TOKYO ELECTRON LIMITEDANNUAL REPORT 06

INTELLECTUAL PROPERTY REPORT

Process and mechatronic technologies used in the manufacture ofsemiconductors and flat panel displays represent Tokyo Electron’score technologies. Tokyo Electron devotes considerable resources
to developing technologies that bolster the competitiveness of its
products. Since the beginning of the fiscal year under review, as
measures to raise profitability, Tokyo Electron has been promoting
three themes: (1) launching new products imbuing high addedvalue, (2) raising manufacturing capabilities, and (3) expanding
after-sales businesses. Protecting the intellectual property rights ofindependently developed proprietary technologies and products isvital in this context to ensure the smooth growth of businesses.
The integration of our intellectual property strategy with ourtechnological and product strategies is thus important to realizing
maximum benefits from development efforts.
With the increasing division of roles between semiconductor
manufacturers and SPE suppliers, Tokyo Electron is playing anexpanding role that goes beyond the supply of production equipment and embraces processing, multiple process integration andprocess control technologies. This situation makes protection of
intellectual property rights all the more complex. Tokyo Electronplaces high priority on protecting intellectual property by actively
filing patent applications for equipment schematics, software
technologies, several process management technologies for
manufacturing equipment and other patents.

Policies on Acquiring and Managing Intellectual
Property, Managing Trade Secrets and Preventing
Technology Leakage
Tokyo Electron has a set of internal rules that define the management of its intellectual property. These rules were revised basedon the purport of the Revised Patent Law that came into force lastyear. Under these rules, Tokyo Electron provides incentives forinventors and creators within Tokyo Electron. We make lump-sum
payments at the time of submission of applications for patents,utility model rights, designs and other property rights. Bonuses arealso given as incentives if such creations are implemented at
Tokyo Electron or licensed to third parties. The latter bonuses are
scaled to the earnings record of such licenses and other rights.
We also established awards to honor inventors and creators.
Management of trade secrets is handled according to Tokyo
Electron’s “Internal Rules on Managing Technology and Marketing
Information” and “Manual for Managing Technology and Marketing
Information.” The provisions of these measures are approximately
equivalent to those of the government’s “Policies Regarding
Managing Trade Secrets” and “Policies Regarding the Preventionof Technology Leakage.”
By promoting greater cooperation with the materials and procurement divisions, Tokyo Electron is strengthening measuresagainst imitation and pirated technologies at the component level.
Furthermore, outside of Japan, Tokyo Electron is strengthening
tie-ups with local law offices in the U.S. and in Asia and actively
conducting other activities to counter imitation and pirated products. These include cooperating with Japan’s Ministry ofEconomy, Trade and Industry, Japan External Trade Organization,

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Japan Intellectual Property Association and other organizations,and participating in various activities.

Intellectual Property by Major Country
The graph in this section shows historical data on the number ofpatent applications filed in Japan by Tokyo Electron up to the endof March 2006. With it becoming more difficult to acquire patents
in Japan and other countries, Tokyo Electron is reviewing its policy
regarding the country of application, including Japan, from thestandpoint of key manufacturing bases and the markets of its
operating divisions. In particular, in addition to the recent policy ofemphasizing filing applications in the U.S., Tokyo Electron is alsostressing the need to file applications in China, South Korea,
Taiwan and other countries as a countermeasure against imitationand pirated products, mainly in East Asia.

Contribution of License-related Activities
In developing and implementing our intellectual property rights
strategy, we do not see intellectual property rights acquired byfiling applications and securing rights for proprietary products anddevelopment technologies as a source of income from licensing toother companies. Rather we view this as a method of differentiating our own products and bolstering our competitive advantages.
Semiconductor and FPD production technologies are becoming
increasingly advanced and sophisticated. To effectively develop
new products incorporating leading-edge technologies, and bringthem to market as quickly as possible, it is essential to utilize allavailable intellectual properties. Tokyo Electron places high value
on introducing cutting-edge technology and constantly enhancing
the efficiency of research and development, and on quickly
launching new products. We also respect the intellectual property
rights of others, just as we do our own, and effectively use themthrough licensing.
Tokyo Electron is also exploring the feasibility of licensing or
selling its proprietary technology to third parties in other businessfields and to cooperating partners.
Number of Patent Applications
Applications (overseas)

Applications (domestic)

500

1,000

400

800

300

600

200

400

100

2000

2001
U.S.

2002
South Korea

2003

2004
Taiwan2005
China2006
Europe0Japan