Corporate management of intellectual property in Japan

Abstract

Intellectual property has rapidly become an area of strategic concern for corporate management and technology management within leading companies, with a concomitant growth of IP (intellectual property) resources. The paper describes how large Japanese corporations organise and manage their IP operations, which is quite different from the traditional patent organisation in Western companies. It appears as if Japanese industry has developed still another area of management from which Western companies have much to learn. The typical IP department in a large Japanese corporation has evolved into a department which is comprehensive regarding IP responsibilities, relatively large, engineer dominated, embedded in a corporate patent culture, and of strategic concern to business, technology and top managers. The paper also describes how this new type of IP organisation could be precursory to further extensions and how IP management could be extended into what could be called distributed intellectual capital management.

Full text

Corporate Management of
Intellectual Property in Japan∗
∗∗
∗
by
Ove Granstrand
Chalmers University of Technology
S-412 96 GÖTEBORG
Ph: +46-31-772 12 09 (dir.)
+46-31-772 12 38
Fax: +46-31-772 12 40
E-mail: ovgr@mot.chalmers.se
∗ Paper submitted to International Journal of Technology Management, special issue on Patents,
guest editor Prof. Edwin Mansfield.

Corporate Management of
Intellectual Property in Japan∗
∗∗
∗
by
Ove Granstrand
Chalmers University of Technology
SE-412 96 GÖTEBORG, Sweden
Abstract: Intellectual property has rapidly become an area of strategic concern for corporate management and
technology management within leading companies, with a concomitant growth of IP (intellectual property)
resources. The paper describes how large Japanese corporations organize and manage their IP operations which
is quite different from the traditional patent organization in Western companies. It appears as if Japanese industry
has developed still another area of management in which Western companies have much to learn. The typical IP
department in a large Japanese corporation has evolved into a department which is comprehensive regarding IP
responsibilities, relatively large, engineer dominated, embedded in a corporate patent culture, and of strategic
concern to business, technology and top managers. The paper also describes how this new type of IP organization
could be precursory to further extensions and how IP management could be extended into what can be called
distributed intellectual capital management.
Keywords: Patent management, patent organization, intellectual property, intellectual capital management,
technology management.
Reference to this paper should be made as follows: Granstrand, O. (1999), ”Corporate Management of
Intellectual Property in Japan, International Journal of Technology Management, Special Issue on Patents,
edited by Edwin Mansfield.
Biographical notes: Ove Granstrand was educated at Chalmers University of Technology, University of
Gothenburg, Sweden and Stanford University. He received graduate degrees in mathematics, economics and
engineering with the Ph. D. degree in industrial management. His work experience includes teaching, research
and consultancy. He serves as Professor in Industrial Management and Economics at Chalmers University. His
research interest concerns economics and management of technology. He has especially studied innovation and
diversification in multi-technology corporations in Europe, Japan and the US, as well as various issues related to
intellectual property and intellectual capital more generally.

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Corporate Management of Intellectual Property in Japan
Paper Contents:
1. Introduction
1.1 Background
1.2 Purpose
1.3 Method
2. IP Resources
3. IP Organization
3.1 Organizational options for IP in general
3.2 Patent and IP organization and management in large Japanese corporations
4. Patent Management and Patent Culture
5. IP Organization at Toshiba and Hitachi
6. Further Types of the IP Organization
6.1 Introduction
6.2 An Extended IP Department
6.3 Distributed Intellectual Capital Management
7. Summary and conclusions
References
Abbreviations
CEO Corporate Executive Officer
IC Intellectual Capital
ICM Intellectual Capital Management
IP Intellectual Property
IPR Intellectual Property Right
JPA Japan Patent Association
JPO Japan Patent Office
MNC Multinational Corporation
PAS Patent strategy system
R&D Research and Development
1. Introduction
1.1 Background
In the USA in 1982 a court specialized in – and thus likely favorable to – patent legislation was created, the
Court of Appeals for the Federal Circuit. Independent of this, but shortly thereafter, a new director of the
Antitrust Division in the US government initiated a change in antitrust policy, implying an upgrading of patent
rights visavi traditional antitrust concerns. These legal developments were seemingly minor events on the world
scene, but nevertheless happened to trigger the emergence of a pro-patent era world-wide, subsequently fuelled

2
by political and industrial concern in the USA over its declining international competitiveness, especially visavi
Japan, and the free-riding of other nations, especially Japan, upon US investments in new technologies. As a
result, the economic value of patents has increased, as have the resources and attention devoted to patenting and
the amount of patent disputes, the latter escalating at times to what has been popularly called patent wars,
especially between the USA and Japan.
1.2 Purpose
This paper will describe developments in the organization and management of patent and IP (intellectual
property) resources and activities in large Japanese corporations.1 Special attention will be paid to what can be
called a patent culture in these corporations. The latter has developed during a long period of time, but was
strengthened considerably from the 1980s onwards, through developments in IP organization and management,
spurred by the outbreak in the 1980s of “patent wars”, notably with large US corporations. Accordingly, IP
resources have increased substantially and the IP organization has become upgraded, more centralized, more
comprehensive, and more attended to by top management, technology management and business management. It
appears as if Japan, partly as a result of the pro-patent era, has developed still another area of management in
which Western companies have much to learn. The paper also addresses the possible future role of IP
management and further evolution of corporate management and organization. With the increasing role of
intellectual capital and the further emergence of what we can call intellectual capitalism (Granstrand 1997), it is
conceivable that intellectual capital management will develop, embracing IP management as well as technology
management. Which countries and companies will take the lead in this development is an open question.
1.3 Method
The paper is based on a questionnaire survey complemented by case studies and interviews of best IP
management practice companies in 24 large Japanese corporations in 1992. The 24 corporations were selected to
include the largest R&D spenders in 1990 in chemical, electronic and mechanical industries.2
2. IP Resources
The level of IP resources in Japanese large technology-based corporations is considerably higher than in most
comparable Western corporations, as is the output in terms of both absolute number of patent applications and
number of patent applications per R&D dollar. As mentioned, the IP resource levels have increased during the
1980s, as have the numbers of patent applications. Table 1 gives some examples of top IP spenders among
Japanese large corporations in different sectors.
1 Intellectual property refers to patents, trade secrets, trademarks, copyrights, designs, utility models, artistic
work etc.
2 The study was carried out by the author and colleagues under the auspices of the Royal Swedish Academy of
Engineering Sciences. See further Granstrand (1999).

