Research by intellectual capital firm Ocean Tomo shows that, on average, 80% of a company’s value comes from intangible assets. Patented technology makes up a significant portion of this intangible value. Are you doing everything you can to turn those intangible assets into revenue opportunities?
There are five primary ways to monetize assets in a patent portfolio. Here’s a quick primer:
Turning IP into commercial products is the most basic monetization method. In industries such as pharmaceuticals, companies’ product pipelines are often defined purely by their patent portfolios. But there’s a science behind evaluating patents for commercialization that many companies overlook.
IP assets may hold potential value for commercialization that at first glance may not seem strategic. The key is using more sophisticated patent search and analytics techniques to map out the “white space” opportunities that exist in existing or new markets.
You can also turn the IP from others into commercial products by licensing third-party patents – effectively outsourcing part or all of your R&D efforts. Think of it as managing a fantasy football team, in which the goal is assembling a set of disparate assets into a winning team – one that can help you gain new market share.
Potential licensors may offer complementary technology within your existing space. Another option is what one of our clients calls a “lift and shift” approach: identifying patents that serve a completely different industry but can be applied to similar needs in your market.
We’re seeing a budding cottage industry of startups taking this approach to commercialize technology and research coming out of universities, providing capital and management resources to bring new concepts to market.
Licensing patents to third parties has long been a reliable and lucrative revenue stream for research-driven companies, particularly in the technology and communications industries. IBM, which regularly tops the annual list of most U.S. patents granted, generates nearly $1 billion a year in licensing revenues.
Companies can find new revenues by looking for licensing opportunities outside of their core industry – the “lift and shift” approach in reverse. This requires evolving beyond patent searches based on traditional classification codes, and instead using deeper levels of semantic analysis to determine similarities across industries. It’s a great way to find novel uses for underutilized patents in your portfolio.
Companies also can derive onetime revenue gains from selling patents or entire portfolios outright. Selling patents through an auction or direct sale can provide companies with a much-needed cash infusion – consider AOL’s $1.1 billion sale of more than 800 patents to Microsoft in 2012 – or provide a financial return on underused or non-strategic assets.
Again, the key is to find the right fit between the patent portfolio and a potential buyer, based on market needs, competitive positioning, and the buyer’s existing portfolio. Often, a carefully constructed portfolio can capture more value from a buyer than selling individual patents piecemeal.
Enforcing IP has become a business model in its own right for non-practicing entities, including patent trolls. However, any company with a large portfolio of patents, even ones that it does not plan to commercialize in the near term, should be diligent about protecting those assets against possible infringers.
The number of patent cases filed in U.S. courts is increasing steadily. In 2012, nearly 5,200 patent actions were filed in the U.S., a 29% jump from 2011. In 2012 alone, three damages awards surpassed $1 billion – equaling the number of billion-dollar awards granted for all prior years combined. This past May, a jury ruled that Samsung must pay Apple nearly $120 million in damages for infringing on three smartphone-related patents (Apple originally had asked for nearly $2.2 billion in damages).