Apr 24, 2013Science and Technology
Case Research Notes: Licensing and information

Last week I published a post detailing the importance of pursuing and developing patent licensing agreements to monetize IP assets. This analysis does gloss over some important details regarding the elements that constitute a successful licensing strategy for a pre-existing portfolio of patented technologies. In today’s note I’d like to take a closer look at some of these details.

Which way to monetize?

Startups to develop technologies are only sometimes a good choice (in certain circumstances), but accepting a lump sum to sell often results in significant undervaluation. Though both of these are no doubt an important portion of many successfully monetized patent portfolios, portfolios that employ only these strategies can only be so successful. In this note, I’m focusing on “out-licensing,” the process of locating potential licensees for a given technology and developing mutually beneficial agreements with those licensees.

No big surprise: the name of the game is information. According to the 2009 OECD study Who licenses patents and why? Lessons from a business survey, “the major to licensing out patent markets is informational (identifying partners).” Four years after the OECD’s survey this conclusion still rings true, and applies to a wider group of licensors than the surveyed small-to-medium enterprises.

Think about the licensing process in three rough steps: locating potential licensees, convincing one or more that they should license that patent, and drafting an agreement. I’m not going to get into drafting agreements here--that is a job for an attorney--instead, let’s take a look at the kinds of information that are important for these first two steps and how to get started looking for them.

Build a list

Finding relevant and successful companies to license a patent is at once the most important and the most difficult part of the out-licensing process. This requires an overall good understanding of the patented technology and its potential for commercialized use. Can the invention stand alone, or does it need to be manufactured into a system with other components? What sort of infrastructure does a company need to start making and selling the invention? Will this require any particular expertise or experience? A good understanding of the potential issues that might come up during the licensing process is essential to identifying companies that can license and those that are a waste of time.

The goal is to generate a list of potential licensees. There unfortunately is not a single all-encompassing resources from which we can generate this list, and exactly where to look will depend on the patented technology. Here are a few good places to start:

  • Conduct a basic internet keyword search. Start by figuring out what types of keywords might appear on webpages featuring a potential licensee. Think about how a consumer might describe and search for the invention or similar products.
  • Local or online stores selling related products are also a great place to start. Staff may even be able to help locate helpful information about a particular manufacturer.
  • Trade shows or advertisements in trade journals. Especially if the invention is closely related to a particular field, this can be a great way to gather lots of potential licensee information fast.
  • Use information from any prior art search results or prosecution records. By looking at companies to whom topically similar inventions are assigned, you can easily find companies with related IP interests.
  • Look at forwards and backwards citations on related patents. Patexia’s patent listings show this information -- just search a patent and use the “citations” tab.
  • Similarly, search related IPC codes. Patent Buddy offers the top ten assignees in each IPC code category, which can be very helpful to determine which companies are most engaged in the IP of a particular field.

Arm yourself with information

With a list of potential assignees in hand, the next step will be to convince some of the companies that the patent is worthwhile for them to license. This step can be very difficult and time consuming as well, and could involve extensive product development and marketing that may be unfamiliar to most inventors. Even if the companies are interested in licensing a patented technology, they will have lots of questions before they are ready to advance to signing an agreement. Faegre & Benson‘s article Four keys to successful in-licensing offers a concise description of what potential licensees will want to know: “how the technology will be used, as well as the risks associated with its development and use and how the finances of the deal will work.“ This sort of information can include:

  • Estimates regarding potential markets for your invention. This can include size, geography, historical performance within these markets, etc.
  • Related intellectual property including patents for competing or complementary technologies.
  • Any potential risks that exist in the process of bringing the invention to market. Regulatory filings (such as FDA filings for medical devices or pharmaceuticals) could present a significant such risk, and potential licensees will want as much information about this risk as possible before deciding to license.
  • Competitors offering similar inventions/products.
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