Commercializing IP

Commercializing IP

Commercializing Intellectual Property (hereinafter IP) is a process based on getting your IP rights into the marketplace or receiving profits from selling/transferring/franchising etc. your IP.
There are several ways to commercialize your IP, such as:

  • Licensing
  • Franchising
  • Assignment (selling IP)
  • Spin offs
Let’s clarify each of above written points in brief.

Licensing

Licensing is a most common way to commercialize, meaning, that you permit another person to use your IP under a License Agreement.
If you don’t have enough experience in development or marketing, licensing may be a great and profitable way to succeed in commercializing your IP.
A license is a contract (agreement) between licensee and you (licensor) to commercialize your IP.
Licensor usually get paid licensing Royalties and the value which Licensor and Licensee are agreed on.
The license can be:

  • Exclusive (meaning the licensee is given the right to use IP to the exclusion of all others, including the licensor);
  • Non-exclusive (that means that the licensor can still exploit the same IP and can also allow other licensees to exploit the same IP);
  • Sole license (the same as exclusive license is, but the licensor is allowed to exploit IP himself).
The most common type of Licensing is an exclusive license, because of the benefits for Licensor as well as Licensee. As for an IP owner, receiving a sum which Licensor and Licensee were agreed on earlier, and which compensates all the losses and avoids comprehensive risks of a product being unsuccessful, and for a Licensee, by being the sole recipient of all the profits from bringing the product to a marketplace.
Nevertheless, exclusive licenses do not always can guarantee blanket protection to a Licensee, because exclusive license can be limited and/or restricted by an IP owner in terms of:

  • Product restrictions (restricts the use of the IP to a certain class of goods or services);
  • Field restrictions (restricts the field of product application);
  • Territory restrictions ( restricts to a certain geographical area).
Franchising

Franchising is a marketing conception – an innovative way to distribute goods and services.
Businesses such as McDonalds, Dunkin’ Donuts or Hampton by Hilton are one of the most common examples of well-known franchises.
If you are an owner of a well-known and successful business, and want to broaden your business field or cover more territories without any additional efforts, you can easily license your IP to franchisees. The most common IP objects related to franchising are trademarks, logos, store out-fits, business systems etc. All terms and conditions under a Franchise agreement have to be strictly followed in order to match the terms and business reputation of franchisor.
There are four key points to consider before franchising (according to the Law):

  • franchising is a system or method of distributing goods and services;
  • the franchisor owns the IP rights over the marketing system, service method or special product;
  • the franchisee pays to be allowed to trade under the name of a brand;
  • the franchisee receives profits from a developed business system and earlier implemented marketing strategies.
Assignment

Assignment means selling exclusive rights on IP. When transferring IP rights, you are not allowed to impose any performance obligations on the new IP rights owner. This is the main difference to licensing. The person who purchases your IP may want to pay royalties instead of a lump sum, thereby giving you a possibility to constantly be paid, but only in case of success of a product on the market. If there is no success there is no payment. Talking about a lump sum, the following points should be involved:

  • all direct and indirect expenses related to materials, researches, development etc.
  • a profit component
  • the potential market relevancy of the technology or IP
Spin offs

Spin off is considered as a common way of commercializing IP in Universities and Research Institutes (organizations) due to a great opportunity to maximize the economic benefits of the technologies and IP itself created. As the practice shows, such organizations and establishments lack financial and other required capabilities to get their IP to the market.

Quite a lot of small to large enterprises find Spin offs as a very profitable and often very cheap way to create their own technological basis.
Also, technologies which are bought from such Institutes etc. are quite often resold by brokers. They find that way extremely profitable due to the price gap in the moment of purchase and when selling. That difference appears when IP or technology gains its relevance on the IP marketplace.

Here you have it! Commercialization of the IP – is mutually advantageous (commercial) process based on converting objects of IP into great income. There are numerous reasons why commercialization of the IP is a profitable way to create successful business. Being a licensor/franchisor etc. of IP gives a perfect opportunity to be constantly paid (in case of licensee/buyer etc. pays Royalties) or sell and/or resell IP rights or technologies and make some great money. Being a licensee/franchisee has some strong advantages too. You can feel yourself confident and there is no necessity to distract yourself on organizational issues, you are just about to grow up your business, follow the terms and conditions under an agreement and that’s it. Or implement a great technologically advanced project by licensing a technology is a pretty good deal, isn’t it? As you have probably understood, in commercializing of the Intellectual Property objects/rights – everyone has its own benefits.

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