Intellectual property often represents the largest and most important asset of the company. These intangible assets are so valuable to a business because by gaining the right protection registered patent, designs, trademarks etc., companies prevent competitors from launching competing products. Secondly, holding the rights to a product design enables a company to make a unique offering to their market and price their products accordingly. By licensing company’s IP, used by third parties provides a significant and valuable income stream.
Intellectual property assets not only increase revenue or reduce business costs, but they also expand and maintain brand’s reputation. IP owned or accessible to the company owners strongly influences the business model chosen for operating on the market and should be considered as a key element in the business plan, which can bring very strong added value to the venture if appropriately described and valued.
Intellectual property valuation can help you determine the value of your business and capitalize on assets that you may not have been aware of possessing. Assessing the value of for example your patent, trademark, copyright may simplify the licensing or assignment process and help you determine the royalty rates that should be paid to you as a result of using your intellectual property assets. Ascribing a reasonable valuation to your intellectual property increases the overall value of your business and provides you with collateral for loans or mortgages. Valuation is determined by many factors and there isn’t actually no particular method of valuation. Traditionally, there are two methods that can be used – quantitative and qualitative. Which method will best serve you depends on your intellectual property needs and goals you have set as a result of valuation.
Valuation and an accurate estimation of the worth of IP can guide business decisions, creation of beneficial business plan and determine actions with which your business will benefit the most.
As a holder of intellectual property rights, you can commercialise your IP in different forms such as licensing, franchising, assignment, joint venture and spin-off. You can also sell your IP by assigning or transferring your IP. To properly exploit your IP rights, however, you need to first identify your IP rights, register them, monitor your portfolio to ensure validity and upkeep and validate them.
The financial success will of course depend on the most appropriate commercialisation form and minimalization of possible risks (legal and financial matters, business reputation, confidentiality)
LICENSING (cross licensing)
License gives another entity permission to use your intellectual property for a limited time and in exchange you get paid for giving permission in the form of royalties. You can also set limits for the use of the IP, for example in which territories the license can be used, if it can be sub-licensed, whether you can still use the license or not. There is no transfer of ownership, which means you retain your rights. However, you are responsible for maintenance of the IP rights concerns. It usually comes in place when a company has its portfolio and well establish brands. By evaluating licensing opportunities, you get a better understanding of which rights should be licences and in which market. Even though there is no such thing as a standard license model, before collaborating the following points should be agreed: which party has the control of IP rights, time of license, for which territories, whether it’s revocable or not, if it is sub-licensable or transferrable, exclusivity, warranties.
And if someone has technology you need, it is cheaper for you to licnese their technology than develop your own and you can also offer them your technology-its a win win, both of you are safe and not worried that by development you would infringeother’s rights and it is much, much cheaper.
The franchisor is the company or person who holds the successful business concept, know-how and brand which are (among other intellectual property) licensed for a fee to the franchisee and continuously supported by training and on-going assistance, enabling the replication of the franchisor’s business in another location and for a determined period of time. It is a strategy for business expansion. Franchise is therefore intrinsically connected with intellectual property, since it is based on a license. of intellectual property rights and know-how. A franchise agreement must be concluded, where how the business is run and on-going training assistance have to be outlined, as well as duration, territory, use of IP rights, royalties, marketing etc. Strong franchise companies usually have uniform contracts, which are non-negotiable.
SELLING YOUR IP
Entity which heavily relays on their IP usually don’t sell their IP, except if they create IP on purpose for other businesses. It’s also reasonable to sell the IP if you are not making any money from it and it’s not giving you a return for your investment. Selling the IP is also common among start-ups, who may lack capital. First the price of the sale of IP has to be evaluated, which depends on how much other parties are willing to pay for comparable assets, how much it will cost you to acquire a new asset and how are estimated the future earnings from the asset. You have to remember, selling your IP means that you won’t benefit from any further commercial success of the asset, but you also won’t have any further responsibilities for that asset. Of course, IP purchase agreement has to be drafted, where it has to be clearly identified and specified which IP you want to transfer, negotiate a financial compensation and other essential elements, for which is, as always, best to seek legal advice.