When Ruud Peters joined Philips’ IP department in 1977, he had no intention of making intellectual property his career. With a background in physics, Peters originally planned to transfer to the company’s R&D labs when the opportunity arose. Little did he know that over 30 years later, he would be leading one of the world’s most innovative and successful corporate IP organizations as CEO of Philips IP & Standards (IP&S).

The Vision: IP as a Strategic Business Asset

Peters’ journey to transform IP management at Philips began in 1999 when he took over as head of Corporate Patents and Trademarks. He quickly recognized that while Philips had long valued IP, the company wasn’t maximizing its potential. The existing structure, where IP creation and management were siloed from business decision-making, was no longer sufficient in a rapidly changing global landscape.

Peters envisioned a new approach:

  • Bringing all IP-related functions under one roof
  • Shifting from reactive to proactive IP management
  • Integrating IP strategy with overall business strategy

In 2000, with board approval, Philips IP & Standards was born as an independent business unit.

Building the “IP Trading House of Philips”:

  • Holistic IP Management
    This approach allows Philips to leverage its full IP portfolio strategically. By considering different types of IP rights together, the company can create more comprehensive protection for its innovations. It also enables Philips to develop more valuable IP packages for licensing or cross-licensing deals.
  • Cross-Functional Teams
    Assembling diverse teams brings multiple perspectives to IP strategy and execution. This collaborative approach ensures that IP decisions align with broader business goals and market realities. It also facilitates more creative and effective solutions for monetizing IP assets.
  • Business-Focused Skill Development
    Training IP staff in business skills enables them to better understand and contribute to Philips’ overall strategy. This broader skill set allows IP professionals to communicate more effectively with other business units and external partners. It also helps IP&S staff identify and pursue new opportunities for value creation through IP.
  • Strategic Outsourcing
    Outsourcing routine patent filing work frees up internal resources for higher-value activities. This allows Philips’ in-house IP experts to focus on strategic IP development and management. It also provides flexibility in managing workload while maintaining quality through trusted external partnerships.

Delivering Results Through Strategic Integration

Peters’ approach has positioned IP&S as a central player in Philips’ overall business strategy:

  • R&D Optimization
    IP&S collaborates closely with Philips’ global R&D labs to develop strategic research plans that align with the company’s IP needs. This proactive approach ensures that R&D efforts are targeted and efficient, maximizing the potential for valuable IP creation. By integrating IP strategy with research planning, Philips can build stronger patent portfolios in key technological areas, supporting its long-term business goals.
  • M&A Driver
    IP&S plays a pivotal role in Philips’ mergers and acquisitions strategy, evaluating potential targets from an IP perspective from the earliest stages. This involvement allows the company to identify valuable IP assets, assess risks, and sometimes even initiate deals based on IP considerations. The acquisition of Color Kinetics in 2007 exemplifies this approach, significantly strengthening Philips’ patent position in the emerging field of solid-state lighting.
  • Collaboration Catalyst
    As Philips increasingly engages in partnerships and collaborative ventures, IP&S has become essential in structuring these agreements to protect and leverage the company’s intellectual property. Peters emphasizes that IP considerations dominate collaboration discussions, with 80-90% of negotiations revolving around IP issues. This central role allows IP&S to ensure that Philips’ interests are protected while fostering innovation through strategic partnerships.

Key Principles of Peters’ Approach

  • IP as a Means, Not an End: “You cannot see IP as a goal in itself. It is an intermediate step in creating value for the company; it is something that creates a business opportunity.”
  • Accountability and Delivery: IP&S operates with its own profit and loss account, setting clear targets and being held accountable for results.
  • Long-Term Vision: While recognizing the need for short-term results, Peters emphasizes building sustainable IP strategies that may take time to fully realize their value.
  • Proactive Portfolio Building: Rather than simply reacting to lab inventions, IP&S works to define strategic IP needs and guide R&D efforts accordingly.
  • Embedded Throughout the Organization: IP considerations are integrated into all aspects of Philips’ business, from product development to partnerships and acquisitions.

The Impact on Philips

Under Ruud Peters’ leadership, IP&S has become a pivotal force driving value creation at Philips. While specific financial figures are not disclosed, Peters confirms that IP&S consistently meets its targets, with profits being redistributed to support various business units.

The group has played a crucial role in guiding strategic acquisitions, such as Color Kinetics, which have strengthened Philips’ position in key markets. By aligning IP strategy with research efforts, IP&S has significantly enhanced R&D efficiency, ensuring that Philips’ substantial investment of €1.67 billion in 2006 is effectively targeted.

The group has also facilitated successful collaborative innovations, including partnerships like the Senseo coffee machine with Sara Lee and the “Active Crystals” electronics line with Swarovski. Furthermore, IP&S has dramatically increased Philips’ engagement with external innovations, growing in-licensing deals from 5-10 per year a decade ago to 20-30 annually, allowing the company to leverage a broader range of technological advancements.

Challenges and Ongoing Evolution

Peters’ approach isn’t without challenges:

  • Skill Development
    Finding and training staff with the right mix of IP, business, and financial acumen is a continuous challenge for Philips IP&S. Peters emphasizes the need for extensive in-house training programs to broaden the skill sets of team members beyond pure IP knowledge. This multidisciplinary approach enables IP&S staff to effectively contribute to strategic business decisions and value creation across the organization.
  • Balancing Time Horizons
    Reconciling the long-term nature of IP strategy with shorter-term business pressures is an ongoing challenge that requires constant communication. Peters stresses the importance of setting realistic expectations and making clear that building a sustainable IP strategy takes time. This approach helps align IP&S activities with both the long-term strategic goals of Philips and the more immediate needs of individual business units.
  • Adapting to Open Innovation
    As Philips increasingly engages in collaborative ventures and partnerships, IP&S must develop new models for sharing and managing IP rights. This shift requires a more flexible approach to IP management, moving away from the traditional model of creating and protecting all IP in-house. Peters notes that IP considerations now dominate collaboration discussions, with 80-90% of negotiations revolving around IP issues, underscoring the need for innovative approaches to IP sharing and protection in joint ventures.

The Philips Formula for IP Success

Ruud Peters’ transformation of IP management at Philips offers valuable lessons for other companies:

  • Elevate IP to a strategic business function, not just a legal department.
  • Integrate IP considerations throughout the organization.
  • Develop cross-functional teams and skill sets.
  • Align IP strategy with overall business goals and R&D efforts.
  • Be proactive in building and managing IP portfolios.
  • Recognize IP’s role in driving acquisitions, partnerships, and innovation.

While not every company will follow Philips’ exact model, the core principle of treating IP as a central business asset rather than a peripheral legal concern is one that forward-thinking organizations would do well to consider. As Peters puts it, “If you want to achieve something with a portfolio, you have to know how to build it in the first place.”

Under Ruud Peters’ leadership, Philips has developed a formula for IP management that not only protects its innovations but actively drives business growth, shapes R&D strategy, and creates new opportunities in a rapidly evolving global marketplace.

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Further information:

The Philips formula