DO NOT SELL YOUR INTELLECTUAL PROPERTY (IP) - LICENSE IT INSTEAD
Why, one might ask…?
Well, let me explain briefly in few sentences. In this article I will not write about how you can protect your IP. If you are looking for article on how you can protect yourself against copy-cats, check out first IP – protection – throwing your money around and When should we protect our Intellectual Property?
Once we understand how specific types of IP can be protected, we get to the point of making a profit/cashflow out of it right?
Selling vs licensing your IP
All sorts of IP can be sold. It is the same as in real estates… Once the transaction is done, and you have sold your asset to another person/company, you do not have it anymore. The best thing about it is that unlike with houses or other »fixed« assets (where they can hold onto a specific number of tenants), IP can be rented out to x number of entities…Again and again. Just think of McDonalds, Coca-Cola, Starbucks etc. All these have one thing in common. You guessed it right: They all know how to hold on to their IP –and license (rent) it out.
Franchising/assignment/licensing/cross-licensing
There are different words out there that company owners hear and throw around when describing their businesses and business ventures.
In principle, licensing means that you give permission to third party to use your registered IP and in exchange, you are getting paid back in royalties (=cash).
If we are being strictly theoretical, Franchising and cross licensing are actually describing sub forms of licensing, where the first is describing deals involving licensing of a trademark (in combination with know-how), whilst cross-licensing is the term used in transactions between two parties where each one allows the other party to use their patents (patented technology). In both cases cash is always involved😊.
IP rights are territorial and (some of them) have a limited lifespan (like designs and patents), whilst some of them can be kept (if proper mechanisms are in place) in perpetuity. IP rights can be limited in scope and time and can also be licensed to only one entity (term: exclusive license) or to many (term: non-exclusive license).
IP brokers – who are they?
Looking at real estate market, if you have no idea as to how you could sell your home or find yourself a tenant for your property, you normally do the obvious…get yourself a real estate agent who helps you with your deal, right?
It is the same with your IP rights. With a small, yet important difference; whilst real estate broker »costs« you between 2-4 % margin on the closed deal, the margins in IP field vary significantly, up to 10 or even 20 % of the deal. The main reason for this is an extremely niche/small market where transactions are rarely publicly disclosed.
So, the next time you are thinking of letting your IP go, think again and discuss it with your IP Strategist first.