Licensing software is one of the most common strategies for monetizing this type of IP. Using the licensing model, the software developer (IP owner) generates revenue without giving up ownership rights.
You can use licensing to tap into other partner resources, such as getting access to marketing and distribution channels, product support, market recognition, or to enhance the software with new technologies or products. Software licensing strategies include direct sales (e.g. end user licensing agreement)and strategic partnering (e.g. OEM distribution). In this article, we’ll discuss three partnering licensing strategies – co-branding, manufacturing and sales, and non-competing markets.
A co-brand license is a strategy you can use to raise awareness and generate sales. Licensing rights to co-package with a well know software brand can create instant credibility by leveraging off the brands name and market presence. Your software and brand would be displayed within the bundled software. You could create special offers for the licensors customers and gain traction into the marketplace. As a side note, It doesn’t necessarily have to be a co-branding deal with another software brand. Google’s latest version of its Android operating system will be named KitKat (yes, the candy bar). In return, Nestle gets the rights to sell chocolate bars featuring the Android mascot.
A second way of using licensing is to access bigger markets. By licensing out rights to market and distribute your software IP, you can enter global markets that you would otherwise not be able to reach. For example, by licensing its disk operating system software (“MS-DOS”) to IBM, Microsoft obtained the benefit of IBM’s global sales, marketing, and distribution systems.
A third way of licensing your software is in a non-competing field. This is a good strategy if you are not planning to exploit certain markets. For example, a developer of mainframe computer software with expertise only in mainframes could license a developer of software for personal computers.
Software is one of the most licensable types of IP’s. Choosing the right licensing strategy is key to successfully commercializing your software. Licensing for strategic partners can be one of the best ways of getting your software into the market faster and for less money than selling it yourself.
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Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies. His decades of experience run the gamut from medical devices to food technology to consumer products. He’s licensed some of the biggest Hollywood entertainment blockbusters including the Batman Movies (1 and 2), and the number one kid’s action TV show, the Mighty Morphin Power Rangers. Rand speaks about licensing and is a featured speaker at investment conferences, trade shows, colleges and startup events. He’s a published writer with articles appearing in several prestigious trade magazine including The Licensing Journal, Intellectual Property Magazine, and License India. Rand also mentors at the Cal State Fullerton School of Business and Economics and is a judge for their startup business plan competitions.