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IP Commercialisation Strategies
Strategic options for commercialising your IP
Once you have secured ownership of your IP,
you are ready to tackle the commercialisation
process. Essentially, commercialising IP is the
process you undertake to move your
innovation from “just another brilliant idea for
a product or service” to the market place.
You need to consider many issues before
commercialising your IP to identify what you
think will work for your business. There is no
one ‘best’ strategy. How you commercialise
your IP depends on your particular IP, your
circumstances, business capabilities,
understanding of the market and your ability
to generate finance.
You need to consider whether you want to
commercialise in-house or with a partner. Or
you might decide that you do not have the
capability to manufacture, market and sell
your product in-house but do not wish to
partner with another company either. In this
case, you may be able to outsource some of
the required tasks. There are many options
for taking your IP to the market; a couple of
the most common are listed below.
Remember that there are different issues to
consider when commercialising in Australia as
opposed to internationally.
Licensing
Licensing your IP to another party can be an
effective way to exploit IP, particularly if you
don’t have the resources or experience to
develop and market your product or service.
Essentially a licence is a contract where the IP
owner gives permission to a licensee to
commercialise that intellectual property. A
licence may extend to all aspects of
commercialisation, from developing it further,
to manufacturing products, marketing,
promoting and selling those products. As
with all other aspects of commercialising your
IP, licensing needs to fit in with your business
strategy and practices.
An exclusive licence is the most commonly
used mechanism to commercialise intellectual
property with a partner but there are many
other types of licenses including know-how,
trade mark and non-exclusive. Licensing
arrangements are a fairly common method of
exploiting copyright, patents, design and
trade marks but any type of intellectual
property can be licensed. They give the
licensee the right to use (but not own) the IP.
The owner of the rights will usually get
payments (in the form of royalties) in return
for its use. The value of these rights is a
commercial agreement based largely on the IP
of the creation or invention.
Another approach is to take out a licence on
someone else’s IP. For example, a franchise is
a type of licence. You may have a good idea
but find someone else has already thought of
it. Taking out a licence is a cost effective
alternative to investing in a proven business.
If you think licensing is for you, we recommend you seek the advice of a licensing
expert to help you negotiate a good deal.
Franchising
When the owner of a successful business wants
to expand without borrowing capital to
develop, they can license IP to franchisees. This
generally includes use of trade marks, logos,
promotional material, the business system,
various processes and shop fitouts.
Franchising is a method or system for
distributing goods and services. The franchisor
owns the IP rights over the business system,
service method or special product. The
franchisee pays a fee or regular royalties for the
right to trade under the brand name.
The franchisee benefits from coordinated
marketing efforts and a developed business
system.
Assignment
Unlike licensing where the creator or owner of
the IP retains ownership and some control over
the use of the IP, an assignment is an outright
sale. When IP owners transfer their ownership,
they can’t impose any performance obligations
on the new owner.
Even with the complete loss of IP ownership,
assignment is worth considering as an
alternative commercialisation strategy. For
example, an owner may prefer to receive a
substantial up-front lump sum payment for the
assignment, instead of smaller royalty payments
throughout the commercialisation period,
which is the case with a license. Capitalising on
the financial rewards up-front may be the
preferred option and often is the option with a
smaller amount of risk compared to licensing.
Such a lump sum payment should be regarded
as a purchase price. The owner should factor into that purchase price all the costs of taking
the intellectual property to its state of
development to the time of the assignment.
These will include all the direct costs of research
and development, all indirect costs, all out of
pocket expenses such as the cost of materials,
the cost of any outsourcing, and the cost of
protecting the intellectual property. As well,
the lump sum amount should incorporate a
profit component, and the potential market
value of the technology or IP.
Who can help?
In the first instance, IP Australia’s website
provides further details about commercialising
IP rights, along with web-links to relevant
agencies. IP Australia recommends that you
seek professional advice from a patent attorney,
trade mark attorney, IP lawyer and/or business
planner before making any final decisions.
For detailed information an licensing, contact
the Licensing Executive Society of Australian
and New Zealand (LESANZ), www.lesanz.org.au
For further information on franchising, contact
the Franchise Council of Australia, www.fca.com.au
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