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Table 1. Japanese corporations with most patent employees (in 1991)
Corporation Patent Total Pat. empl./ Total Total R&D/
employees1 employees3 Tot. empl. 4 R&D sales sales
(%) (MUSD)2 (MUSD)2 (%)
Electrical:
Toshiba Corp. 370 162 000 0.23 2 390 35 507 6.7
Canon Group 350 62 700 0.56 830 14 053 5.9
Matsushita Electric
Co., Ltd 340 210 848 0.16 2 887 49 619 5.8
Hitachi Ltd. 330 324 292 0.10 3 690 58 173 6.3
Fujitsu Ltd. 210 155 779 0.13 2 947 25 880 11.4
Sony Corp. 200 110 000 0.18 1 504 27 068 5.6
Mechanical:
Honda Motor Co., Ltd. 150 85 500 0.18 1 459 32 342 4.5
Toyota Motor Corp. 130 102 423 0.13 3 233 74 099 4.4
Chemical:
Asahi Chemical Ind. 70 27 018 0.26 300 9 785 3.4
Mitsubishi Kasei Corp. 70 17 000 0.41 379 9 479 4.0
Notes:
1) Number of persons working more than half-time with patenting activities.
2) Consolidated data, including majority owned subsidiaries worldwide. Conversion rate used is 1USD =
133JPY.
3) Consolidated employee data.
4) Hitachi, Honda, Toyota and Asahi reported non-consolidated data. It is therefore possible that these companies
have higher consolidated patent employee ratios.
Source: Questionnaire survey by the author and colleagues. Corporate annual reports.

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As seen from Table 1, the electrical corporations top the list regarding total number of patent employees.
The electrical industry was also first and hardest hit by the patent wars and reacted early by building up in-house
resources. In terms of the ratio of patent employees to total employees, Canon is leading, followed by Mitsubishi
Kasei. There is no industry difference in this respect. However, it must be kept in mind that the degree of
outsourcing and centralization of IP resources and R&D varies among the corporations. The degree of
consolidation also varies and the figures for total number of employees, total sales and total R&D are reported on
a consolidated basis.
Table 2 then shows the general picture of patent and R&D resources in the sample. A few observations in
relation to Table 2 are noteworthy. First, total patenting costs have grown considerably between 1987 and 1991,
roughly in line with sales and R&D. However, the growth of in-house patenting staff is much less, except for the
electrical industry which has been a precursory industry in building up IP resources in the 1980s. The lower
overall growth of in-house patent employees compared to growth of patenting expenditures is probably a growth
lag that reflects both a temporary peak in work load and bottlenecks in more long-term build-up of IP resources,
leading in turn to growth of outsourcing.
Patent employees in Japanese large corporations are predominantly engineers, with small percentages of
economists and lawyers. The main strategy in building up in-house competence has been to “convert” engineers
in general to patent engineers, although there is a growth in percentage of lawyers in patenting. There are,
moreover, significant differences across industries in degree of centralization of patent employees, the chemical
corporations being most centralized and the electrical corporations least centralized, although with a trend
towards centralization among the latter. On average, patenting is also more centralized than R&D.3 For example,
about 20% of IP personnel are located at corporate headquarters in Toshiba, while only 10% of the university-
degree engineers work in corporate laboratories.
A final observation is that on average “patent intensity” in terms of the ratio of patent costs to R&D costs
is still fairly low, i.e. around 2.3%, which is lower than the average R&D intensity, i.e. the ratio of R&D costs to
sales. However, some companies like Toshiba have a patent/R&D cost ratio around 10%.4
3 A similar result was found in Etemal and Dulude (1987) as well for a sample of large European, Japanese and
US MNCs.
4 A study by the author of 10 US large corporations (General Electric, ITT, Xerox, Pfizer, Motorola, 3M,
Honeywell, Control Data, RCA, and Zenith) in 1985 showed a patent-to-R&D cost ratio in the range 1–3%.
However, the ratio of number of patent applications per R&D dollar has been over ten times higher in Japan
relative to the USA in leading chemical, electrical, and mechanical corporations.

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Table 2. Patent and R&D resources in Japanese large corporations
Variable Chemical Electrical Mechanical Total
(n=9) (n=10) (n=5) (n=24)
R&D expenditures globally
in 1991 (MUSD) 255 1984 1285 1190
Growth ratio 1991/1987 1.38 1.56 1.50 1.53
Cost of in-house patenting department
activities and purchased services in 1991
(MUSD) 8.0 51.5 22.4 27
Growth ratio 1991/1987 1.63 1.35 1.17 1.43
Number of persons working more
than half-time with patenting activities
in the company in 1991 40.8 217.2 94.8 121.6
Growth ratio 1991/1987 1.04 1.35 1.01 1.23
thereof:
percentage engineers 1991 83.8 62.6 76.8 74.0
Growth ratio 1991/1987 1.01 0.96 1.05 1.00
percentage lawyers 1991 4.9 6.3 2.2 4.9
Growth ratio 1991/1987 0.86 1.58 0.73 1.11
percentage working in
central/corporate headquarters 1991 75.0 37.6 46.2 54.1
Growth ratio 1991/1987 1.00 1.10 0.95 1.02
Key resource ratios: 1)
Percentage patent workers
in the company 1991 0.32 0.17 0.22 0.18
Patent cost/R&D cost 1991 (%) 3.10 2.60 1.70 2.30
Note:
1) Calculated as ratios between sample averages (rather than sample averages of company ratios).
3. IP Organization
3.1 Organizational options for IP in general
There are various general options for how to organize IP activities. These options could be combined in different
ways, e.g. in a 3-tier organization with IP activities at corporate, business area, and business unit levels plus

6
parallel IP activities in an independent foreign subsidiary or newly acquired company, all supplemented with
outside patent bureaus, agents, attorneys and law firms. Thus, IP activities could be:
1) Centralized at corporate headquarters (mostly as a staff function)
2) Decentralized to business areas, business units and subsidiaries, domestic and foreign
3) Decentralized to one business division as a lead-house with corporate-wide IP responsibility
4) Organized as an independent IP business unit in the corporation
5) Externalized to a supplier organization, with one, two or more patent bureaus, agents, attorneys and law
firms (more than one is definitely advisable for a large company), or to collective IP resources shared with
others.
At functional level IP may be organized:
a) As organizationally separate functions for various IPRs (patents, trademarks, copyrights etc.)
b) As a comprehensive IP department, integrating various IP activities
c) Integrated with R&D, a special innovation company, a legal department, a licensing department, a
department for intelligence, information and documentation, or with marketing.
Rarely an IP department is organized as a profit center or business unit. Often it is a cost center, with a
cost-sharing arrangement, possibly with some services sold internally on top of this. As a typical staff service
function, the IP organization works in a matrix arrangement with the line organization. Coordination is also
achieved through committees, liaison people and the like.
Traditionally in Western companies, the effects of patents have been perceived to be very small in most
industries, although companies still have showed a considerable propensity to patent (see e.g. Mansfield 1986).
Consequently patent and IP matters have not attracted a great deal of resources and attention to how to organize
them. Usually, IP activities have been split into patenting and other activities, attached in a subsidiary manner as
staff or service functions to other functions in the corporations. A traditional large Western corporation has
typically had some kind of patent department attached to R&D or a legal department at corporate level with some
liaison engineers decentralized. Trademark-related activities have mostly been attached to marketing. Sometimes
there has also been a separate licensing department. While there has naturally been a certain amount of writings
about the work operations of IP-related departments and their staff, especially patent departments, there have
been few, systematic studies of patent organization and management across companies, industries and countries.
A classic study is Taylor and Silberston (1973), which contains a sub-study of patent and licensing departments
in about 30 UK companies in chemical and engineering industries. Some of the findings in this study may well
represent the traditional situation in many other Western companies, and will therefore be described here.

