The 4 step process to patent licensing
Successful licensing deals provide a new revenue stream to your company which you can further invest in fueling innovation. Talking of revenue stream, companies like Qualcomm earn billions in patent royalty.
I think you will agree with me when I say:
It’s REALLY a complex process to license your patent(s). When your company board on patent licensing ship, it gets exposed to a whole new world of customers and hence the challenges.
Well, it turns out that this complex process can be simplified if we follow a systematic approach divided into multiple small steps. Also, we will know what is in our to-do list at a particular step.
And in today’s article, I’m going to show you one such process which divides this seemingly complex process into small steps.
In general, we can divide the process licensing a patent into four steps:
- Identifying patents that could be licensed
- Finding the companies that would like to take a license
- Assigning a value to the patent
- Let them know your offer of wanting to license your patent
Let’s elaborate each point one by one.
- Identifying patents that could be licensed
Well, this is the first step. Before you go to the market you should know what you want to offer. It might seem a very easy go thing – you may say that everyone knows what they have and what they want to sell, but believe me it’s a no easy thing and making up your mind on what to take to market and what to keep to your self is going to take time, effort and of course experience as well. If you have 1 patent or maybe 10 patents, you can go ahead and directly jump to the second point in this article, but what if you have 100 patents or maybe 1000 patents. Let me share what you can do in that case
- First you should know what all patents you want to take to market for licensing. Sometimes, you find patents that are not important to the current and future business strategy of your organization. You can find patents that are not that important for you to have exclusive rights on. You need to have answer to the following questions.
- Which are the important patents which are currently used in your products?
- Which are the patents which are not related to your products but might useful to other companies that are not your competitors?
- Which are the patents that were once used but we have moved to latest technology and those might be useful for the companies that are still holding to old technology?
- Next, you need to assess how big is the market that you are going to target. Filter out the patents accordingly. One tip – here you may want to consider patents that encompass companies from variety of industries so as to help you cover big market.
- Next check the size of the companies working in that domain. The bigger the better.
All in all, this step helps you in two ways: first, you get to know the patents that could be licensed and second, it gives you the patents that are of no use. You may decide to abandon such patents. Here is one strategy that can help you in this pursuit if you decide so : A Patent Abandonment Strategy
- Finding the companies that could be your licensee
Once you have a list of patents that you want to monetize via patent licensing, you have to find who could take a license for those patents. In this step, you have to find companies that could get benefitted from the technology your patent(s) are covering. To give you an example, IBM sold (which is different than licensing) 900+ patents to Twitter. 90% of Twitter’s patent portfolio comprise of IBM’s patents.
“Get an understanding of whether they need your intellectual property or whether this is just a convenience,” he said. “Is this something they can walk away from?
~ Brian O’Shaughnessy of RatnerPrestia,”
This step is not that easy as such licensing or sale initiatives are based on the technology similarity between the patents and products. Here is what all is done at this step of finding licensing or sales targets –
List of potential targets – yes, not one, you should have a list of all the potential targets which can be approached for licensing.
Evidence of Use – not only list, you would also get the evidences which help in concluding which companies in the list are using the technology you have patented. It requires a detailed level of search and digging in product literature of different companies and establishing a correlation between the patented technology and the one being used in product.
At such a time, you may have to perform reverse engineering to locate the proof for your patented technology being used in the product. Reverse engineering many a times help you in finding infringers of your patents and turning your patents into a money generation asset.
Most of the work is done here, now you need to calculate the value of your assets and the way you want to approach the licensees.
After first two steps you are done with all the hassle and now it’s time for deciding the reward for yourself. Multiple factors play their roles in assigning monetary value to a patent set of a patent family. Here is something for you which I feel can help you gauge the process: http://www.willamette.com/pubs/presentations/reilly_patent_valuation_methods_aicpa_110711.pdf
- Letting Licensees know you want to license your patents
This is the final step of a patent licensing program. In general, if a licensee receives a letter from an attorney, though it is offer to license, it may have connotations of “I’ll sue you, if you don’t opt for licensing”. Hence, it would be up to you to decide whether you want to go ahead with attorney route or want to follow another route where your organization sends an offer to license without involving a patent attorney.
A lot of organizations go with another option which is Open Licensing Program. Unless you specifically want to target some company, this option is good and have hurts no one. You simply put your patents publically for licensing and ask the organizations to come and license whoever needs the technology.
That’s not all there are other ways and you can check out more on the patent monetization strategies.
No matter which way you follow, it’s for sure, you are ready to make money out of your IP assets.
Authored by: Muzammil Hassan, Team Lead, Patent Infringement and Nitin Balodi, Team Lead, Market Research