Guest blog: The five principles of IP licensing
Samuel Davis of Landon IP and Haydn Evans of CPA Global explain how to develop a strong licensing programme
News that US investment company Starboard Value is reportedly urging Yahoo to create additional value for shareholders through a licensing programme for its extensive IP portfolio underlines a more general corporate trend – at Board and investor level – to focus on the monetisation of intellectual assets as part of broader business and value creation strategies.
Indeed, for numerous technology companies, licensing is becoming a major revenue stream – sometimes, even their entire business model. A more pro-active use of patent portfolios is an increasingly acceptable and lucrative alternative to the traditional “secure-maintain-defend” approach to IP. In addition, details of licensing deals and associated revenues that may not have been transparent in the past are frequently appearing in the media, adding to the general awareness and subsequent pressure for companies to do more with their IP.
Yet, for many companies seeking to exploit licensing opportunities, a number of obstacles lie in wait. Chief among these is insufficient awareness among IP holders of what assets could be licensed to other parties and who those parties are. Effective use of analytics and smart day-to-day IP asset management practices can help.
The foundation of a strong licensing programme is based on five principles:
1. Ensure management buy-in
2. Know what you have and organise it
3. Rank your assets
4. Track competitor activity
5. Revisit and reevaluate
Ensure management buy-in
Some companies still view patents only as a tool for defensive purposes. It is imperative, therefore, that you gain management support before proceeding with licensing investigations. These can involve a large amount of work and you do not want to end up unable to reach consensus on what patents you are actually prepared to license.
Know what you have and organise it
Keep a good inventory of your IP assets. At a minimum, assets should be tagged in a way that shows their relationship to the business, thereby enabling the portfolio to be mined more efficiently. Which products are covered by which patents? Which business units are benefiting from which patents? Are there adjacent industries that might benefit from technologies covered in your patents? The inventory might also include information on likely potential infringers; any initially-identified infringing products; the potential future value of the claimed technology, etc.
samuel20davis20landon20ip.jpg Rank your assets
Ranking patents can be difficult as there is no magic formula and every organisation’s structure is unique. A patents “value” basically comes from two factors: legal strength and commercial relevance.
Legal strength is often assumed to be high. However, this is not always the case, and changes in legislation, such as, for example, the recent Alice v CLS Bank International case regarding patentable subject matter, can fundamentally impact the legal strength and enforceability of your patents. Such legislative changes need to be tracked.
Commercial relevance is somewhat easier to define since organisations typically have an embedded knowledge of what is relevant to their business. Does the patent cover an entire product or just part of it? Is the market for this product mature or nascent? Is infringement of this technology easy or hard to detect? Patent landscape studies can be used here to assess the broader technological field and to identify other players and potential licensees.
Track competitor activity
As the patent owner, you are solely responsible for identifying potential patent infringement. Therefore, it is good practice to reward staff for locating target products that may infringe your patents. However, as licensing opportunities generally arise through awareness of infringement and concerted follow-up, it is also fruitful to put in place a more thorough monitoring of competitor product activity.
Revisit and reevaluate
The value and importance of a patent or portfolio changes over its lifetime as the market shifts, so it is essential to update rankings regularly. An effective way to do this is to build an automatic evaluation update into your IP processes; for example, including a re-evaluation as part of the keep/abandon decision before paying a patent renewal.
Once you have identified which IP assets are likely to be most attractive and who the potential licensees are, you need to demonstrate to those target organisations the requirement for a licence.
Illustrating there is a real likelihood of infringement will often be sufficient evidence to convince a target company that it is in their best interest to take a licence. However, in order to get to that point, you need to be able to compare the service or product of the target against your patent claim(s). This can be as straightforward as making a chart of what the elements of the patent claim mean; then performing technology research on what the target’s product/service specifications are, and comparing the two.
Come up with a good match and it provides a more transparent and easily demonstrable reason for licensing.
Samuel Davis (pictured, above left) is based in Tokyo and is director of business development, analytics and technology consulting services at CPA Global’s specialist patent research arm, Landon IP.
Haydn Evans (pictured, top right) is vice president, IP solutions at CPA Global, based in London.