Managing the Intellectual Economy.

Corporations around the world are searching for ways to ensure success, but they often overlook hidden financial opportunities within their portfolio of intellectual properties. These companies are losing sight of a huge opportunity for growth--and a new way of doing business in which intellectual property is a universal "currency" that is bought, sold, licensed, pooled or exchanged. This new market is the vital nucleus of the Intellectual Economy--a system in which governments and corporations work together for symbiotic growth.

Why work with governments? They also have a huge stake in developing a more cohesive way of managing intellectual property. Developed countries in Europe, North America and Asia could enjoy faster economic growth if more technology were commercialized. And countries such as China and India could make more rapid economic progress if companies that possess cutting-edge intellectual property felt confident enough to transfer it to their subsidiaries in those countries or to license it. Most CEOs I know are hesitant to do that.

To create this Intellectual Economy, we need a healthy dose of collaborative competition. Every company wants to win with the top inventions and the best products, but there are some issues on which companies and governments must come together.

First, my company or your company is not always the one most qualified to develop a new technology or bring it to market. To survive, companies have to gain access to ideas, technologies and designs they do not generate themselves. They need to complement their own intellectual property. Philips, for one, is not only a seller hut also a buyer of intellectual property. We trade with big names such as Hitachi, Sanyo, Sony and IBM.

Even in developed countries, however, there are issues surrounding the protection of intellectual property. A case in point is the "preemptive" patent, which occurs when companies or individuals secure patents they never intend to market or license. They quietly hold the patent until another company has pursued the innovation and is already making money from it, at which point they surface to collect revenues from "patent infringement." Any discussion regarding a fair and equitable framework for the Intellectual Economy should address the issue of bow to move away from a litigation-based system to a commercial system.

We should also continue working on a more harmonized international patent system. At the moment, there is a fundamental philosophical difference between the American and European patent systems. The U.S. system tends to protect the inventor whereas the European system tends to prefer a more rapid distribution of innovation. We support the talks between patent organizations of the U.S., European Union and Japan. Positive developments include the Patent Cooperation Treaty of the World Intellectual Property Organization and the recently adopted Community Patent in Europe.

Working together also means working with governments in developing countries, or should I say countries that are still developing fair patent protection. I am seeing fascinating signs that China is now recognizing the value of protecting innovations. Why? Because China is trying to transform itself into a knowledge economy. The Chinese government now has more at stake as a generator of intellectual "currency" and will enforce patent laws that benefit all companies doing business in China. Since the Chinese are trying to move up the technological ladder in telecommunications, semiconductors and other fields, they are beginning to see that a climate which discourages innovation works against their own best interests.

I would encourage my fellow CEOs, as they interact with governments around the world, to reinforce the importance of protecting and activating tomorrow's innovations today. Regulatory frameworks should encourage corporations to invest in innovation and disseminate it as rapidly as possible, not hoard it in secret treasure chests.

Gerard Kleisterlee is president and chief executive officer of Royal Philips Electronics.