Ways to commercialise IP

Commercialising intellectual property (IP) is about getting your products or services into the market place. Your commercialisation strategy depends on many variables:

  • your individual circumstances
  • business capabilities
  • competitive environment
  • access to finance.

There are four main ways to commercialise your IP:

Assignment - selling your IP

An assignment is an outright sale of your IP in which you transfer your ownership to another person. This can be a viable business strategy if you prefer to receive a substantial up-front lump-sum payment instead of smaller royalty payments throughout the commercialisation period.

When you transfer your IP ownership, you cannot impose any performance obligations on the new owner. This is different to licensing.

The lump-sum payment for an assignment should be regarded as a purchase price. You should factor into the purchase price:

  • all costs including direct and indirect costs of research and development, materials, any outsourcing and the cost of protecting the IP
  • a profit component
  • the potential market value of the technology or IP.

The person purchasing your IP may want to pay royalties instead of a lump sum. This way, the purchaser's initial capital outlay is less and the royalty payment for the IP becomes conditional on the IP product being successful in the market place. In this case, if there is no success there is no payment.

Licensing

Licensing is a common strategy to commercialise your IP. It means that you give permission for another person to use your IP on agreed terms and conditions.

If you don’t have the resources or experience to develop and market your product or service, licensing can be an effective strategy.

Key points to consider when licensing your IP:

  • a licence is a contract between you and the licensee to commercialise your IP
  • a licence can cover product development, manufacture, marketing and selling products
  • you will usually get paid licensing royalties and the agreed value is based largely on the type of IP
  • there are many types of licences, but an exclusive licence is the most common
  • there are specific licence conditions you need to consider.

Read about types of licences for more information.

The national Personal Property Securities Register

The national Personal Property Securities Register (PPSR) is now the only place to register claimed security interests on IP Rights, such as a mortgage, licence or claimed interest.

The PPSR is a national online register that can provide information to help protect consumers when they are buying personal property (including intellectual property).

As registration is voluntary and you could consider legal advice before proceeding. We are not able to provide advice on this. 

We will continue to record new claimed interests if they are submitted under the relevant acts and existing security interests recorded on our databases will remain, but they have no legal effect. Interests recorded with us will only you to receive certain notifications from us in relation to your IP right.

Franchising

Franchising is a marketing concept - an innovative method of distributing goods and services.

Businesses such as 7-Eleven, Jim's Mowing and Pizza Hut are typical examples of well-known franchises.

If you are the owner of a successful business and want to expand without borrowing capital to develop, you can license your IP to franchisees. This generally includes trade marks, logos, promotional material, the business system, various processes and shop fit-outs.

Key points to consider when franchising:

  • franchising is a method or system for distributing goods and services
  • the franchisor owns the IP rights over the marketing system, service method or special product
  • the franchisee pays for the right to trade under the brand name
  • the franchisee benefits from coordinated marketing efforts and a developed business system.

Read about franchising and IP for more information.

Spin offs

A spin off refers to a separate company established in order to bring a technology developed by a parent company to the market.

When setting up a spin off company, depending on the form that has been chosen, there are several IP activities to be carried out including:

  • IP due diligence: investors will be able to clearly see who owns the IP and any obligations affecting it, such as research contracts, granting conditions or third party alleged infringement
  • confidentiality: it is best practice to conclude a Non-Disclosure Agreement before engaging in negotiations for spin off agreements
  • employment contracts: covering issues related to the ownership of the IP that will be created by employees/researchers during the spin off life cycle
  • assignment agreements: when the IP belonging to the research organisation is assigned to the spin off company and the research organisation has to comply with its contractual obligations
  • licence agreements: these agreements are needed when the research organisation decides to license its IP assets to the spin off company.

Read about spin offs and IP for more information.

Common mistakes

No matter which way you decide to commercialise your IP, be aware of two common mistakes:

  • failing to keep your IP a secret before applying for protection
  • failing to secure ownership of your IP.

Working out how to commercialise your IP

When working out how to commercialise your IP you need to decide whether to undertake all the steps in-house or work with a partner.

Before deciding which approach best suits your situation, ask yourself:

  • Does this new commercialisation effort complement your existing core business?
  • Do you have the right business capabilities to commercialise your product to its best advantage?

Commercialise in-house

When you commercialise in-house you develop your product to a market-ready state without any external assistance. This means that you take on all the work and risk associated with launching a new product. It also means that if you are successful you reap all the benefits.

Commercialising in-house might involve:

  • having (or acquiring) your own manufacturing facilities
  • manufacturing the product using your own facilities, staff and resources
  • marketing and promoting the product using your own staff and resources
  • arranging all distribution and sales channels.

Case study: Rapid commercialisation for a product with short IP life span

Garry McConnell had the idea for a fridge magnet that tells you when your dog needs worming.

'The product I'm selling is not rocket science, so just about anybody could copy it,' Garry admits.

For this reason, his strategy was to get the product into commercial production quickly, saturate the market, make money and then get out and move on to the next idea.

The strategy: Non-disclosure agreement and provisional patent application

From the outset Garry knew there were IP issues he needed to manage effectively in order to commercialise the product without losing his IP.

'First, how would I present the idea to investors, designers and potential customers without being ripped off?'

He wanted to present his concept to a potential financial backer, but not until he had some sort of IP protection.

'The cheapest protection I could figure out was a non-disclosure document - prepared by a solicitor - that had reference to a provisional patent application. The reason I chose a provisional patent application and not a full standard or innovation patent application was that information in a provisional application is not in the public domain for 12 months, so theoretically it shouldn't be able to be seen and subsequently copied.'

Last updated: 
7 March 2016