What is Technology Licensing?
The best way to commercialize the technology generated from university based research centres or small research labs is by exploiting Intellectual Property Rights (IP). The IP owner allows another party to use, reproduce or sell a property/technology in exchange of a compensation.
- Lump sum royalty- Instead of continuous royalty, the IP owner can settle down for a lump sum payment from the licensee. However, this might not be a great option if the invention has the potential to be very in the market.
- Running royalty– Instead of being paid in lump sum, the licencor is paid royalty as the business continues.
- Cross licensing– Cross licensing is the most common way of doing business in an open innovation ecosystem. A cross licensing agreement is a contract between multiple parties where each party grants the other party rights to their IP.
Licensing Steps and Strategies:
Licensing is possible only when the innovator has IP rights for the new innovation. As there is a significant amount of cost involved in protecting the IP, there are few important things to consider before applying for the patent-
- Patentability– The innovation must be novel, non-obvious and useful. Its confidentiality is maintained as per the IPR law of the country.
- Marketable– Products must have distinct features which would appeal to a wide range of consumers. Must have a better cost to benefit ratio.
- Profitable– It must be commercially feasible.
Patent exploitation options:
Once the patent is applied for and granted, there are few options to exploit the patent which should be considered:
- Manufacture the product and market independently.
- Sell off the patent to another party.
- License to another or multiple parties.
Few questions to answer before making the exploitation decision:
- Licensing Vs manufacturing – If the new innovation has high commercialization potential, licensing could yields less revenue but it mitigates the risk involved in the process of starting your own business. The Royalties can be negotiated to suit all the parties.
- This is of utmost importance to understand what commercial roles your patent fulfills before considering exploitation options? By commercial roles it means is your invention a novel technology or it improves the already existing products etc.?
- Weather to go for non-exclusive licensing (which will include multiple partner) or exclusive licensing (with a single partner).
Seeking potential licensee:
1.Assess the current market and stake-holder within it.
Things to consider:
a) Who is currently manufacturing competitive products or alternatives?
b) Are there any very large companies looking to enter this market?
c) What strategy the existing players doing to reinforce their foot hold?
2. Find the companies looking to invest in the particular area of your IP by attending trade shows, reviewing publication of trade associations, business directories and govt. grant websites etc.
3. Proper advertisement of your license.
Things to discuss with the potential licensee:
- Address the “pain point” of business or product. Include what is the issue with the currently available products or method and clearly demonstrate how your invention can fix this?
- Discuss how your innovation is different from others and what unique and marketable features does it have?
- Include cost Vs benefit analysis of your product in the presentation.
- Clearly communicate the legal status of your invention. (Patent granted or pending etc.)
- Share information about the inventors and their business goals.
- Discuss about the agreement type and discussion about payment.
Struggling with licensing your patent or negotiations? Write to us at firstname.lastname@example.org to discuss how we can help you.