CIO&Leader – 5 Ways Enterprises Can Make Profits From IP Assets
Large companies operating on a multinational level often have robust intellectual property (IP) portfolios that enable them to compete with powerful rivals. While this is one side of the business spectrum, the other side is populated with relatively smaller businesses. Market intelligence from 1981 to 2017 has shown a steep rise in the share between large and small businesses in terms of overall market capitalization. Although high-tech start-ups and businesses have a lower market value, their arena is fiercely competitive due to being more populated. As a result, these businesses need to sharpen their competitive edge by actively investing in innovation and differentiation.
Small and medium-scale enterprises (SMEs) are resource-constrained, and therefore every single IP investment by them must ensure timely protection/exclusivity and should support scaling-up of the business. Hence, besides the key function of protecting unique knowledge embodiments for exclusive use by them, SMEs must explore every other method to fully leverage their IP. The following article sheds light on both these aspects.
Protecting exclusive use of proprietary knowledge embodiments
It is important that enterprises keep in mind the following factors while making an IP decision:
- Geography of interest (now and in the future)
- When (and where) can IP be enforced to block others
- The cost (and the expected results) that will justify the decision
IP is a business investment decision requiring proper due diligence to ensure the ability to create, deliver, and capture value from new products/services/inventions in a profitable manner.
Generally, IP is not considered as a means to make the organization visible to potential customers and investors. This is mostly associated with the long periods of secrecy (18 months) associated with IP fillings. That said, a meticulous selection of specific IP authorities (e.g., Sweden, UK, others) would allow an immediate publication of 3 key elements of any IP filling:
- Priority date
By doing this, businesses can preserve confidentiality while making the new IP filling visible through any of the tools used by technology Scouters. A proper fine-tuning of IP title helps others in identifying a foreseen area of applications and avoiding overcrowded IP arenas.
In addition to the above, the remaining part of our article will cover five ways in which small businesses can effectively leverage their IP for profit.
Leveraging IP Assets
Taking full advantage of your IP assets can be rewarding. Here are five effective ways in which small businesses can make a profit by leveraging their IP assets.
5 Ways to Make Profit from IP Assets
There are several ways to capitalize on IP assets for small businesses that have been using their limited resources to develop innovative technologies. Apart from getting a return on investment (ROI), such small businesses can also generate a healthy revenue stream using these five methods:
1. Attracting Investors for Manufacturing and Growth
To successfully generate profits out of your IP assets, you need to commercialize them into products that can be sold either to businesses or consumers. Since small businesses often lack the capital needed to venture into large-scale manufacturing, they can rely on capital investment from external investors. There are several different types of investors, starting from friends-family-fools, angel investors, and venture capitalists, who can provide you financial aid for the large-scale manufacturing of your patented product.
This is one of the most common ways to share IP with large businesses that can turn it into commercially viable products. The benefits of licensing are that a small business does not need to invest in equipment, manpower, or inventory further. You can license out some IP and get recurring royalties from multiple practitioners of your IP. This is the most legitimate way of sharing your IP to generate profit throughout the IP lifecycle. For example, large corporates may fund SMEs through their corporate venture funds, and licensing can be one of the ways through which they provide such funding.
For small businesses that are looking to make a quick and final profit out of their valuable IP, selling out an IP asset can be a good option. For any small-sized company with a decent-sized portfolio, maintenance fees can strain their pockets. If such patents are not actively used or do not fetch any licensing revenues, they can be sold to regain some of the costs incurred earlier in prosecution and maintenance. However, before selling your IP asset, you need to conduct a comprehensive valuation so that you can get the best possible buyout. There are several methods of patent valuation that you can use to get a fair market valuation for your IP asset.
Similar to licensing, this method allows several businesses operating within the same technological domain to share their IP to further their product development. For instance, a company’s patent portfolio may cover something that a third party wishes to use to develop their technology and vice versa. In this situation, companies can trade access to their patent portfolios by cross-licensing. Since there are several ways by which one company may utilize another company’s IP assets, there is a high degree of flexibility when it comes to product differentiation.
Collaborating with other small businesses within your technological domain can be yet another effective way to share your IP for profit. This is different from cross-licensing because, in this case, you do not just exchange licenses but actively collaborate with the partner organization in departments of manufacturing, sales, marketing, and promotion, as well as while facing legal issues if they arise. Although sharing your IP is an important part of a joint venture, the bigger picture here is that you gain active support in terms of manpower and capital from your partner organization.
Using the aforementioned ways of sharing your IP, you can diversify your small business’ revenue streams and make profits. The value of IP often depends on the market valuation of products that incorporate it. So, even if the value of the IP is not related to your product, it could be valuable in a completely different business. Therefore, small businesses should review their patent portfolios frequently to make sure that patent filings still align with their business goals. This review should focus not only on the relevance of geographic locations but must also make sure that the patents and claims are still relevant to their core business. Based on such an analysis, the businesses can take decisions like selling/licensing or abandoning their patents. However, while licensing your IP product to a competitor, also consider the risks involved with that. Always take into account the age of your product and the competitive edge that you may get by delaying licensing.
The author is SBU Head, ICT – Licensing – Sagacious IP
Originally published on: https://www.cioandleader.com/article/2021/12/30/5-ways-enterprises-can-make-profits-ip-assets