IP COMMERCIALIZATION AND MONETIZATION OF CREATIVITY

The completion of Research and Development phase of IP embarks an inventor to the next step of commercializing his invention. However, before the economic benefits of the invention can be availed, the inventor has to protect his asset by patenting it and then only shall he reap the benefits of his invention. Commercialization of IP covers the aspect of generating income by making the intangible asset available in the market either for lease, trade or use it to improve business efficacy by either increasing revenues or reducing costs. The market allows the inventor to exploit the potential of his invention and reward him for his creativity and ingenuity.

The inventor can use the available commercialization tools, such as licensing and assignment, to monetize his creativity when he is unable to commercially exploit or generate income from his patented invention. The intangible asset i.e., patentscancomplement the tangible assets like money, real estate, potential consumersof a business,in such a way that it can help a business do better than it would do without it.This creates a win-win situation for the inventor, as well as the business owners.

Assignment and licensing are the two common ways to makeprofit from one’spatent.At the outset, it is only the owner of the patent who can assign or license its patent. However, it shall be noted that in the case of joint ownership, one of the owners of the patent cannot assign or grant a license without obtaining the consent of all the other owners of that particular patent.

Assignment
Assignment is a process of transferring the control and ownership rights of a patent, from the inventor to another party.Assignments are usually preferable when the inventor is not capable of financing or marketing his IP assetor there lies an immediate need of monetizing the IP asset without exploiting his available options or lack thereof.

So, once it’s been decided to monetize the patent by the way of assignment, certain points need to be taken into consideration. These are:

  • Signing a Non-Disclosure Agreement (NDA)
    The very purpose of an NDA is to safeguard any shared confidential information regarding the patent to prevent it from becoming common knowledge to other market participants and competitors. This becomes significantly important at the pre-agreement stages when negotiations between the assignor and the assignee takes place.
  • Observance of Due- diligence
    Due diligence is a risk management tool used to get information on the value of IPassets and liabilities, and to get clarification on other aspects such as ownership status, the status of IP protection, and other legal requirements for the assignment.
  • Assignment Agreement
    Although the legal professionals take care of the assignment agreements,it’s a good practice for an inventor to know the IP clauses, that are included in the agreement and are negotiated in the pre-agreement stagesbefore signing the assignment agreement. These important clauses may be the payment clause which lays down the amount and method (lumpsum or installments) of payment, warranties, Dispute resolution clauses (Courts, ADR), etc.

Licensing
IP licensing is another effective way to monetize the patent. Licensing is a contractual agreement between the patent holder(licensor) and the other person (licensee) that grants permission to the licensee to use the patent of the licensor within the provisions of the contract. The contract allows the licensee to obtain the right to use of the asset in exchange of consideration for a specified period of duration. Hence the licensor is entitled to consideration in the form of leases, rent or royalties whereas the licensee to the right of the use of asset.

Advantages of licensing:

• The License agreement proves to be a risk-sharing instrument between the licensor and the licensee.
• It provides an opportunity for the licensor to reach new markets with existing products/services and on the other hand, the licensee gets a chance to venture into new businesses. Also, it allows the licensor to enter a market with the existing client base of the licensee as well as allows the licensee to provide his clients with the well-established products/services of the licensor. This proves to be a win-win situation for both, the licensor and the licensee and reduces the market failure risks.
• In terms of investment, the licensor is not required to invest in the marketing and distribution of his invention. On the other hand, the licensee does not need to invest in the R&D of the invention.
• Unlike Assignment, licensing lets the licensor retain ownership of the patent whilst receiving the royalty fee from the licensee. The licensee, on the other hand, gets the benefit of testing the market success of the licensed product without purchasing the IP.

Deciding between assignment and licensing
The decision of choosing between assignment and licensing of the IP asset by the inventor depends on the royalties, risk factor undertaking, and the objective sought by the parties involved. Assignment is an irrevocable and permanent sale of one’s IP rights.In exchange of the transfer of ownership of the IP, the assignor gets a lump sum amount for the IP asset, whereas in licensing the transfer of ownership does not take place and the inventor can collect royalties for the use of his IP. Therefore, if the inventor has spent too much capital in the R&D of the invention that has left him with debts then assignment seems to be a better commercialization toolthat provides a lump sum amount with no risk undertaking. Licensing is a better option if the inventor wants to give the rights in a patent for a limited period of time and is in a position to share the market risk.