Bringing a new product to market is both time-consuming and costly. As the idea for a product takes shape, the process to protect the IP with a patent begins. With a patent granted, it’s time to commercialize and enjoy the benefits of patent protection, yet 90% of patents don’t get commercialized. Figuring out how to make money on your patents requires guidance.
There are four basic ways to commercialize patents:
One is Patent Licensing. Licensing involves the patent owner (the “licensor”) granting certain rights to a patent to one or more parties (“licensees”) for a certain period of time and according to negotiated financial terms. Licensing monetizes intellectual property for the inventor without having to produce or market a product while allowing the licensee to bring a product to market without the expense and risks of developing the IP.
Licenses may be exclusive (with a single licensee alone having rights to the patent) or non-exclusive (where multiple parties may become licensees). Royalties–the payments due from licensees to licensors for use of the patent–can be fixed or variable (e.g., changing based on sales of the product incorporating the patent). The license can be global or restricted to a specific country or a particular region.
A second way to commercialize patents is through Patent Enforcement, to monetize through unauthorized use. While patent infringement can be inadvertent, it often occurs when one party has knowledge of the IP embodied in the patent owned by another party, for example when one company uses confidential information that was wrongfully disclosed to them. Whatever the case, you have the right to enforce your patent under patent protection laws. The process begins with filing an infringement suit with the appropriate court. The court may order the infringer to stop manufacturing and selling or impose monetary damages–or both. However, court intervention is not required; the parties involved can negotiate compensation without judicial involvement.
Sometimes, a patent (or set of patents) has limited commercial prospects but is of great value when used in conjunction with other patents. Patent Pooling is when two or more patent holders come to an agreement to license patents to third parties collectively. One challenge with pooling is determining the synergies that exist across patent portfolios. Another hurdle is working out the terms between parties. The pooling of patents with little or no commercial potential can be valuable and a significant source of revenue.
Finally, there’s the opportunity to Sell a Patent. This is an attractive approach when you’re unable to afford or manage the manufacturing and marketing of a product that incorporates a patent. Selling the patent allows you to generate revenue in a relatively uncomplicated manner, without the difficulty of negotiating licensing terms or pooling arrangements.
Whatever methods you use to monetize your patents, you’ll need the data from your licensing contracts to ensure royalty rates align with prevailing industry rates. You’ll also need to monitor and track royalty collection for out-licensed contracts. Elevate is happy to assist with managed services, the drafting of in-licensing and out-licensing contracts, pooling arrangements and patent sales.
With a patent granted, it’s time to commercialize and enjoy the benefits of patent protection, yet 90% of patents don’t get commercialized. Figuring out how to make money on your patents requires guidance.