7
Taylor and Silberston distinguish between four types of patent organizations.5 The types (1–4) differ
primarily in terms of size (from small to large), degree of internationalization of specialist operations (from low
to high), and degree of formal organization and management (from low to high). The four types refer only to
patenting, and thus do not consider functional responsibilities outside the patenting area (e.g. for trademarks).
The first type of patent organization had no specific arrangements other than having a chief engineer or a
technical manager assuming responsibility for patenting with no special staff, instead relying fully on outside
patent agents. The second type of patent organization had an in-house patent specialist with a very small staff,
still relying greatly on outside patent agents. The third type, considered a typical industrial patent department in
the study, was a central patent department at corporate headquarters, headed by a specialist middle manager as
patent manager, being qualified as patent agent and graduate engineer. This department had a central staff,
supplemented by liaison individuals or small units with patent specialists in main R&D and production units, and
then some outside patent agents, especially for work on foreign applications.
The fourth and final type was termed the ‘super patent department’ in the study. The total staff of this type
of patent organization ranged from around 35 to around 50 patent employees, including secretarial and clerical
staff, doing all professional patent work except that which needed foreign agents. The largest such patent
departments, of which there were only a few in British industry at the time (late 1960s), were able to handle
several hundred UK priority applications. There were perhaps five or more foreign applications for each of these.
Licensing was likely to be a separate department. Finally, the traditional functions of the patent department as
identified in the study were: obtaining and maintaining patents (including identifying patentable inventions in the
organization and deciding whether to patent or not); opposing patent applications of others; handling
infringements; linking up with licensing and litigation when needed; dealing with foreign patent work; and being
a clearing-house for technical information in the firm, including the monitoring of patenting by others.
3.2 Patent and IP organization and management in large Japanese corporations
The patent organizations in Japanese large corporations in the 1990s have a number of common features that
clearly distinguish them from the traditional patent organization in Western large corporations. First, the
resources devoted to IP activities are not only larger, they are often larger by a magnitude, i.e. up to ten or more
times larger than in a Western counterpart.
Second, responsibilities for patenting and other IP matters have been integrated and centralized into a
comprehensive IP department at corporate level. In fact, all 24 corporations in the sample had a centralized
patent department with corporate-wide responsibilities for patent coordination, headed by one central corporate
5 The authors call them successive stages of patent organization, but present no historical evidence that the types
constitute stages in some sort of evolution of the patent organization. Nevertheless, given that patent resources
grow overall, the types are likely to follow roughly upon each other, possibly with some leaps.

8
patent manager. Usually, this department had similar responsibilities for other IP matters as well and there was an
organizational trend from a patent department to an IP department, and from a patent manager to an IP manager.
Third, the status and power of the patent and IP department have been elevated. Questions about patents
and related matters were regularly discussed at company board meetings in most of the corporations, and not
seldom the IP manager reported directly to the CEO. The career paths to top positions often had resided
substantially in R&D with involvement in IP matters, and several Japanese CEOs were strongly IP-oriented. The
IP department was thus of strategic concern under pro-active management, not just a reactive service department.
Consequently, there was a need for sustainable in-house competence on a substantial level and scale. Still, much
patent work was outsourced.
Fourth, substantial emphasis and resources were devoted to having the patent department serve as an
active clearing-house for technical information, with activities for technology scanning internally and externally,
patent mapping, patent clearance, dissemination etc. Sometimes, technology intelligence was conducted in
special subsidiaries as well. Such information-related activities are clearly important but in Western companies
they have been difficult to maintain, coordinate and link to decision-making. Often the Western patent
department has scanned and disseminated patent information without adding much value for the user, and without
much follow-up and feedback. Difficulties like these are also experienced by Japanese firms, but they tackle them
in more determined and systematic ways.
Fifth, good working relations between the patent department and R&D were much attended to. This is a
natural concern in Western firms as well, but the Japanese patent department was usally more powerful than a
reactive service department purely under the aegis of R&D. Patenting people were regularly involved in early
stages of R&D, not casually called in at too late a stage as has often been the case in Western companies. Patent
management was pro-active rather than reactively responding to requests from business and R&D operations, and
was expected to take sufficient initiatives in order to secure viable patent positions in various business and
technology areas. Needless to say, that is not an easy task as business divisions become increasingly independent
also in Japanese corporations. Corporate patent management had more power than its Western counterparts,
however.
To illustrate, in one corporation a review of patent positions was regularly undertaken at an early stage of
entering a business and/or technology area. If the review showed an unfavorable “jungle” of patents, the IP
manager had the clout to hold up the project until some kind of patent clearance (through e.g. licensing) had been
undertaken. However, more commonly than vetoing, an IP manager had the possibility to bring such a situation
to the attention of higher management as part of his (they were all male) responsibility.
Finally, the Japanese patent organization was immersed in what can be called a patent culture in the
corporation. This is an important feature, which will be dealt with in a separate section next.

9
4. Patent Management and Patent Culture
Japanese industry, and large corporations in particular, have developed a general orientation around patenting.
This orientation could best be described as a patent culture residing within and between companies.6 The patent
culture has not developed as a result of a grand design but has been part and parcel of a catch-up process,
especially since World War II, then being further strengthened after the emergence of a pro-patent era in the
1980s. That is not to say that managerial action cannot influence the formation of a culture in business, such as a
patent culture. The early efforts during the Meiji restoration of the first Director General of Japan Patent Office,
Mr. Takahashi, provides one example of such action. The efforts of Mr. Saba, former CEO and Chairman of
Toshiba, and Mr. Yamaiji, former CEO and vice Chairman of Canon provide other examples.
The question is to what extent a patent culture can be fostered by managerial action in a corporation. A
more general question is how a corporate culture in general could be formed. Japanese corporations are
renowned for having built strong corporate cultures by various means. Needless to say, a well-functioning culture
of some sort could be an effective vehicle for coordinated, purposeful action and as such could work as an
efficiency-enhancing control mechanism. At the same time a culture could become a barrier to change. Moreover,
in society as well as in large corporations, there is a fair amount of cultural diversity, with several subcultures
which may clash with each other.7
Thus, there is a need for management to consider how to influence cultural formation and change. General
managerial instruments that are mentioned in the management literature as useful in bringing about cultural
formation and change are strategy and policy formation, recruitment, promotion, restructuring of communications
through organization and location, and campaigns of various sorts. There are also less tangible managerial
actions on the level of fundamental elements in a culture, such as actions that influence language and values,
create symbols and rituals, integrate company life with social life and leisure activities, take on social
responsibilities, strengthen ideologies, nurture common myths, and create implicit incentive and penalty
structures. The importance of company leaders as role models who live as they preach is also extremely
important.
These are all general elements in fostering a culture in a corporation, and it is in the nature of things that
an exhaustive listing of elements cannot be made and that many elements are intangible, requiring much
managerial sophistication. When it comes to building a corporate patent culture as found in the large Japanese
corporations studied, the elements become more specific. Some of these elements, as observed, are dealt with
below, with no ranking order intended.
6 The concept of culture has come into popular use – and misuse – in management in the last few decades.
Despite a certain vagueness and tendency to use culture as a catch-all concept, it will be used here since it after
all captures some important, if yet evasive, features in organizations. A standard textbook in social psychology
has the following definition: “Culture includes all institutionalized ways and the implicit cultural beliefs, norms,
values and premises which underline and govern conduct” (Krech et al. 1962, p. 380).
7 A subculture is simply speaking “a culture within a culture”.

