Sometimes an IP is more valuable inside someone else's product than as your standalone product.
Recently BlackBerry, a brand known for its communication products, announced a licensing deal with a Swiss consumer-electronics maker. The terms of the agreement include BlackBerry's cybersecurity technology and its brand, which will be embedded into the products and then certified by the brand name “BlackBerry Secure” as a secure device to connect with home and business networks.
That is an excellent example of a company which is reinventing itself through the licensing model. When the market for its devices took a nosedive, the company had to reinvent itself. Blackberry is capitalizing on its brand name and technology. Instead of making and selling “cybersecurity” products, it is licensing its security technology into a host of communication devices. These licensing partners integrate the technology into their products and use the BlackBerry brand-name on their product to reinforce the quality of security in their device. Not only does BlackBerry generate revenues from all these devices, they also expand their brand name into new product categories and markets.
Integrating your IP into other products or services is a great licensing strategy that's often overlooked by most IP owners. Also known as ingredient licensing, these are incremental IPs that improve a product or technology. Many of the biggest industries in the world license lots of “integrated IP” that's inside their core products, including smartphones, computers, and automobiles. Some of the best-known examples are Intel computer chips, Goretex fabric, and Scotch Guard waterproofing.
Formulas are trade secrets and one of the best examples of integrated IP. One of the most famous formula trade-secret licensing deals was struck in 1886 between J.J. Lawrence, the maker of Listerine, and the Lambert Pharmaceutical Co. By 1956, Lambert had paid more than $22 million in licensing fees to the Lawrence family. One of my clients is licensing their new cleaning formula with a proprietary static eliminating ingredient that cleans everything from electronics to cars, boats, and even kitchen counters and bathrooms. Industries such as health supplements, pharmaceutical, and now Cannabis, use formula licensing as a strategy to break into a new market or add new products.
Software OEM licenses is another example. These licenses allow original equipment manufacturers (OEMs) to integrate software into their products (such as computers) or services, then sell the combined product. In this case, the OEM license gives sub-licensing rights so the OEM licensee can transfer rights to its channels and customers. Royalties are paid in different ways such as set amount license fees; royalties per license; a percentage of product revenue; number, type, and size of accounts or users.
Training and educational content is often integrated with other types of content. Course-ware can be customized and combined with other learning content in developing an enterprise-wide curriculum. Under a licensing agreement, the licensee gets rights to repackage the content and sell it under their brand or use it as part of their seminars or workshop trainings.
Brands add realism to many mobile games, and many consumer products companies license their brands to mobile game developers who integrate them into the game. In many cases, these are promotional deals for the consumer products companies, giving them exposure to captive gaming customers.
One of the fastest-growing areas of integrated IP licensing is Big Data. Businesses are using big data to gain customer insights, optimizing processes (both human and machine), and for generating better AI algorithms (e.g., financial trading, driverless cars, etc.). From sports wearables to health care, medical devices, automobiles, smartphones ,and more – these industries are all driving demand for licensed data integrated into their technologies.
If you've developed an IP such as a formula, ingredient, or even a technology, licensing it for use in other people's products is one of the best ways to capitalize on it. Instead of spending all your money producing and selling, licensing your IP to companies who in turn integrate it into their products and pay you a licensing fee is a smart business strategy, especially if your IP is in a competitive industry dominated by big players. Rather than trying to establish yourself in these markets, which is competitively risky and expensive, licensing, let's you partner with these big companies. You tap into a bigger pie and get paid by all the competitors in these markets while focusing your resources on enhancing your IP and creating new licensing opportunities.
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.