Maximizing Value with Intellectual Property (IP)

In my previous blog, as a part of my IP clarity series, I have discussed the essence behind Intellectual Property (IP) and why IP matters. Now, I aim to expand on this by delving into the definition of IP and exploring ways to generate value from the protected rights.

The basis for IP is laid down in the Universal Declaration of Human Right that says:

“Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author”

Anyone who has created an intellectual property, be it a technical invention, product, service, art, design, writing, music, logo, slogan, etc., holds the right to protect it under their name. This protection creates a sense of security to the creator against unauthorized use or copying of his creation. Government provides this security and allows the creator to choose what he likes to do with the protected IP.

The fundamental question arises once you secure the IP rights: how to generate value from it? Typically there are two paths the IP owner can pursue — exclusivity or licensing. In the first approach, exclusivity, the IP owner decides to keep the use of IP to himself only, and excludes others from using the protected IP. For example, Philips decided to keep the exclusive rights for the technology behind ambient light TVs. Other typical examples are the exclusive use of trademarks by different companies. For instance, Macdonalds “I’M LOVIN’ IT”, or Apples ‘Think Different’, or Nike ‘Just do it’ which are uniquely associated with the respective firms. Additionally, Pepsi or Coca cola have exclusive rights for the design of their beverage bottles.

The other option to leverage your protected IP is by licensing the technology in exchange for economic benefits, e.g., a royalty fee. Licensing entails the owner of the IP allowing the other party to utilize the protected IP in return for creating value. Various forms of licenses and business models exist, with the most common involving the use of IP in exchange for royalty payments, often tied to the total sale involving the protected IP. Another form is cross-license, which is a mutual agreement between two parties to use each other’s (selected) IP. One may opt for an option license. It is a standard and efficient agreement that guarantees access to license a technology (or IP) for an agreed upon time period. For universities or for small and medium enterprises (SME), IP and licenses are an excellent opportunity to grow by engaging major industrial players. IP licenses can elevate the technology readiness level (TRL) of their product(s) with the support of industrial partners.

There are many examples of IP licensing, for instance, Signify (formerly Philips Lighting) has an active patent licensing program named ‘EnabLED’. Under this program, a set of active patents (buckets of different technologies) is licensed to different companies in return for royalties on sale. There are numerous examples of licensing trademarks, for instance, the right to use the trademark of an ingredient for a product, e.g PC computers use the trademark of ‘Intel Inside’, Diet soft drinks with NutraSweet, Stereos with Dolby noise reduction, or Teflon in cookware. Monaco Coach, a luxury recreational vehicle manufacturer, engaged in a licensing agreement with Dodge, a truck manufacturer, allowing them to use the Dodge trademark and logo on their trailers.

The decision on how to utilize your IP depends entirely on your business model. A crucial consideration is understanding how to maximize the value derived from the protected IP. Given that IP protection is often costly, one should carefully assess the cost versus the value when opting for IP and subsequently when commercializing or using the protected rights. For patents, for instance, if a company is developing a technology crucial to their product, maintaining exclusive rights to the protected technology is vital. These exclusive rights offer ample time to introduce the technology to the market and solidify your position within it. The timing of using exclusivity or licensing the technology also plays a role in this decision-making process.

For licensing, there are multiple advantages. For instance, the most obvious advantage of licensing is to generate revenue and broaden the reach of IP into different markets. It may also increase market penetration to reach the market that you initially might not have targeted. It may also help to have collaboration with other players to work together to develop new products and services. For trademarks, licensing can be helpful in co-branding, in which two or more reputed trademarks, not necessarily with the same level of reputation may join together in one product creating a new appeal to the same clientele or break into a new market. Such co-branding helps parties to benefit from each other’s market and territorial reach and coverage.

In essence, protecting Intellectual Property (IP) rights act as a strategic lever, empowering you to elevate your standing within the market. The choice of how to use these rights depends on your business plan, ensuring you get the most benefit and value out of your protected ideas. This approach lets creators not just compete but succeed by smartly using their protected intellectual assets.