Ratio of Sold vs. Unsold Patents

To determine how to use licensing-out to create value, company needs to formulate a licensing strategy that is consistent with its overall business strategy. Note that not all art offered for license is sold/licensed as shown in the “Ratio of Sold vs. Unsold Patents” figure. In fact some studies show as little as 1% of R&D efforts are monetized. Thus sorting through the following questions and issues begins the spadework of developing an appropriate licensing strategy: Does your company have the capabilities to develop the market through proprietary use of the technology as efficiently as a group of licensed competitors? Is it more profitable in the long term to be the dominant player in a smaller market than it is to be smaller player in a bigger market? Is a technology used in an underdeveloped market? Does a company want to create strategic alliances to minimize risks associated with penetrating underdeveloped markets? Does a company want to develop the technology as the industry standard? Could the company license technology in markets where it does not have manufacturing and marketing capabilities? Does a company plan to license core technology on lapsed basis? Are there any product lines that the company wants to protect? Are there any geographic areas the company wants to protect?

To answer these questions every company should have a written IP licensing policy. A written IP licensing policy provides a company numerous benefits in the normal business operations of the company, as well as during lawsuits the company may find itself a party to (either as a plaintiff or defendant).  Aspect aspects that could be covered in a written IP licensing policy include, but are not limited to, a company’s: (1) general licensing strategy; (2) preference for licensing over litigation to both acquire and protect IP; (3) proper contact for various stages of the licensing process; (4) list of owned IP assets it would be willing to license out; (5) list of owned IP assets it considers court to its operation and therefore would not be willing to license out; (6) this divide the assets and/or technology areas it would consider licensing and; (7) due diligence process in evaluating a licensing opportunity; (8) referred terms, conditions, and other clauses and (9) best practices for complying with any executed license agreements.

On creating a written IP licensing policy, the next question for a company is whether to publish that written IP licensing policy. A public IP licensing policy can benefit a company’s public image and goodwill. For instance, it can demonstrate that a company respects the IP of others and, in return, expects that it’s IP is similarly respected. It may also provide the perception that the company is innovative, cutting-edge and sophisticated.