Licensing is one of the most flexible strategies for generating revenues with IP. A big part of its flexibility is the different ways of creating licensing deals.
One example is royalty calculations and payments. Most often, this is based on income from sales revenues. But one size doesn’t always fit all, especially if the IP doesn’t generate cash directly from sales. In this case, a little creative thinking can convert other forms of “sales” into royalty payments.
That’s exactly what an electric scooter company did to generate revenues from its carbon reduction credits. It licensed a carbon engine process that lets it “capture” and sell the carbon reduction credits. The carbon process engine integrates with the electric scooter company software platform, enabling them to track, verify, and convert every mile its electric scooters travel into a carbon offset credit.
After a third-party independent verifier verifies these carbon offsets, it’s an asset the electric scooter company sells directly to a third party looking to offset its emissions or through a broker/exchange.
The Carbon Credit market incentivizes businesses financially to invest in sustainable products and reduce their carbon footprint. Carbon markets provide an extra source of revenue for companies with technologies that reduce greenhouse emissions. The price of carbon credits fluctuates depending on market supply and demand. In many cases, individual buyers and sellers negotiate and agree on a price. Larger companies trade carbon credits through one or more major platforms, including the Chicago Climate Exchange (CCX), European Energy Exchange (EEX), NASDAQ OMX Commodities Europe, and others. (Carbon credits can also be traded by homeowners on these international exchanges as well).
The carbon engine process technology they licensed enables the electric scooter company to “monetize” its carbon credits by selling them for cash. Royalties are then calculated and paid to the licensor based on the revenue generated from the carbon credit sales.
The technology company that developed the carbon credit process platform generates a higher return from their license. Instead of using a traditional software licensing approach with a fixed annual or per-user license fee, they licensed it as a production process for producing carbon credits. As the electric scooter company increases its user miles, it captures (i.e., produces) and sells more carbon credits, and in turn, pays increasing royalties to the technology company.
When you think of generating royalty revenue with your IP, it doesn’t always require directly selling a product or service. In today’s technologically fluid marketplace, there are many creative ways to do a licensing deal. The trick is looking at your IP as more than just a tangible product or service. It’s an income-generating asset, and through licensing, it can be molded and applied in unique and creative ways to convert “non-traditional“ sources of revenue into income-generating royalty payments.
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. His first book, Hidden Wealth: The Money Making Power of Licensing was released in 2019 and is available on Amazon.com. He’s also 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.