LIXIL's management direction - called the LIXIL Playbook - focuses on a set of strategic initiatives that will strengthen our competitiveness, enable us to achieve sustainable growth, and ultimately deliver on our corporate purpose of “making better homes a reality for everyone, everywhere.”

In line with the LIXIL Playbook, the Intellectual Property (IP) Division has defined and is pursuing a clear mission: support the creation, acquisition, utilization and risk management of intellectual property rights to enhance the execution of management strategies and contribute to sustainable competitiveness.

By supporting our business units with acquiring intellectual property assets and managing their intellectual property portfolios, the IP Division can play a key role in improving LIXIL's competitive advantage, enabling us to achieve higher profit margins and long-term growth.

Global Intellectual Property Strategy

Three Core Pillars and Key Performance Objectives (KPOs):

1. A risk management structure that prevents and eliminates significant business risks

   To ensure we respect the intellectual property of third parties, the IP Division has implemented a risk management structure that includes conducting prior searches of third-party intellectual property and, therefore, prevents and eliminates significant risks to the business For example, the IP Division and business units have incorporated intellectual property risk assessments within the product development process, enabling the IP Division to search and analyze third-party intellectual property rights during the early stage of product development.

2. Intellectual property management that protects differentiated value

   We develop attractive and differentiated products and services to create value for our consumers around the world. Therefore, we are continually investing in our technology, design, brand and other intellectual property, which are important management resources alongside our human capital. To maintain our competitiveness and achieve high profitability over the long term, the IP Division manages the company's portfolio of intellectual property to protect our intellectual property rights and prevent our source of competitiveness from being imitated by other companies. This enables us to consistently deliver differentiated, high-quality products through a unique and unparalleled portfolio of brands around the world.

   In addition, we are actively applying the advanced technologies that we have developed in Japan, which account for approximately 70% of our company's patent applications, to products in overseas markets in order to accelerate the growth of our international water technology business. By combining our technological capabilities in Japan with the strength of our brand and design capabilities in global markets, and by generating synergies to accelerate the development of differentiated products and services, we are leveraging our intellectual property to achieve sustainable growth.

3. Intellectual property intelligence that supports management and business units

   Intellectual property is an important management resource for LIXIL. We utilize an IP landscaping method in our IP analysis and incorporate the results into our management and business strategies. Our strategic initiatives described above in (1) and (2) are based on various data analyses, including IP information from those IP analysis, to avoid risks and ensure competitive advantage in our business. In addition, the IP Division provides business units with advice and counsel on what kind of IP assets to obtain based on the results of comprehensive IP analysis and marketing strategies during the technology development and product planning stages. This enables our business units to strategically establish IP portfolios to develop differentiated products and services. It also helps prevent our differentiated technologies from being imitated by other companies and protect the uniqueness and functionality of their design, ensuring we maintain our competitive advantage.

Intellectual Property Governance Structure

The IP Division works with business units to develop IP strategies that match each unit's unique circumstances, as well as cross-divisional IP strategies. In addition, the IP Division reports annually to the Board of Executive Officers and the Board of Directors on the progress of each business unit's IP strategy, while each business unit also reports to the Board of Executive Officers or the Board of Directors on the progress of its IP strategy as necessary. In response to these reports, the Board of Directors provides an oversight function, including offering advice to the IP division and each business unit.

Our continued investment in intellectual property is an important foundation for the development of attractive and differentiated products and services, as well as it is an essential piece for the sustained growth and competitive advantage of our business. Our IP division aligns closely with the Board of Directors and the Board of Executive Officers to ensure optimal investment in IP. As of March 2023, LIXIL has an intellectual property portfolio consisting of approximately 20,000 IP assets (including patents, designs, trademarks and their pending applications) globally, primarily in Japan, Europe and the United States. By constructing such governance structure including the introduction of a common IT platform for global IP management, Our IP division is working closely with the R&D and business units to strengthen and utilize our intellectual property rights.

Governance Structure on IP