Patent monetisation: license or sell?

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Gannons used out in depth knowledge of patent monetisation to create both a licensing and sale strategy for an inventor wishing to monetise an invention.

Our client approached us with his patent for a mechanical device. He had recently filed for protection in the United Kingdom. Now he wished to monetise his invention. Patent monetisation is tricky, however. In this case, identified our client’s target industries and companies. We then conducted an infringement analysis, all of which resulted in the successful monetisation of our client’s patent.

Introduction to patents

The grant of a patent does not guarantee that said patent is actually valid. There is a possibility that their invention may infringe another patent. Patent owners are also not protected from regulatory constraints.

The register of patents often confuses inventors. It requires skill to track which inventions are already registered or in the process of being proposed and registered.

Nevertheless, a patent still has some uses. For instance, it could deter rivals from infringing upon the patent, and thereby competing with the patent owner. It could equally stop rivals from competing by driving them to find an alternative products or processes that do not infringe upon an existing patent. Patents can also be monetised by prompting rivals to approach the patent owner for a licence.

Conducting a patent monetisation exercise

Our client asked us to conducts a patent monetisation exercise. Such an exercise requires in depth market knowledge, commercial awareness, and the skills to research existing technologies and that may threaten the validity of the patent.

Our in depth patent monetisation skills enabled us to carefully order and target potential buyers who would most value our client’s asset.

Market analysis

Understanding the technology and the marketplace is crucial to determining the true value of a patent.

Realism must temper the patent owner’s expectations. This is in order to accurately determine whether the cost of developing a patent is commercially justifiable given marketplace demand. Marketplace demand is what will inform future earnings from the patent.

Results of patent monetisation exercise

We discovered that our client’s patented technology was useful to several industries. Further research, and meetings with experts, pinpointed appropriate applications and named the market leaders within each industry.

Infringement Analysis

After identifying potential applications and checking available prior art, we conducted an infringement analysis. This analysis establishes whether a patent, be it for a product or process, infringes on an existing patent.

Infringement analysis is a two step process:

Claim construction

This determines the meaning of each term and element of the claim, and establishes the scope of the claims.

Claim comparision

This compares properly construed claims to any existing patents.

Target companies

Based on our findings, we formulated a bespoke two stage patent monetisation process. The process split the companies we would offer a licence for the patent into two groups.

The first group consisted of companies using the patented technology under a license, which would grant our client a revenue stream. The second group consisted of companies who would purchase the patented technology.

In order to categorise the companies who would be licensing the technology, we conducted in depth research into each target companies. We assessed their intellectual property portfolios; their commitment to research; and their track records for acquiring patents.

Licensing vs selling a patent

Licensing generates a constant revenue stream. However, it carries a risk of litigation. This could be over the licence terms, royalty payments, infringements, and patent invalidation. Hence, patent owners often prefer an outright sale.

To license a patent simply means to grant another party permission to do use the patented product or service. A licence grants a right to use without transferring ownership of the patent. A patent licence agreement is a formal, preferably written, document. It records the circumstances under which a promise shall be legally binding on the person making it.

A patent licence agreement is a partnership between a patent owner and another who is authorised to use the patent under certain conditions. Usually there is monetary compensation either in the form of a flat fee or running royalty. Often the royalty is a share of the revenues gained from using the patented invention.

Our strategy to monetise our client’s patent involved a licensing programme, so that our client could benefit from royalties until we found a suitable buyer. We set about initiating negotiations with selected target companies in order to sell the patent assets. We drew up appropriate licensing terms to facilitate a sale of the patented technology.

Benefits of our patent monetisation strategy

Licensing enabled the patent holder to show that the patent can generate revenue. That the patent generates revenue helps to sell the patent outright.

Patents, particularly if owned by inventors with limited financial resources, often have a relatively low value. Potential buyers may consider that a poverty stricken patent holder cannot afford to enforce the patent through prolonged licensing negotiations and litigation. Often the same patent increases in value when the owner has resources to licence and enforce the patent.

Our client was an individual inventor. Hence, we tailored our monetising strategy to license the patent to entities that would benefit most from using the patent. This generated much needed revenue, until a suitable buyer emerged.

  • I didn’t realise patents were so complex – without the excellent work done by Gannons, I’m not sure where I’d be