10
a) Top management involvement in patenting and IP
Top management involvement is indeed a necessary but not sufficient condition. It is also typical for most
Japanese corporations to have top management involved in technology and R&D. Many corporations, too, have
had a preference for technologists as CEOs, although there are corporations like Hitachi and Toshiba that prefer a
succession of technologists and commercialists as CEOs. In either case there are almost always members of top
management with an appreciation of patenting matters and many have direct personal experience. Some top
managers make it a habit to ask questions about the patent situation in all sorts of presentations, and some also
make it a habit to visit labs and discuss, among other things, patenting in more casual ways. It is then important to
show concern and at the same time refrain from letting obsolete or otherwise insufficient technical knowledge or
one’s own pet ideas misguide R&D.
b) Patenting and IP as a common concern for all engineers
Although specialists are always needed for patent work, it is considered important not to consider patenting
primarily a specialist function but to make patenting a common concern for all engineers. Training through
courses, job rotation and career paths with at least a stint early on in a patent department are then valuable,
together with other measures described below.
c) Patent policies and strategies integrated in business plans
Without a requirement to make patenting and IP a regular and specified item on the agenda of business plans,
business managers will easily neglect the IP situation or let IP strategies become overly general and watered out.
Integration of business and IP aspects is then not only a matter of thinking hard and coming up with cunning
ideas, but also a matter of two-way communication with some integration of business language and IP language.
“What is our unique competence in this business?” is a common question in business analysis. The near at hand,
but less commonly used, IP– related question is “How can we protect our unique competence in this business?”.
d) Clear patent objectives
Clear, quantified objectives for patenting are common in the Japanese corporations. An example is given by
Hitachi, which had as one objective to increase the number of strategic patents by 100 per year. Strategic patents
were then defined to mean “basic and inevitable patents that must be used by our company and others in major
products of the present and future”. There are many arguments against quantifying objectives, and not seldom
such arguments are produced by patenting people. Thus, quantified objectives are said to stimulate quantity
rather than quality of patents, and to foster unfruitful competition. On the other hand, quantification focuses
attention and provides clear yardsticks for rewards and penalties, as well as for improvements. The arguments for
quantifying objectives appear to be stronger when building a patent culture. Such objectives then function also as
symbols and provide a basis for habitual behavior, even rituals, such as the “Kamikaze research” with frenzy
patenting in Japanese companies at the end of the budget year in order to meet objectives. Such behavior could
be seen as going too far, but nevertheless is part of the patent culture.

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e) Clear patenting incentives for R&D personnel and organizational units
The issue how to reward inventive work by individuals, teams and units is a very important and fundamental one
in both Japanese and Western firms, an issue that could be elaborated at great length. Without doing so here, one
can just point to the clear and fairly strong incentive schemes employed by Japanese firms, often also without
much of the adversary relation between the firm and the inventor that easily develops in a Western firm. In
Western firms, top management sometimes takes the view that R&D people basically are salaried for doing
inventive work and thus no substantial extra reward schemes are needed for such work. (At the same time various
generous bonus schemes may apply to business managers.) The following citation contrasts with this view:
— “We try to encourage the view that the company’s value to society lies in
developing new technology. We also try to provide a corporate environment where
thought and originality are rewarded.”
— “We give annual cash awards to the employee who has applied for the most
patents that year and to those who have developed patents or software of an outstanding
nature.”
Keizo Yamaji
Former CEO, Canon Group
f) Fostering of behavioral attitudes and norms
Fostering of behavioral attitudes, norms, habits and standards conducive both to technology protection by patents
and secrecy and to technology intelligence can be done in various ways. For example, certain reading and writing
habits of engineers can be encouraged, as in Canon. A citation by Dr. Yamaji may again illustrate:
— “I encourage our researchers to read patent specifications rather than academic
theses. I also tell them to make virtual experiments (Gedanken experiments) in order to
have them apply for more and more patents, so that we can be prepared for the era to
come when only some companies, strong in patents, will cooperate with each other and
survive.”
Keizo Yamaji,
Former CEO, Canon Group
Canon as well as other companies also try to encourage writing habits by aligning reporting on R&D work
to the norms and standards used in patent documents. In this way, patent application work is facilitated while
thinking in patent terms is encouraged.
Speaking, listening and observation habits of engineers, salesmen, managers etc. could also be influenced
for protection and intelligence purposes, although too extreme behavior in this regard may be counter-productive
in other respects.

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g) Visible organizational means
Tangible and intangible means for building a patent culture have to complement each other. Examples of visible
organizational means besides the ordinary patent organization are patent promotion centers, patent liaison
officers distributed in the organization, corporate-wide patent campaigns, patenting prizes, and patent strategy
seminars.
h) Language, methodology and philosophy
A common language is central to any culture. One way to foster a professional language for a patent culture is to
develop concepts and tools and employ them in communication as well as in a methodology for analysis, which
could be further turned into a kind of philosophy. The so-called patent-mapping methodology has been
developed in Japan by Japan Patent Office initially and then increasingly by large corporations. It has been a
useful methodology for several purposes in itself, but at the same time it has contributed to building a patent
culture through its influences on language, analytical perspective, conceptualization and communication.
Finally, it must be emphasized that corporate patent cultures are embedded in and reinforced by an
overarching industrial and national culture, conducive to patenting, inventions, intelligence, and so on. There is a
wide range of institutional arrangements for this with government agencies and initiatives, legislation,
associations, institutes etc. which have developed historically during a long process of catching up with the West.
The large Japanese corporations as a collective now play an increasingly important role. The corporate IP
managers all know each other and are part of various “old boy networks” (to use a Western term). The Japan
Patent Association (JPA) is a good example of an organization catering to the interests of primarily large
corporations since long ago.8
5. IP Organization at Toshiba and Hitachi
Toshiba is one of the leading Japanese corporations in the IP field, with top rankings in terms of e.g. number of
patent applications and patent employees. Thus, it is natural to look at the history, organization and management
of IP in Toshiba in greater detail.
Table 3 indicates that the organizational history of Toshiba and its R&D and IP resembles, at a very
general level, a Western large corporation's organizational development. The corporation grows, diversifies,
refocuses and internationalizes. At the same time R&D, established early as a separate lab, grows, diversifies,
differentiates into product and process development and research, and is organized in a mix of
centralized/decentralized labs under a technology management structure. At a later stage, R&D starts to become
internationalized, a process that began fairly late in Toshiba. The IP organization gets established as a patent
department at an early stage, also by Western standards (comparable to stage 2 in Taylor and Silberston's study
8 JPA was formed in 1938 by some large corporations like Toshiba and Hitachi. It was originally called
Chrysanthemum Feast Club and was renamed Japan Patent Association in 1959.

