Caterpillar Corporate Licensing Program

Probably each of you know that the most difficult thing about giving a speech is coming up with the first thing that you´re going to say. Although I´ve given this talk about two dozen times both inside and outside of Caterpillar, I struggled with exactly how to begin this morning until I heard the last speech given here. If Chuck Dennis from 3M is out there, I´d like to thank him for giving me my lead-in. If you were to take the Caterpillar symbol, the world´s #3 most valuable trademark (see me later if you want to know how we came up with that) and place it where the 3M symbol is on Chuck´s presentation, you would basically have Caterpillar´s story. [See Mr. Dennis´ presentation in the Industry Insight archives. -ed.] The parallels between the two company experiences are absolutely phenomenal. The story, or the process I went through, is almost identical to what Chuck described, and the things I learned are almost identical to his takeaways.

Comparing the experiences at these two companies is a very appropriate way to begin this discussion. You look at the two companies -- Caterpillar is the world´s largest earth-moving equipment manufacturer and also the world´s largest producer of engines, and 3M is also one of the most innovative companies in the world. Why is the comparison between the two important? Because both of these companies, who have been leaders in innovation, have been slow to adopt licensing. There are only a few companies, like IBM, who is probably the licensing leader, approaching $2 billion in annual revenue, that have long accepted licensing as core to their business. But for most companies, in what I call the second tier of the industry, the story has been very different. For our two companies, and for others such as P&G, Boeing, and Rockwell, the initial attempts at licensing were met with a similar response: "You want to do what?" In all of these companies, licensing professionals have had to overcome a lot of inherent skepticism to get their programs going.

A little bit about Caterpillar: We have 68,000 employees world-wide in 26 business units. We have 400 legal entities inside those business units, and, on the intellectual property side, we have 7000 patents and applications. The breadth of our IP portfolio surprises some; for example, we have over 100 patents in the area of global position sensing. Caterpillar developed some of the earliest and most accurate ways of measuring position with satellites. In our licensing business, as is the case with most everyone else that I´ve spoken to, the business units, the true owners of the patents and technology, are the ones who receive the money -- a system which helps drive behavior inside our company.

In terms of what we´re doing at Caterpillar, I´ll have two basic points I´ll want to come back to. One is a very obvious statement that a marketplace needs buyers. The world´s largest earth-moving equipment company has its hand up saying: "If you want to sell us something, come to me or my staff. We´ll find for you who might be interested inside of Caterpillar." And I challenge each of you to think about being buyers as well as sellers in order to develop and grow this technology transfer marketplace that we all know is necessary. And secondly, the most important thing, is the somewhat counter-intuitive point of the importance of tying licensing to the legal community within a company.

With the corporate licensing program at Caterpillar, our job is to sell the concept of a technology marketplace, which surely sounds familiar to companies dealing with yet2.com. I want to tell you a little bit about how we´re doing it. In facilitating adoption of the technology marketplace within Caterpillar, the terms connectivity and integration were essential, not just within our company, but also within the industry. As I said, the theme is, "A marketplace needs buyers." In our case, we built our licensing organization both from the ground up and the top down. We began with an individual champion working with a single business unit. I came from one of the most proactive units in the company -- the engine business. In engines, we did some portfolio mining, which helped us to determine what it is we have and who wants it. Then we demonstrated by example. While putting together the ideas for engine licensing, we jumped right in by starting to do some licensing and completing some donations. We built a business model that suited our company culture, which is of utmost importance. Even if the same process or structure works for IBM, 3M, and Caterpillar, there certainly are unique ways in which it´s implemented. Like most companies, Caterpillar is unique in its culture, and we had to structure ourselves with that in mind.

Once we had constructed a successful licensing business in engines, we brought this to the rest of the company. We took it out to the stakeholders, on a road show of sorts. We went to 12 corporate officers and got 100% support behind our project. The executive office has supported it. The Chief Executive Officer had previously created what he called an Innovation Board to drive new business models within Caterpillar, and Licensing was the first to get funded by that board. The key message that we pushed is one of excitement -- you have intellectual capital in your companies that arguably represents the bulk of corporate value. Our group, and similar organizations in other companies, have to share the excitement of how intellectual capital is a forgotten asset, and, like any other type of asset, needs to produce optimal returns.

If you manage to generate excitement throughout your company, you then take the early successes of your program and grow on them. We built a corporately integrated program, and one that I believe is unique. Without exception, as I talk to my peers in other companies through seminars like this, they all have given me the advice to get my licensing program out of the legal department or it won´t make it. This suggestion is because the basic discipline of law is very different from marketing. Well, we have continued to keep it in the legal department, and I want to show you later why at Caterpillar that remains the right place for it.