Patent Licensing Strategy: Everything You Need to Know
The right patent licensing strategy is essential, especially if you want high-value, highly selective transactions that involve fewer of your company's assets but that meet your strategic and tactical goals.3 min read
Patent Licensing Strategy
The right patent licensing strategy is essential, especially if you want high-value, highly selective transactions that involve fewer of your company's assets but that meet your strategic and tactical goals. You'll need to prepare if patent licensing or sales are, or will be, part of your corporate strategy. The C-suites and boards of companies around the world recognize that patents can be revenue generators. Many companies have diversified their revenue by filing a variety of patents.
Since the 2006 eBay court ruling, the patent licensing environment has become more challenging and complicated. The values for individual patents or small groups of them have changed as well. Many technology companies won't respond to licensing offers unless they're sued. Companies should make sure they have the patents they need to protect their inventions. They should identify the patents that are ideal for licensing and those which can be sold.
Executing a Licensing Deal
You should understand the strength of your patents along with any gaps in your existing portfolio. Explore monetization opportunities by:
- Abandoning low-value patents or licensing existing patents.
- Looking for manufacturers or service providers that are selling your product illegally.
- Finding and speaking to people or companies in your field that aren't already using your invention and might be interested in it.
- Acquiring third-party patents, also called licensing in.
Buying a third-party patent can reduce your costs for research activities, increase market penetration, and give your business an advantage. Before you start, you should understand the needs of your business and how your new license will increase its value.
Procedures for Patent Licensing
Many companies outsource the preparation for patent licensing because it can require a lot of research. They usually manage the assertion phase with their existing licensing teams. With outsourcing, licensing teams can get independent reviews of their patent portfolios from independent experts. Here are some of the most important steps for patent licensing:
- Understand your portfolio and identify the best candidates for licensing.
- Think about the ways that people can use your invention.
- Consider several scenarios or licensing models and their possible return on investment, or ROI.
- Choose whether you should focus on applying for lots of patents or a smaller number of high-quality patents.
Core patents protect technologies that are, or will be in current or future products; non-core patents cover technologies that aren't used in any existing or planned products. Most companies have more non-core patents than core patents. You should categorize your patents in clusters to make it easier to license similar ideas in packages. However, you should make your portfolio's range of ideas as wide as possible. Ranking your patents by their potential profits can help with analyses as well. For a market or commercial hypothesis, consider all the applications or product categories in which your patent is likely to be used.
Sometimes, a patented technology is used in a completely unrelated industry. For example, in the 1990s, companies realized that some of their work in radio astronomy had applications in communications, especially wireless networking. Parallel campaigns with different patent clusters let licensors target several markets and get rid of less-attractive options, but each campaign requires resources.
Target Identification and Prioritization
You can identify potential licensees and evaluate their relevance to the hypothesis through several techniques. Product relevance research identifies products in the prospective licensee's product range that could be infringing your patents. It pinpoints specific features and assigns an infringement confidence rating to each target. Combine infringement confidence ratings with target assessment rankings for a list of companies to approach. The best targets depend on which factors are most important to the licensor or campaign. Commercial goals, timetables, and risks are usually the main factors.
Different scenarios can lead to different financial outcomes. Some possible scenarios could include licensing and programs run by in-house teams, law firms, or licensing firms. An excellent licensing strategy is essential for a substantial return on investment. The best licensing scenario depends on the patent owner's objectives and the funding available. Estimate the royalty rate, other possible revenues, and the costs. You should study several market development scenarios for reliable valuation ranges and an objective view.
If you need help with patent licensing strategy, you can post your job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.