13
described above). The IP organization has historically been oriented mostly around patenting, which grows and is
upgraded in the organization, adopts a centralized/decentralized mix, internationalizes, and finally consolidates
into one large department the various IP activities that have grown up in a diversified way over the years. Thus
developments in the corporate organization reflect, often with some time lag, into developments of the R&D
organization, which further reflect into the IP organization.

14
Table 3. Key historic events in Toshiba’s corporate, technology and IP organization
Some key events in Some key events in Some key events in
corporate organization R&D organization IP organization
1870 Shibaura Electric established
1890 Tokyo Electric established
(first producing light bulbs) 1906 R&D lab established
in Shibaura Electric 1912 Patent Section est'd
1918 Matsuda R&D lab est'd
in Tokyo Electric
1931 Tsurumi R&D lab est'd
in Shibaura Electric
1939 Toshiba established as merger
of Tokyo Electric and
Shibaura Electric
1944 Patent Division est'd
1960s Cooperation with NEC and
General Electric in computers
1961 Corporate research
lab established
1968 Heavy industry research 1968 A decentralized system
lab established adopted
1970 Production engineering
lab established
1972 Start of trainee
education
for foreign countries
1976 Adopts General Electric type of
organization (with business portfolio
analysis,business units etc.)
Decides to focus on electronics
and information technology.
1978 Exit from mainframe 1978 Labs in business units
computers established in a 3-level
organization under business
sector labs and corporate labs.
1979 Washington Intellectual
Property Office
(“WIPO”) established.
1980s Promotion of globalization, 1980s Various new labs established,
and E&E strategy e.g. a VLSI lab in 1984.
(energy & electronics). The ‘Tokken’ system for
Later extended to 3E – R&D management established
energy, electronics together with the 3-level
and environment. R&D organization.
1989 Infocom technologies account 1989 Intellectual Property
for over 50% of sales Division established
Source: Material from Mr. Saba, Mr. Takayanaga, Mr. Norichika, Miyazaki (1995), and interviews.

15
Figure 1 shows the overall Toshiba corporate IP organization in the mid-1990s. One can note that each
business group has an integrated IP department or section under the business group management, but also a
functional administrative management arrangement with the corporate IP division. The latter in turn is at the
same staff level as R&D and design centers.
Figure 2 further shows the inner organization of the IP division, with departments for each major type of
IPR, except trade secrets, plus departments for licensing and patent information. Toshiba Techno Center is also
doing patent analysis but, for various reasons, is organized separately. Finally, there is a relatively large
department for planning and coordination of IP departments in business groups. Thus, the IP division is by and
large comprehensive, and represents quite another type and stage than the “super patent department” in the study
by Taylor and Silberston (1993).
Education in IP, of both IP personnel and engineers corporate-wide, is important in Toshiba, as in any
company seriously responding to the pro-patent movement. Table 4 shows Toshiba's patent education system.
Similar, although not identical, IP organizations can be found in other large Japanese corporations, as
illustrated in Figures 3 and 4 in the case of Hitachi. Figure 5 also gives a bird's eye overview of how R&D and
patent departments cooperate in the Hitachi case.

16
Table 4. Toshiba’s patent education system (as of 1995)
Career stage IP-related Engineers
personnel
When entering IP generally IP generally
the company
Introductory Basic education Freshman course
education First term collective education on business and
Second term collective education patent/IP rights
1–3 years Advanced course Basic knowledge about
Research of precedent cases the patent system
Patent surveys
Ways to summarize proposals
Mid-level Selection Patent review/patent maps
personnel Drafting specifications in English Improving the quality of proposals
Patent application management
Patent specialty courses
System of overseas patent study
Deputy managers Family training 1) Family training
1)
Patent supervision Patent supervision
Managers Family training Family training
Patent strategy Patent management
Note:
1) Training and socializing in off-the-job settings (signs of titles and positions removed, night-time sessions etc.)
Source: Mr. K. Norichika, Toshiba.

17
Figure 1. Toshiba IP organization (as of 1995)
CORPORATE TECHNOLOGY COMMITTEE
STAFF
Corporate Environmental Protection & Production G.
Productivity Div.
Manufacturing Engineering Research Center IP S
Technology Planning & Coordination Div.
INTELLECTUAL PROPERTY DIVISION
Washington & West Coast IP Office
Toshiba Techno Center. Ohgo Patent Office
Research & Development Center IP D
Design Center Design Patent D Design Patent D
BUSINESS GROUP (DIVISIONS)
Information Processing & Control Systems G. IP D
Information Equipment & Automation Systems G. IP D
Electronics & Telecommunication Systems G. IP S
Medical Systems Div. IP S
Electron Tube & Device G. IP D
Semiconductor G. IP D
Video & Electronics Media G. IP D
Airconditioners & Appliances G. IP D
Energy Systems G. IP D
Industrial Equipment G. IP D
Material & Components G. IP S
Legend:
IP = Intellectual Property, D = Department, S = Section, G = Group
–––––– Organizational Management
– – – – Administrative Management Source: Toshiba
President
&
Chief Executive
Officer
Senior Executive
Vice Presidents
Board
of
Directors

18
Figure 2. Toshiba IP division (as of 1995)
Planning & Coordination
Technology Contracts & Legal Services
Software Protection
Designs & Trademarks
Patent Application & Management
Patent Licensing 1
Patent Licensing 2
Patent Information Center
Washington IP Office
West Coast IP Office
Toshiba Techno Center Inc.
Intellectual Property Division
Ohgo Patent Office
Legend:
–––– Organizational Management
– – – Administrative Management
Source: Toshiba

19
Figure 3. IP management in Hitachi (as of 1992)
Management Function of Intellectual Property
Executive Committee, Budget Council for Research Deliberation of basic policies on
Laboratory Management Conference, intellectual properties
Long-Term Business Plan Council
Intellectual Property Committee
Deliberates various measures on
intellectual property activities.
Headquarters Staff Function Line Support Function
Technology Contracts & Legal Services
(Window and Control for Litigation)
Corporate Research &
Development Promotion Office
Intellectual Property Office
Respective Staff Group
President
Directors in Charge
(Negotiates licensing)
(Patent application,
processing disputes)
(Window and Control for Litigation)
Meeting to deliberate measures
on other firm's patents
Business Division
Business Office Patent
Strategy Meeting
H Works
(15 groups)
P Patent Group
A Research Laboratory
Patent Department 1–3
Licensing Department 1–2
Secretary's Office
Source: Hitachi

