Seminar report

DELHI TECHNOLOGIACAL UNIVERSITY

Correlation: IP & Auto

By
Himanshu Gupta
2K10/PE/012
1

STUDENTS DECLARATION

I, hereby certify that the work which is being presented in the seminar entitled Correlation: IP
& Auto is submitted in the partial fulfillment of the requirements for degree of Bachelor OF
Technology at Delhi Technological University is an authentic record of our own work.

Student signature

Name: - Himanshu Gupta

Roll No.:- 2K10/PE/012

Contents
S.No.

Topics

Page No.

Overview

Auto-Clusters

Intellectual Property and Auto Industry

10

Intellectual Property as an Economic Asset

13

IP Management MethodologyTen Points Best Practice

14

Case Studies
I.
Bishop Steering
II. Toyotas Automatic Loom

17
17
19

Overview

Intellectual Property

Intellectual Property is like a proprietary knowledge, a creation of mind like inventions,

symbols, songs, poems etc., possesses value and has utility, and determines the
competitiveness of a corporation.

INTELLECTUAL CAPITAL of a Human Being1

Intellectual Property is the result of the overlapping of the three domains i.e., Law, Business
and Technology, Art & Creation.

Overview of the Indian I.P. Regime: FICCI IP Certificate Course Study Material

Domains of IPR1.

Types of Intellectual Property

The convention establishing the World Intellectual Property Office Article 2 (viii), defines that
the intellectual Property office would protect the following forms of Intellectual Property:
1. Artistic, Literary, and scientific works
2. Performance by performing artists, Phonograms and broadcast.
3. Invention in any form of human endeavor.
4. Scientific Discoveries
5. Industrial Designs
6. Trade mark, service marks and commercial names and designations
7. Protection against unfair competitions.

Indian Auto-Industry

According to the latest statistics available from ACMA, It is observed that Indian Auto-Industry
is currently going through a challenging phase, growing at a CAGR of about 14%2, attributed to
increased VUCA3 (Volatility, Uncertainty, Complexity and Ambiguity).

2
3

http://www.acma.in/pdf/Auto-Industry.pdf
http://acma.in/pdf/Accenture_Presentation_5_September.pdf

But, still, it is believed that Indian Auto-Industry has a high potential due to:
1. Growing Indian Middle Class.
2. Increasing consumption of Commodity by Indians4.
3. Increasing Vehicle penetration in India5.
The latest projection by ACMA for the Vehicle market and Auto-components in India are
encouraging and depicts the high growth potential for Indian Auto-Industry.
Automobile
Current Status
Segment

Future Prospects

CAGR

Volume (in million)

CAGR

Volume (in million)

Passenger

14

3.24

13

10

Commercial

22

0.832

11

2.351

Tractors

0.641

2/3 Wheelers

16

16.56

30.23

Construction

14

0.054

14

0.18

Vehicles
Source: http://www.acma.in/pdf/Auto-Industry.pdf

Auto-Components
Current Status

Future Prospects

CAGR

Revenue (in billion)

CAGR

Revenue (in billion)

Turnover

12

40.6

14

115

Export

12

9.3

16

30

Import

11

13.1

13

35

Source: http://www.acma.in/pdf/Industry-Statistics_10062013.pdf

Some silent features of the projections are:

4

World Bank
World Bank; Vehicle Ownership and Income Growth, Worldwide: 19602030, Joyce Dargay, Dermot Gately and
Martin Sommer, January 2007
5

