How to Turn Your R&D Know-How into Licensing Revenue

R&D is an expensive undertaking…especially for certain industries such as bio-sciences or pharmaceuticals. But sometimes your know-how, such as an R&D process, can turn into a licensable (and valuable) intellectual property that others can use to develop their IP.

One example is a small pharmaceutical company, who licenses its antibody R&D platform to other drug companies. In return for rights to use the R&D platform, licensees pay fees to use it and royalties on sales from each product incorporating its antibody technology.

What you know how to do is a trade secret. It includes business processes, formulas, recipes and other confidential information – basically anything you’ve created that helps you make a profit and don’t want anyone to know how you do it. Know-how is often an overlooked revenue source for IP owners. But the trick to generating revenues requires attention to confidentiality, pricing and managing the licensee relationship.

Monetizing your know-how is challenging. Sometimes its hard to  figure out exactly what it is. In most cases, its your trade secrets – confidential  information about how to make or do something – such as a manufacturing process or software source code – that’s your know-how.

Know-how can be licensed on its own or combined with other types of IP, such as a patent.  Other options include licensing it as part of a consulting agreement, where you are providing your expertise  to a company so  they can us it in their business.

When licensing it, you’ll  want to give enough information to show it’s value, but don’t disclose everything. The goal is to show the licensee the value of your know-how either directly to their business or as part of a patent or technology.

Know-how is secured under a licensing agreement with non disclosure and other clauses to “secure” it and keep it confidential. Know-how can be licensed exclusively and non-exclusively. Which option to use depends on how it’s being licensed. For example, if the know-how is a production process for a patent, it’s most likely part of the exclusive patent license (and it makes the exclusive license more valuable). If it’s part of a consulting agreement, then it’s a non-exclusive license so you can continue using the know-how with other clients.

Keeping your know-how secret is key. Don’t publish it or let it out publicly. And make sure you include a detailed description of your know-how as part of the licensing agreement. If it’s part of a patent, make sure not to disclose it until after you get the patent.

One big advantage of licensing know-how is avoiding the litigation issues with patents. One strategy to overcome this risk is licensing your know-how instead of your patent. For example, you invented a better computer part and production know-how that improves how the computer part is produced. Rather than license the patent, the know-how is licensed to one or more companies that make and sell those parts. Your licensing partners agree to keep the technology secret (to thwart competitors) and to pay royalties on any products sold using the know-how production process.

To  keep your know-how intact, make sure your licensing agreement is very clear and specific on confidentiality.  That’s what insures your know-how IP will remain your IP.

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