20
Figure 4. Organization of Hitachi's corporate IP department (as of 1992)
Personnel & Education Group
Patent Planning Group
Foreign Administration Group
Administration Group
Office Automation Group
Patent Information Group
Trade Mark Group
Copyright Protection Group
(Overseas Licensing Work)
(Domestic Licensing Work)
(Related patent work involving power & industrial system &
equipment, some consumer electric appliances,
automotive products, instruments)
(Work related to patenting of consumer electric appliances,
air conditioning & refrigeration
and telecommunication and design patent work)
(Work related to computer and semiconductor patents)
Intellectual Property Office
Patent Department I
Patent Department II
Patent Department III
Licensing Department II
Licensing Department I
Source: Hitachi

21
Figure 5. Hitachi's “PAS System” (Patent strategy system) (as of 1992)
Pivotal research and development • Acquiring strategic patents and use of rights • Eliminating patents posing as obstacles
PAS Promotion Committee
• Selection of theme
• Formulating patent strategy
• Follow-up on status of promotion
Research and
Development Department
General Manager,
Research Laboratory
Person in charge
of promotion
Researcher • Engineer
Patent
Department
Patent Department
manager
Deputy in charge of promotion
Patent Engineers
PAS Conference
• Preparing PAS map
• Imaging patent network
• Reviewing strategic patents
• Measures for other companies' patents
Source: Hitachi

22
6. Further Types of the IP Organization
6.1 Introduction
As has been described in this paper, the leading-edge Japanese patent department of the 1990s is clearly a further
stage away from the “super patent department” found in a few leading UK firms during the late 1960s in the study by
Taylor and Silberston (1973). Also the patent department in some of the largest US firms has evolved substantially
since the 1980s. In the wake of patent wars and the pro-patent era, many Western firms in fact have initiated
processes for overhauling their patent organizations.
A natural question, then, is how the patent and IP organization in large firms in general will evolve into still
further stages in the future. First, one can note that temporary variations occur which may not be significant for long-
term trends or shifts. A certain cooling has affected the US-Japan patent wars since the early 1990s, and some
reductions of IP staff have been made in several Japanese corporations during the Japanese recession in the mid-
1990s.
However, the long-run trend of an increasing role of knowledge and intellectual capital (IC) in firms in
general is most likely to have a profound effect on their future IP organization and management, especially in an
increasingly competitive environment.9 Already now, many industrial firms have major parts of their assets as well as
their investments geared towards intellectual capital, and new types of firms emerge in which IC clearly dominates.
Compared to the large share of IC in the total resources of large, technology-based corporations, the share of
resources devoted to the IP department appears minor indeed. Patent departments have always been minor in firms,
even in Japan, and still are when viewed as functional departments, despite growth of their resources and a transition
into IP departments with more comprehensive IP management responsibilities.
However, the formal organization of IP-related activities is not the most important concern. Few people in a
traditional manufacturing firm would for the foreseeable future dream of formally reorganizing R&D, human
resource departments, external relations etc. into one formal, large department, division or business area for
intellectual capital with some kind of executive corporate IC manager.10 Nevertheless, an organizational arrangement
of that sort could be feasible. In fact, a “pure” IC firm or a firm in which IC resources dominate (e.g. a consultancy
firm) could in itself be viewed as such an arrangement, in which case the CEO is the corporate IC manager. The
feasibility of having an IC unit accountable on a normal balance sheet and profit/loss account is thereby
demonstrated. This is certainly not to say that accounting and organizational principles would make a large IC unit
an attractive organizational option in a more traditional manufacturing firm. A few US companies have tried to let
9 Intellectual capital is here taken synonymously with intangible or immaterial assets, comprising intellectual
property, human capital and “relational capital” (goodwill, organisational capital, etc.). A firm’s total capital base
then consists of physical, financial and intellectual capital.
10 Labels such as Chief Information Officer, Chief Knowledge Officer, IC Director, Intellectual Asset Manager, and
the like do crop up, however, as fans and fads of information businesses proliferate.

23
the patent department operate as an internal profit center. Internal and external licensing agreements then provide a
suitable institutional mechanism for business transactions. The experiences are mixed, however, and there are risks
of short-termism, high transaction costs and transactions detrimental to the operating business divisions. There have
also existed pure technology license brokers in traditional industries, but without manufacturing they are vulnerable
in the long run. In service industries, like insurance, more creative attempts have been made to account for IC in a
balance-sheet manner, but so far without separate profit/loss accounting.11 Appointments to IC manager or
Intellectual Capital Director have also occurred in this context.
What is far more important than the formal organization, though, is how the informal organization, the
culture, and the organization as a whole will change in response to the increasing role of IC.
At a general level, there is a shift in management thinking towards knowledge management, the knowledge-
based corporation etc. However, it could be argued that knowledge per se is not the primary concern for a firm. It is
when knowledge is turned into an exploitable resource in a competitive environment that it becomes of value to a
firm, i.e. when knowledge becomes an asset or a piece of intellectual capital. The same could be said about inter-
personal relations when viewed as corporate resources. The ways (or strategies) to turn knowledge and relations into
IC are many, some of which are objectionable in society. Ownership is one way in principle, but it is difficult to
exercise in general for institutional and social reasons. Having intellectual workers as some kind of slaves owned by
the firm is indeed infeasible; far-reaching collection and privatization of knowledge are objected to; exploitation of
personal networks is limited by countervailing forces and societal control, IPRs are limited and so on. Many
limitations of ownership of intellectual resources relate to very strong and fundamental cultural elements in societies
in general, like concern over personal integrity, individual freedom, democracy and so on. Some limitations also
derive directly from the institutional framework, such as the legal framework.
However, more important to a firm than the ownership aspect of IC per se is the control aspect or the
managerial aspect. That is, the key issue from a firm's point of view is how to obtain and maintain sufficient control
of the possible rents from IC for appropriation purposes. It does not necessarily have to be total control, only control
that enables in some sense satisfactory appropriation of rent streams for the firm as an IC possessor (or IC
controller). For this purpose, there are no ready-made managerial philosophies or tools. What we can call IC
management and IC organization are most likely to develop in the future at various levels – corporate, individual,
national etc. Two kinds of scenarios for organizational and management development will be elaborated here: first
what can be called an extended patent department and, second, what can be called distributed IC management and a
distributed IC organization.
11 See Fortune (1994) for the case of the European insurance company Skandia. The article also illustrates how US
companies like Dow Chemical run their patent departments as profit centers.

