Companies build IP asset base through M&As

KOLKATA: Tata Steel insiders love narrating a story about how the creation of a new pigment in the cold-rolled pickling process, and the need felt to protect that innovation, eventually led to the birth of a new company, Tata Pigments, which is now a leading producer of synthetic iron oxide used in paints.

A trademark perhaps carries more weight than steel. After a spate of M&As in 2007, companies are taking a good look at leveraging their IP assets. For instance, Tata Steel’s acquisition of Corus; Essar Steel buying out Algoma Steel or Hindalco’s acquisition of Novelis — acquisitions that appear to have earned major IP credits for these companies. And, they are now increasingly becoming aware of its value.

“There is mutual learning in methods, philosophies and technology between the two companies (read: Essar and Algoma). It has also triggered a higher IP asset base,” said Mukesh Bhavnani, legal head at the Essar Group.

“Compared to five years ago, the Essar brand is now visible around the world,” he added.

Though Hindalco didn’t offer any comment, metal sector analysts pointed out that the Novelis buy also gave Hindalco the right to use world-class technology for making aluminium beverage cans. That apart, Novelis also happens to be a world leader in recycling used beverage cans, a technology that can prove valuable to Hindalco. Since, in calender 2006, it was Novelis that had launched its breakthrough Fusion Technology for production of multi-alloy sheet ingots, according to the company’s official website.
Similarly, with Corus in its fold, Tata Steel is also waking up to its full IP potential. The group’s intellectual asset base has grown following its merger with Corus, which is a leading patent holder in the European steel business.

“We plan to develop and expand our portfolio as part of a strategy to commercialise R&D efforts in strategic alliances, licencing and transfer of IP rights. The merger with Corus has been a good learning for us,” BK Bhuyan, Tata Steel’s senior manager, IP, said.

The company has rustled up an interesting IP portfolio comprising some 850 patents and copyrights with an equal number of applications in a bid to channelise its knowledge base into a potentially lucrative revenue stream.

Tata Steel acknowledges it was a late-starter in protecting its IP regime. “Though we initiated it in calendar 2001, we started out in right earnest only in 2004. European companies have a more systematic approach on IP. However, since then, IP awareness is fast becoming a part of our DNA at Tata Steel,” Mr Bhuyan said.

Tata Steel also admits some of its in-house expertise has definitely got lost down the years.

Few people know more than three decades ago, it achieved a breakthrough innovation in basic steel-making process — a coal-based method to produce direct reduced iron (DRI). This is now being used by other steel plants. Without a patent, it lost the chance to earn royalty out of it. Since then, Tata Steel has got its coal dust injection process patented and later licenced it to Vizag Steel Plant.

“While the technology base of these companies have definitely gone up post acquisition, a lot will depend on whether it is transferable in India and to what extent domestic market can absorb these items,” said Angel Broking metals analyst Paresh Jain.

Post-acquisition, regular interaction and exchange of ideas have also helped these companies build a strong IP portfolio. “In our company, a huge amount of interaction takes place between Canada and India. The gains are felt at the macro level,” Mr Bhavani said.

In fact, post-acquisitions, the value of each Essar business has increased and is now higher than what they were at the individual level, both in terms of processes and technical skills. “It is also giving rise to a whole lot of consciousness around IP values. Hence, we are trying to secure IP by registering and protecting our technology in different parts of the world,” Mr Bhavnani added.

Cross-fertilisation of ideas between Corus and Tata Steel also saw its IP kitty extend to some 250 pending trademark applications and over 1,500 registered trademarks in FY09. This includes premium products like ‘Shaktee’, a galvanised corrugated steel; and ‘MagiZinc’, a newly-developed corrosion resistant steel coated with aluminium, magnesium and zinc and ‘Colourcoat’ range of pre-finished steel products. Compared with this, Tata Steel’s total IP portfolio consisted of a 32 trademarks in FY2000.

Armed with its IP base, Tata Steel plans to commercialise its IP assets. “In the past six months, we have been scouting for opportunities globally to commercialise some of our patents. We have received very good response. There’s huge revenue potential in this. In particular, a number of companies have shown interest in our training packages,” Mr Bhuyan said.