1. The market for all segments in the vehicle market ( Passenger, Commercial, Tractors,
2/3 Wheelers and Construction Vehicles) would atleast grow by 1.5 times in terms of
volume, and about 43 million vehicles are expected to be on the Indian roads till 2021.
2. The growth for the passenger vehicles (3 times) is found to be more favorable than that
for 2/3 wheelers (2 times) and commercial vehicles (1.5 times) indicating the growing
Indian middle class segments, who despite high fuel price, increasing space crunch for
road and parking infrastructure and poor quality of roads subjected to harsh weather
condition (increasing servicing and maintenance cost), aspire to own a 4-wheeler that
symbolizes their enhanced living standards.
3. Imports, in my view, is a result of unavailability of quality product at an economic
price at the time of need, suggesting insufficient and/or undeveloped capacity and
hence, should be taken as a sign for manufacturing potential in the domestic land.
4. The data for increased vehicle penetration, volume of both vehicle & auto-components
and imports, suggest an urgent need to enhance manufacturing and supply chain
capacity, aleast by 2-3 times to keep pace with the growing demand, as projected by
the ACMA
5. Presence of Constraints like poor quality of Indian roads, volatile fuel price and
insufficient road and parking infrastructure, enhanced environmental regulations and
value for money conscious Indian customers, etc., mirrors the high scope for R&D and
an urgent need to enhance and strengthen I.P.R system in India.

Auto Clusters

Auto-Clusters

Delhi- National
Capital Region
BangaloreChennai
Mumbai-Pune
JamshedpurKolkata
Indore

Mumbai-Pune, a one of the oldest clusters has the presence of large OEMs such as Tata
Motors, Fiat, General Motors India, Mahindra, Daimler Chrysler, Tata Motors, Force Motors
Bajaj, Auto and Kinetic. To support these OEMs in the region, there are a number of large
suppliers including Tata AutoComp, Bharat Forge, Bosch, Lear and a whole lot of smaller
component manufacturers6.
The cluster around the National Capital Region (NCR) of Delhi originated with Maruti. Most
of the suppliers in this cluster have Japanese origin attributed to the fact that most of the OE
companies being Japanese manufacturers or their collaborations. The leading suppliers in this
area are mostly Maruti affiliates like Asahi Glass, Krishna Maruti, Sona Koyo, Jai Bharat Maruti

Report on Defining the Role of Government in the Transnationalization Efforts of the Indian SMEs in the Auto
Components Sector by IDC

(JBM), Omaxe and Bharat Seats. Honda SIEL Motors, based near Delhi also draws from the
suppliers cluster in the region5.
Ashok Leyland and a small Hindustan Motors facility primarily drove the auto component cluster
in the Bangalore-Chennai sector 5 and also the largest contributor to revenue in the Autoindustry
However, After the delicensing in 1990, many manufacturers like Ford, Hyundai and Toyota
have set up their manufacturing facilities and hence, attracting suppliers into this region.
Visteon, Delphi, and Bosch are some of the important suppliers in the cluster. The proximity to
the Chennai port facilitates exports for the suppliers in the cluster. Toyota has established its
own supplier park in the Bidadi region near Bangalore and has its own transmission components
unit under Toyota Kirloskar Auto components. Bangalore is also the Indian headquarters of
India's largest automotive supplier Mico Bosch5.
The last decade has seen increased investment in the automotive sector in new geographical
areas with General Motors establishing its plant near Vadodara (Gujarat) and Sonalika Groups
Car division established in the Una district (Himachal Pradesh) has the potential to attract a
number of automotive component suppliers in that region5.

Intellectual Property
and
Auto Industry

Automotive industry is a high-tech R&D industry involving high margin and high growth
potential due to rising income level especially in the developing countries. Today, OEMs are
facing intense competition among themselves to gratify the ever increasing customer
aspirations. Today, customers are becoming highly demanding and specific about various
attributes like styling, safety, comfort etc., forcing companies to continually develop new
products, processes, and technologies. Recent consumer demand for fuel-efficient, costeffective, and environmentally friendly cars has sparked even more extensive research and
development (R&D) efforts7.
To survive intense global competition, OEMs must create and leverage intangible assets. The
automotive industry trails only the pharmaceutical and technology industries in global R&D
spending. 1
Thus, technology-based IP is critical to succeed in the automotive industry. But there are other
important types of intangible assets, as stated by a report by the Price water house coopers 1,
that enhances the OEMs competitiveness such as:

Core product Intangibles:

concept engineering, product engineering,

R&D, innovation, product testing, and
validation etc,

Process Intangibles:

know-how

Marketing Intangibles:

brand-name, trademark, distribution

network, customer
loyalty etc.

