Ownership of IP rights: Do you see IP as an asset and consider its licence, sale or purchase as part of your commercial strategy?

5 mins

Intellectual property (IP) is an asset to any business, and as such can be subject of transactions.  In other words, IP can be bought or in-licensed, and equally, your own IP can be sold and out-licensed.

Purchasing and In-licensing someone else’s IP – can this give you a competitive advantage?

Owning IP or having a secure licence in IP can provide a degree of exclusivity in a market, or at least some advantage, and so can be used to attract investment. Other benefits of purchasing or in-licensing IP include:

• Gaining commercial certainty by avoiding infringement of third party IP rights.

• Reducing risk associated with investing resources in early R&D, by buying or licensing in innovation already rendered plausible.

• Developing collaboration with the IP owner, thus diluting risk while tapping in to the know-how of external experts.

• Reducing time to market, by allowing exploitation of existing products covered by the IP.

• Entering the market in new countries that would otherwise be impeded by the IP.
  

Selling and out-licensing your own IP – can this be profitable for your business?

IP ownership alone does not guarantee any revenue, however, deriving exclusivity from marketing the invention covered by the IP can increase the chances of making a profit. All IP rights can also be sold or licensed out for a fee, which can also enhance profitability. A sale would result in a transfer of IP right ownership to the purchaser, in exchange for an agreed sum of money. On the other hand, a licence provides the licensee with rights to benefit from the IP right in exchange for royalties, while the owner remains the same and retains overall control. Other benefits of selling or licensing IP include:

• Access to new markets – licensing out IP to a local business abroad can be an easy way to penetrate a geographically foreign market, without the uncertainty and cost of attempting to explore the region first hand. Alternatively, licensing out IP to a business in a different industry can enable to grow scope in already existing geographical regions.

• New revenue source – most typically via royalties or a sale payment received from a third party. This can be of particular interest if you lack the resources to commercialise the product yourself or wish to focus on other areas of your business.

• Money saving – entering an agreement with another business, who already have an established manufacturing and distribution facility can save a lot of money through not having to establish such capabilities from scratch.

• Reduce/ share risk – the purchaser/ licensee may have a more established business, with strong R&D resource and existing sales channels to immediately exploit the product or service. The route to success can thus be expedited and commercial risk is reduced.

• You may simply lack the desire to bring the encompassed product or service to market and wish to instead use the IP to gain capital for investment elsewhere.
  

An experienced IP attorney is well equipped to help you audit your IP, and to help investigate the existing IP landscape when you need to decide on whether to enter an IP transaction. The associated agreements can be complex and must be carefully drafted to ensure optimal benefit to your business. Thus, we are always at hand to assist you in any way we can.

Written by: Lionel Newton