24
6.2 An Extended IP Department
Could the patent and IP department in large, technology-based corporations be further extended, beyond the type of
IP departments emerging in Japanese industry? Without elaborating in detail, a few arguments for such extensions
will be offered.
First, IP-related aspects penetrate a wide range of activities in a firm, more so the more IC based the firm is.
This penetration often requires two-way communications, which give IP staff large contact networks in the
organization and the IP department the potential as a communication node in the firm.
Second, IP-related activities need to link technological, commercial, economic and legal competencies. These
correspond to distinct bodies of professional knowledge, education and careers, which gives an IP department the
potential for being a platform for extended competence development (see below).
Third, IP-related activities have to be focused, especially because of their legal aspects. Dealing with IP
requires focusing on concrete inventions, trademarks, contracts etc., and attention to order and detail. Trade secrets
are less concrete but may still require attention to detail.
Fourth, as has been repeatedly emphasized, the value of IPRs as assets and competitive means has increased
substantially since the 1980s – and will probably continue to increase. Firms in general will become increasingly IC-
based. In addition, the range of more “pure” IC firms will evolve further in various industries and service businesses,
and new types of IC firms are likely to emerge.
Fifth, IP-related activities have a wide span in the time dimension. They interact with technical and
commercial activities in both the short and long runs. There are patent races where the winner takes all, at the same
time as patents may be kept valid for 20 years. Licensing contracts are typically long-term, which necessitates long-
term planning. Thus, IP-related activities instill both urgency and long-termism, and thereby have a potential to
induce people to try to integrate the often conflicting short-term and long-term views of a business firm.
Sixth, IP-related activities are, and have to be, closely connected to many sources of detailed information of
various kinds – technical, commercial etc. Thus, the IP department may also function as an information center or
clearing-house for technical and commercial information in the organization. The time value of patent-related
information also gives an incentive to deploy new information and communication technologies. This in turn may
further be used to extend the role of the patent department as a technical information center, as well as to extend its
role in information security, which also relates to protection of trade secrets and proprietory information as well as to
protection against disinformation.
Hence, there are several conditions surrounding IP-related activities that could be turned into advantages by
organizing an extended IP department. There are, of course, various directions and approaches for developing an
extended IP department in different types of companies and situations. This is not the place to make specific outlines
except to give some general examples of extended roles and responsibilities for a more traditional patent or IP
department, especially in Western large firms.

25
Licensing in and out is one area that sometimes has been integrated with patenting and IP. Although company
situations and licensing strategies differ, the reasons to centralize licensing more and integrate it more with patenting
have increased in general, everything else equal. This is mainly due to the increasing amount of cross-linkages
between patents, technologies, products, companies and markets arising from diversification and internationalization.
New generic technologies emerge, products and companies become increasingly “mul-tech”, i.e. multi-technology
based, and companies increasingly become globalized. (See e.g. Granstrand and Sjölander 1990 and Granstrand and
Oskarsson 1994.) These cross-linkages or interdependencies in turn require increased coordination, especially since
licensing contracts are long-term in nature. Too often companies, small as well as large, regret a license sold on an
ad hoc basis in a too independent and opportunistic business unit.
R&D and technical cooperation agreements of various types also increasingly involve IP matters which, just
like licensing, may require central coordination and cooperation with the IP department.
Another area that to some extent has been integrated with patenting is technology scanning, using patent
information. This is an area in which capabilities of various sorts (methods, databases, communication networks,
software tools etc.) develop fast, and Japanese companies are in the forefront together with some US companies. The
activities could at one extreme be limited to a rudimentary form of “patent watching” and standard distribution of
front pages of patent documents in the company, something that is not uncommon in Western firms. At another
extreme, activities could extend into full-fledged technology intelligence integrated with business intelligence and
perhaps further integrated with technology planning.
Technology planning in itself is an activity that is quite emphasized in Japanese large corporations – again in
contrast to many Western companies, in which strategic planning, long-range planning, technology planning etc. on
the whole became demoted after the oil crises a generation ago. It could be argued that an activity like technology
planning is more justified in companies trying to catch up. However, that argument does not fully explain the
emphasis put on technology planning in some leading Japanese corporations, where technology planning
departments are headed by highly qualified, mid-career technologists with considerable staff.
One further area, which naturally relates to IP but has not yet been much managed in systematic ways, is the
trade secret area. Trade secret legislation is weak in many countries, but strengthening measures are being taken and
companies seem increasingly to take trade secret-related disputes to court.12 However, it is in the nature of things that
secrecy measures have primarily to be strengthened and policed by the companies themselves. This could be done in
various ways, but an extended IP department is a natural locus for a central lead-house responsibility for corporate-
wide trade secret management, an area that probably will develop in the future, probably also under other names
such as information security. Such an arrangement is also aligned with the role of the IP department in technology
12 An example of a large-scale legal secrecy case is the one regarding Volkswagen's hireover of Mr. Lopez from
General Motors, where General Motors allegedly lost many trade secrets. Other examples come from biotech firms
in Silicon Valley, where many moves of key personnel between firms are accompanied by secrecy suits.

26
intelligence, as well as with the need to complement patent protection with a more comprehensive view on protecting
rent streams, rather than protecting pieces of property as if they were physical property.
One possible, although controversial, role for an extended IP department is to generate inventions, i.e. to
perform some inventive work, a role that is traditionally assigned to R&D and engineering departments (although
perhaps encouraged in quality circles or in the organization as a whole as well). The IP department should, of course,
not take over that responsibility from R&D but have it as a supplementary task. With competent patent engineers,
with engineer careers passing the IP department, and with technology intelligence and IP activities vested, the IP
department would be well positioned to contribute to inventive work.
Certainly more roles and responsibilities could conceivably be relevant for an extended IP department, and
some are likely to evolve in the future that are as yet inconceivable. One role that will be finally considered here is
the role of the IP department as a platform for competence development, or in other words as a training ground or as
a section in a corporate university. This competence development is primarily not intended for the IP department
itself, but for the company as a whole. Clearly, many companies have not been particularly patent-oriented in the
past and have consequently staffed their patent department with too few qualified engineers.13 If the IP department in
addition takes on new roles and responsibilities, its need for internal competence development further increases.
However, what is suggested here is that IP-related activities are suitable elements in learning processes for many
other company activities as well. IP is a nexus of technological, commercial, economic and legal aspects that require
attention to operational detail as well as strategic perspectives and attention to both the short term and the long term.
IP can thereby provide a vehicle for competence development in several professional disciplines, as well as for
linking those disciplinary competencies together in concrete ways. Moreover, IP-oriented training may be needed in
management and employee development in general in order to make the company more IP-conscious. For example,
engineers get training in systematic functional design and technology analysis through analyzing patents, as well as
getting a feel for market analysis and business operations through preparing license agreements and negotiations.
These perspectives and skills are then useful to build upon in technology management training. Similar examples
could be given for other non-engineering professional categories. An extended IP department can provide such an
interdisciplinary training ground in many of the normally used ways – courses, seminars, case work, projects, on-the-
job training, job rotation and so on.
13 In all fairness it must be said that some of these have a high level of professional competence and insight in the
company's technologies, but they are bogged down in various tasks, leaving their real competence underutilized
many times. It must also be said that on the other hand there are also some traditional patent engineers that stick to a
pretty narrow range of operational activities.

