” survey, please contact Pete Collins, survey director, at 646-394-4496, or e-mail to pete.collins@us.pwcglobal.com For more information about Barometer surveys, including recent economic trend data and topical issues, please visit our web site: www.barometersurveys.com