Intellectual Property refers to expressed creations of the mind such as trademarks, copyright, patents and industrial designs. These intangible assets are usually working in the background of your business, giving it a competitive edge. IP rights grant exclusivity to the IP owner for specified periods of time. While protection of these rights help prevent others from using it, these assets can do so much more than just protect your business- it can be used to generate new revenue streams!
Where you have protected your intellectual property through filing (trademarks, industrial designs, patents) or where you have put measures in place to assert your ownership (copyright), you can offer licenses to other traders to use your intellectual property in exchange for royalties. These royalties can be a new passive revenue stream for your business. When negotiated effectively, licensing can be a very effective and lucrative initiative for businesses. Licensing is also a very effective means of benefiting financially from an infringer. Where another trader infringes your intellectual property, you can negotiate a license to stop the infringement and get royalties in return.
Many businesses have many different types of intellectual property which they do not directly use. These businesses should ensure regular IP Audits are conducted to determine what IP they own, ensure it is protected, identify key IP as well as IP that is not in use and to detect any infringement. Where there is IP that is not being used by the business, this IP should be put to work!
The royalties derived from licensing will depend on exclusivity, territory, time-period and industry. The IP owner should therefore create a licensing strategy to determine the following:
- What can the business license,
- What rights will be granted with the license,
- The territory/territories where these rights will be licensed,
- Whether the license is exclusive or non-exclusive,
- The time-period of the license.
Determining the royalties for IP licenses can be difficult and so businesses should ensure they know the proper value of the IP before determining and negotiating a license. A valuation of the IP can be done to determine the best licensing fees. The valuation can also be used as a negotiating tool to re-assure the licensee of the IP’s value.
