In today’s IP centric economy, your intellectual property is your competitive advantage foundation. IP creates a competitive advantage in several ways – licensing i exclusive rights to an outside IP, license out your IP to generate revenues and combine your IP to create a competitive moat.
Acquiring exclusive rights to the an IP can turn your company into a market leader. The release of hot movies like the Lord of the Rings trilogy provides a significant market advantage to licensees selling toys, games, and children’s apparel. Some retailers use exclusive agreements for licensed apparel and movie tie-in products as a strategy to differentiate themselves in the marketplace. Exclusive rights to a disruptive technology or process can dominate an industry. A good example is a Danish company that licensed a breakthrough manufacturing process enabling it to dominate the European market with its diabetes drugs.
You can capitalize on your brand recognition by licensing out rights to non-competitive products. Exploiting trademark rights in areas where you don’t have the ability, infrastructure, or capital resources is a great way to generate revenues and increase brand value. Examples include entertainment characters such as Mickey Mouse, Barbie, and the Lion King, and big consumer brands such as Coke, Apple, and GM. This strategy diversifies your business and expands it into more product categories without the cost and risk of launching a new product.
Licensing your competition is another way to build a competitive advantage. It’s not uncommon for IP owners to use this strategy to dominate their market. Some examples include Microsoft’s DOS operating system, Proctor & Gambles packaging designs, and Navidas graphics chips. You are using your competitors resources to build your market and brand. Plus you get the added benefit of getting paid from your competitors every time they sell a product with your IP.
Combining a trademark or trade secret with a patent can extend its economic life. A 2014 UK study found that over 25% of midsize and over 45% large business, particularly in the pharmaceutical, telecom and chemical industries used an IP bundling strategy to extend the economic life of their patents. Owens Corning combined their design patent with the trademark “Think Pink” and extended the life of their patent beyond it’s 14 years lifespan. A major pharmaceutical company combined its first patented product with a trademark, and continues to be the leading brand in its market for over 100 years.
Intellectual property, whether it’s technology, software, formulations, brands or trade secrets, is the foundation for building a significant competitive advantage for businesses of any size. Acquiring the exclusive rights to a disruptive technology or innovative process can dominate a market or industry. Permitting others to use your IP can extend your business into new markets and level the competitive playing field. Bundling your IP rights can increase their economic life, build market value, and create a sustainable competitive advantage for your products or services.