Companies have developed large portfolios of patents and other forms of intellectual property (IP) but there are only a few that are monetizing their patents to generate revenue. The remaining assets effectively sit on the shelf, yet some of them can offer huge opportunity to generate revenue. Viewing the importance of adopting a comprehensive patent monetization plan in place we felt it is important for these companies to know how they can monetize their patents to maximize their revenue generation attempt. This article provides a roadmap for companies to better understand how to generate greater economic returns from IP portfolios and summarizes some of the tactics to get there.

 Patent monetization techniques-

Cutting patent maintenance costs- Sometimes maintaining a huge patent portfolio can be cumbersome for companies because they may either have gone obsolete or have lost its competitive effectiveness to other prevailing technologies. In such a situation it is better to let them go off the shelf to get rid of bearing un-necessary burden of annual maintenance fees. You must be aware of the news is that a few years back Dow Chemical saved $40 million in annual maintenance fees by cutting 10,000 patents from its portfolio, leaving 14,000 patents that it does maintain.

The best way to do such things is by mapping patents to existing business, future business and obsolete business. Those patents which are in no way going to adds to our revenue should be let go off. Such activities can save a lot of maintenance fees that we are paying for no reasons at all.

Third-party licensing- Third party licensing is another way that is being used these days effectively by companies to monetize patents. In this method companies offer licenses to third parties in lieu of agreed monetary compensation and thus the license holder gets an authority to use the inventions owned by patent holder to manufacture, sale, import or use that concerned technology. Some companies that are making billions of dollars simply by licensing their patents to third parties are:

  • IBM
  • Qualcomm
  • Hewlett Packard
  • Microsoft
  • Kodak
  • Apple
  • Texas Instruments
  • Acacia
  • Intellectual Ventures
  • Conversant
  • Technicolor
  • Rockstar (ex. Nortel)
  • Nokia
  • NTP

 

Patent donations- donating patents to universities, research institutions and other public entities has emerged as another important patent monetization technique for companies with large portfolio of patents. Donations can yield tremendous tax advantages and may also permit companies to strengthen ties to early-stage research in universities. Patent donors can take a tax deduction for the fair market value of the asset.

Mergers and acquisitions- Two companies with complementing patents and technologies can go for mergers and acquisitions to strengthen their business penetration. This technique has also emerged as one of the best potent monetization technique for companies. Acquisitions and mergers can give the acquiring company an opportunity to grow market share without having to really earn it by doing the work themselves – instead, they buy a competitor’s business for a price. Usually, these are called horizontal mergers. For example, a beer company may choose to buy out a smaller competing brewery, enabling the smaller company to make more beer and sell more to its brand-loyal customers.

Patent securitization- Lending partly or wholly against intellectual property (IP) assets is a recent phenomenon even in developed countries. Collateralizing commercial loans and bank financing by granting a security interest in IP is a growing practice, especially in the music business, Internet-based SMEs and in high technology sectors.

In-licensing and out-licensing– The terms in-licensing and out-licensing are mostly used in context of drug commercialization. Company X innovates and takes a drug through clinical trials. It can then market the drug globally which is a tough task. So generally, companies out-license these drugs in some geography to other companies who have capabilities in that region. That company typically pays an in-licensing fee to the innovator for the commercialization rights.

Simply put, formulating an effective patent monetization plan in place is important for companies with large number of patents in their portfolio. Though the process is complex and lengthy but still can reap great benefits to companies those wish to increase their revenue stream.

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