27
6.3 Distributed Intellectual Capital Management
As IC becomes increasingly important to firms and countries, it is natural to ask what the proper managerial
responses would be, which of course is a mega-dollar question. What has been said so far points to the need to
consider extensions of the IP organization as one response. However, a formal organization with departments,
committees, managers, specialists and so forth is insufficient. The arguments in the quality-management movement
of the 1980s against sole reliance on such an organizational response apply in the main to this context as well.
Extensions and transformations of corporate culture then have to be considered a second response, likely to be
complementary to the first response. Just as the patent organization could be extended to an IP organization, which
could further be extended to an IC organization, perhaps ultimately encompassing the whole firm if it becomes
sufficiently IC-based, the patent culture could be transformed into an IP culture and perhaps further into an IC
culture. Needless to say, cultural change is far from something that can be managed at will. However, as described in
the previous section, cultural change can be influenced to various degrees by managerial action. Having some kind
of patent culture already is thus a good starting point. Extending it to be more comprehensively IP-oriented means
extending the property dimension. A further extension from IP to IC means adding a value dimension, and
broadening the concern from mere property protection to rent control or rent protection and the acqusition,
development and exploitation of IC on the whole. In principle, then, the managerial actions mentioned in the
preceding section have relevance for building an IC culture as well, although there will be additional difficulties, e.g.
in clashes between the company and a wider range of groups of people with strong concern about their individual IC
or their group's IC.
Moreover, cultural formation and change take time, often too much time in the fast pace of contemporary
business. Thus, a third type of managerial action may be called for. This is what could be called distributed
management, which refers to a corporate-wide focused reorientation with responsibilities distributed at management
levels and no central responsibility except vested in top management. Mostly such an organization is implemented
swiftly on a broad front in order to get momentum in mobilizing and motivating the organization, besides saving
time. It thereby becomes one out of at most a few corporate-wide concerns. Often a similar reorientation is
implemented in many companies across industries at about the same time. Its form could be labeled a corporate
campaign, a crash program and the like, and its content a managerial or organizational innovation, a management
revolution and the like. It could also be a short-lived management fad, especially if it fails. Attempts to make too
many corporate reorientations at the same time also considerably weaken their prospects of success.
There have been several such reorientations in the corporate world in the recent past, with various rationales
behind them and a fair amount of success on average. Thus, there have been reorientations focusing on inventory
levels, total quality, lead times and core competencies. The foci of these reorientations or movements have had
certain shared features, which can be seen as requirements or facilitators for successful reorientations. Thus, foci
such as inventory levels, total quality, and lead times are:
a) concrete in character
b) able to penetrate a wide range of activities in and around the organization

28
c) having a potential for visible improvements
d) possible to attract realistic expectations in a situation susceptible to organizational change
e) having a direct and credible (and positive) influence on basic and acceptable objectives and visions of the
organization.
These requirements could very well be fulfilled by IC-related activities. Thus, IC could be the focus of a
reorientation through distributed management. As with any form of distributed management, there are two main
rationales. One is that the activities or operations actually focused become improved. The second rationale is that
many other types of related activities become improved in the process. This might superficially seem a side-effect,
but may in fact be the most important effect. By focusing on lowering inventory costs at all stages (through Kanban
etc.) the whole production and distribution organization could be improved, since its slacks and deficiencies then are
likely to surface. By securing and increasing quality in a broad sense, a certain innovativeness in the organization
could be improved. By lowering lead times, both improved efficiency and innovativeness across R&D, production
and marketing functions could be attained, at least in the short run. By focusing on core competences, being by
definition valuable, widely applicable and difficult to imitate, these could be improved and exploited more
efficiently, while at the same time increasing the awareness of the strategic value of IC. By focusing further on IC
and its dynamics, the IC management could be improved at all levels in the corporation, while at the same time
improvements in overall efficiency and innovativeness are likely. Anyone with experience in intellectual work knows
that it has a tremendous potential for productivity improvements.
7. Summary and conclusions
Partly as a result of a long process of catching up with the West, partly as a response to the pro-patent era emerging
in the 1980s and “patent wars” – hot as well as cold – with US corporations, Japanese large corporations have
developed leading patent management practices and resourceful, comprehensive IP organizations. Apparently patent
management is still another example of a management area in which Western corporations have much to learn from
Japan.
Taylor and Silberston (1973), being one of the very few systematic studies of patent organizations in industry,
identified four types or stages of them. In relation to these, the patent organization in Japanese large corporations
represent a quite different fifth type, as summarized in Table 5.

29
Table 5. The evolution of the corporate patent organization.
Type Characteristics
1 Headed by part-time technology manager plus outside patent agents1)
2 Full-time patent manager with small staff plus outside patent agents
3 Specialized patent manager with a corporate patent department and
liaison people in business divisions
4 “Super patent dept.” (35 – 50 persons). Separate licensing dept. 2)
5 Comprehensive IP dept. (50 – 500 persons) of Japanese type. Patent culture. 3)
6? Extended IP organization?
(Future scenario) Distributed Intellectual Capital Management
Notes:
1) Outside patent agents are used in all types but their relative importance is largest in types 1 and 2.
2) This is the fourth and most advanced type identified in the study of UK firms by Taylor and Silberston (1973).
3) Comprehensive IP departments of this size can also be found in some leading Western firms. For example, IBM
reportedly in 1989 had 240 professional employees linked to its Intellectual Property Law Department. However, in
contrast to large Japanese IP departments, IBM’s was much more internationalized (with ca. 30 locations globally
and ca. 10% of the patent professionals located in Japan) and decentralized (with only ca. 5% working in corporate
headquarters) and lawyer intensive (with ca. 60% being US lawyers). Cf. Table 2 above.
Many large Japanese corporations could also be said to possess a kind of patent culture, which can be
characterized as having: top management involvement in patenting and IP; patenting and IP as a common concern
for all engineers; patent policies and strategies integrated in business plans; clear patent objectives; clear patenting
incentives for R&D personnel and organizational units; behavioral attitudes and norms conducive to technology
protection and technology intelligence; visible organizational means to promote attention to patenting; and special
language, methodology and philosophy.
Patent organizations have developed also in many companies in the West during the pro-patent era, although
to a lesser extent on average than in Japan. In general, the patent department has moved from being a small, reactive
service department, often with low status and narrow operative tasks decoupled from business and top management,
towards a larger, pro-active organization with more comprehensive IP responsibilities, more status and power, more
commercial orientation, more strategic concern and more interaction with technology management, business
management and top management. Besides having grown, diversified and become more integrated in the
corporation, the IP organization has also gone international as the R&D organization continues to do.

30
Further developments of IP management and organization are conceivable. As the role of intellectual capital,
comprising IPRs, human capital and other intangibles, become more important in firms, intellectual capital
management, embracing IP management, might develop in various ways. The IP organization may be further
extended in terms of resources, tasks and responsibilities. The IP organization may also be subordinate to a kind of
distributed management of intellectual capital, signifying a reorientation of the whole company organization towards
its intellectual capital, somewhat analogous to the total quality management movement.
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Acknowledgements:
The comments by Prof. E. Mansfield and Prof. A. Mifune and the research assistance by Bo Heiden have been very
valuable. The assistance of participating corporations in Japan is greatly appreciated. The research was financed by
the Swedish Patent Office and carried out under the auspices of the Royal Swedish Academy of Engineering
Sciences in collaboration with Prof. Jon Sigurdson.