Deciding when to license your intellectual property is always a question. License your IP too early and no one is interested. License it too late and the market is shifted in a new direction.
Your intellectual property goes through a life cycle. First it’s created, then it moves into development, then it’s ready to commercialize. The ideal time to license it is somewhere between the completed development and when it’s proven itself in the market, and it’s ready to grow and expand.
So how do you decide if it’s better to license your IP or market it yourself? To help you answer that question, here’s a list seven signs that licensing may be a better strategy than commercializing it yourself.
- Your IP is an incremental improvement to an existing technology used in current products or by other companies. Industries such as high-tech and consumer products use incremental IP to improve their products with new features increasingly desired by consumers. Some examples of include the Apple’s iPod (the incremental accessories are licensed), GPS systems (incremental version for cars), and automobile features (the incremental IP improvements such as electric windows, ABS break systems, air bags, and many others).
- Your IP is market ready, meaning it works and customers will buy/use it. This includes making sure its protected, customers are identified, and it’s been tested with a prototype or is selling on a limited basis, such as on-line or through retail stores.
- You’re competing in a crowded field with lots of players and there is a high risk of potential infringement. An example is the high-tech industry, which is not only highly competitive, it also prone to lots of patent infringement litigation.
- It’s in an existing market where customers loyalties already exist with particular brands and companies. A good example is soda beverages, where Coke is the dominate brand with high consumer loyalty to their product. It’s very difficult (if not impossible) to convince these customers to drink a different cola drink. This consumer loyalty enables Coke to capitalize on these customers with their other types of beverage products.
- Existing companies dominate the distribution channels for your IP. Food is a good example. It’s very difficult and expensive to get a new food product on supermarket shelves. Big food companies, such as General Mills, Kraft and many others dominate the retail shelves. I worked with a client that invented a packaging and dispensing system for the professional hair salon market. Very large consumer products companies, such as L’Oreal and others, dominate this distribution channel. Rather than try to compete against these big players, its better to license to one of them.
- You IP is complex, requires a lot of R&D, regulatory approval or rights to other outside IP, and makes raising capital difficult. Or your IP is in a technology area that’s not favored by investors, such as semiconductors and consumer electronics.
- You don’t have a management team with the experience and resources.
Keep these seven signs in mind when considering whether licensing is the right strategy to commercialize your IP. Timing is everything when it comes to licensing. Changing technology, customer demand, legal regulations, and a score of other things are constantly creating new windows of opportunity for your intellectual property. Knowing when to license your IP can make the difference between signing a big deal or floundering in the market.