Report on Transfer pricing of Intellectual Property in the Automotive IndustryA Focus on India Transfer
Pricing by PWC.

10

Trade Intangibles:

identification, development, and

management of a
strong vendor network with requisite skills
and quality standards, efficient supply
chain, etc.

Presently, US, Europe and Japan are focal points of generations of intangibles related to
Intellectual Property are generated. OEMs in these places develop the technologies and license
them to their offshore manufacturing units in the developing countries.
But, Surfacing of various constraints like High shipping costs and government regulations, such
as tariffs and quotas, are forcing OEMs to bring a change in their above strategy. Also,
accelerated economic growth and rising demand in countries like India and china creates
premium for an OEM to establish manufacturing units in these countries. Accordingly, OEMs
looking to tap into growing markets have increased production and assembly operations in AsiaPacific countries. As the following graphic demonstrates India and China hold by far the
greatest potential for growth in the industry1.

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But to tap the growing market and gratify the rising aspiration of customer, a need is felt for
the local manufacturers in the Asia Pacific region to perform greater amounts of in-house R&D
and subsequently, to lawfully register the valuable intangible created to enhance the profit.

12

Intellectual Property as an
Economic Asset
Intellectual assets are becoming a measure of corporate viability and future performance. A recent
study shows that, on average, 40 percent of the value of a company that tied up in its intangible
assets is not shown in any way on its balance sheet and thus, IP is sometimes referred to as
hidden value; but whether hidden or expressly valued, it is now clear that patents, copyright and
related rights, trademarks, geographical indications and trade secrets are significant contributors of
enterprise value.

IP is now one of the most valuable, or often the most valuable, asset in commercial transactions,
whether licensing agreements, manufacturing, purchase or distribution agreements, or mergers and
acquisitions.2
I.P system confers exclusive rights over the commercial use of the created intangible to its owner.
But now-a-days, I.P. owners instead using their intangible by themselves license them to others and
in turn receive royalty revenue while licensees receive products and technology that might not
otherwise have had access to them. In such transactions, I.P. owner may also allow licensees to
create improvements or derivative works and to develop their own IP assets, which can then be
cross-licensed or licensed to others, creating a cycle of invention and business transaction, hence,
increasing the tax revenue, contributing to the countrys GDP and flourishing the economy.
A report issued by PricewaterhouseCoopers in 1999 found that the global IP licensing market
totalled more than US$100 billion, giving an idea of how economically important IP assets are
today2.

http://www.wipo.int/export/sites/www/freepublications/en/intproperty/888/wipo_pub_888_1.pdf

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IP Management MethodologyTen Points Best Practice

In todays commercial market space enduring high competition, challenging margin and high
geo-political & gas price volatility, I.P. is not just an important vein for an enterprise to survive
but an important weapon of commercial competitiveness. Ability of an enterprise to effectively
and efficiently manage the I.P. portfolio determines the sharpness of this modern-day sword
of global competitiveness and hence the probability of the enterprise to achieve its desire.
Lawyer Sharyn Ch'ang in a WIPO case study discusses Ten points Best Practice IP Management
Methodology 9 for intellectual property owners to capitalize on investment in research and
development, or their creative pursuits:

http://www.wipo.int/edocs/mdocs/sme/en/wipo_reg_ip_guz_02/wipo_reg_ip_guz_02_8_b-related1.pdf

14

Identify
Record
Protect
Value
Risk-Evaluation
Commercialization
Attribute
Enforce
Adherence To Corporate
Policies

Identify all the IP they own

Record appropriate details about those assets in an IP asses register audit it periodically

Protect it wisely, using the most appropriate legal mechanism availablenot all
necessarily expensive

Value each IP asset and reflect this in the balance sheet

To ensure commercialization of new IP does not expose the company to risk, clear any
new products and processes before marketing

15

Commercialize the propertythere are numerous ways to do this including new

marketing methods available through the Internet

Attribute ownership of IP so that others know who owns it.

