Like many forward-looking organizations, Dow Chemical Co. has put machinery in place to increase the leverage of its intellectual assets through licensing. A licensing competency center has been established to evaluate and negotiate licensing opportunities, with improvement targeted at a tripling of licensing revenues by the year 2000 to $125 million. The twist here is that the Midland, Mich.-based chemical giant plans to reach the goal, not by licensing idle technology, but with active core technology, such as its metallocene catalysts that reduce the cost of manufacture and enhance the performance of polyethylene. The key to success in this approach is understanding individual business strategies and how the intellectual assets fit into those strategies, according to Gordon Petrash, former global director of intellectual asset and capital management at Dow, who recently joined Price Waterhouse, Chicago. "Not every advantage in the marketplace is dependent on technology alone. We understand what creates the value in our businesses, and are able to make good conscious decisions, so we arent stuck by being afraid to do something because we dont know what the ramifications are. We can license technology and compete with it, because our strength is more than technology -- its the franchise, the distribution, our quality, and continuous improvement of our manufacturing process. The vast majority of what we will be licensing will be our key technologies, the stuff we use. Thats what we have demonstrated has value and will command the highest licensing royalty. We just know how to manage it better, so we will not suffer, and we will collect royalties. These are the kinds of new strategic pieces we are fitting together that will allow us to increase our licensing revenues." In 1994 Dow conducted an assessment of its 29,000 patents, cutting them back to 16,000, and saving $40 million in maintenance fees over the next 10 years in the process. As part of the cleansing, Dow donated patents to universities and nonprofits. Other patents were licensed, some dealt through brokers, a few exchanged with other chemical companies, while others were left to expire. Since then, licensing revenues have grown some 60%, up from $25 million, and "we are well on our way to reaching the target of $125 million in revenues by the year 2000," says Petrash. In fact, he suggests a more sophisticated approach than simply summing licensing fees and royalty income when assessing the total value of intellectual assets: "We get significant value from joint ventures where we participate by having intellectual property as our part of the JV, while the other party puts in their hard assets. That was a discovery on our part that royalty tracking was less significant and that the total value you get from intellectual assets is a much better measure. We are far above the $125 million target already if we consider the total value we have extracted in JVs, joint development, and royalties." Other companies actively pursuing patent licensing include Xerox Corp., which established an intellectual-property office to grow revenues based on its 7,000 active patents by 85% per year over the next five years, and IBM Corp., which has increased licensing revenues from some $646 million in 1995 to more than $1 billion in 1997.