Enforce their rights when they are infringed or threatened.

Develop and adhere to corporate policies and practices about handling and managing
IP.

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Case Studies
I.P. To Economic Advantage

I: Bishop Steering 10
Making Money from Royalties

Bishop steering is an innovative company, established in 1957 by Dr. Arthur E. Bishop who
first designed commercial aircraft steering and landing gear, and then applied the ideas in
developing Automotive steering technology. The company is one of its kinds that are driven by
its I.P. portfolios and one of the best examples in recent time to showcase Making Money from
Royalties. Since Arthur Bishop set up the firm as a sole trader 40 years ago the company has
developed an extensive and very detailed inventory of its intellectual property and is now a
leader in Australia in managing and profiting from intellectual property.
The Bishop group, well known for its power steering technology, currently has more than 500
patents and patent applications from which it earns more than $7 million each year in royalties.
Ninety per cent of this comes from licensees overseas and 25 per cent of motor vehicles
produced every year incorporate Bishop technology.
"It's an interesting aspect of our business that we literally bootstrapped ourselves from a fairly
low base in the late 1960s," said Dr Baxter 4.
"At that time we went out and exclusively licensed our technology to various companies.
Exclusivity generated a higher royalty rate but as our products became more accepted in the
market place, we re-negotiated those licences in the early '80s, making them non-exclusive.
This allowed us to substantially broaden the user base of Bishop Technology.

10

http://www.wipo.int/edocs/mdocs/sme/en/wipo_reg_ip_guz_02/wipo_reg_ip_guz_02_8_b-

related1.pdf

17

Managing all this valuable intellectual property (IP) is a major component of the company's day
to day business. It's all done in-house and Director Dr. John Baxter says that defending it is an
important part of their business. Multi-national team of engineers and IP protection experts
enabled introduction of numerous innovative power steering systems.
Recent Accomplishments4:

In Sep 2000, multi-million dollar licensing agreement signed with Robert

Bosch GmbH to manufacture Bishops patented Torque and Angle
Sensor key to replacement of traditional hydraulic steering with Electric
Steering for passenger vehicles

In August 2001, 30% shares acquired by DaimlerChrysler AG, world's

Fourth largest car maker

Revenue received as Royalty will enhance Bishops ability to fund new and current R&D
initiatives and thus, the size of the portfolio of intellectual property in the transportation and
telecommunications engineering field.

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II: Toyotas Automatic Loom 11

Using Royalty to Set Up Company

The second story is about an entrepreneur cum inventor who licensed his invention and
utilized the royalty received to lay a strong R&D foundation for the now called Toyota Inc.
Entrepreneur cum Innovator Sakichi Toyoda invented a version of automatic loom 13 years
after receiving a patent for the same in 1896 along with a number of additional patents, later,
to complement and fine-tune the invention. In 1924, his invention, Worlds first automatic Loom
Toyota Type G Automatic Loom reached the market and Kiichiro Toyoda, Sakichis son, made
an important agreement with Platt Brothers & Co. for its commercialization. Platt Brothers paid
Toyoda 100,000 (equivalent to US$25 million today) for the exclusive right to manufacture and
sell the automatic loom in any country other than Japan, China, and the United States of
America. Toyota decided to use the 100,000 as initial capital to set up an automobile company
and fund the necessary R&D.

11

http://www.wipo.int/export/sites/www/freepublications/en/intproperty/888/wipo_pub_888_1.pdf

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