Intellectual property is one of your organization’s most valuable assets and knowing how to effectively license it as well as protect it is key. IP licensing can be a profitable business both for the IP owner and the licensee, but knowing the basics about the process and how to protect your company’s assets is paramount.
What Is Intellectual Property?
Intellectual Property (IP) include the assets that are the products of original, creative thought that are highly valuable – they are usually the product of years of research and development as well as large sums of capital invested into them. In many instances, IP is the greatest asset of a company.
In most instances, IP falls under one of the following categories:
The rights that creators (or owners) of creative works, whether it’s written, musical, artistic or visual, have over their work. An example is the content of a book that is copyrighted. This disallows non-owners from publishing (or for profiting) from that material.
The U.S. Patent and Trademark Office is a governmental agency whose primary responsibility is granting U.S. patents and registering trademarks. By registering a product or process with this agency, the inventor (or owner) is protected from others from making (or profiting from) the same item.
While similar to patents, a trademark (often referred to as a “Service Mark”)” distinguishes an item (usually a product name, graphic element or even a catchphrase) from other similar products. Most major brands have a trademarked brand name as well as a trademarked logo.
Often abbreviated as “ID,” industrial design creates products that are unique and distinguishable from similar products. It entails the design practice of a product, device, object or service, which has the goal of being able to manufacture a mass-produced product. Apple’s iPhone is a classic example of ID.
An indicator that a product is very specific in its origin. An example would be Champagne, which is a sparkling wine produced only in a specific region in France. Therefore, similar sparkling wines from other regions cannot legally be labeled as Champagne. A similar scenario to Champagne is Tequila, which comes from one certain region in Mexico.
Also known as “Intangible Assets,” Trade Secrets are proprietary, confidential information owned by an entity. They are typically formulas, practices and processes that are closely guarded. These assets usually have a high value, as often an entire brand (such as Coca-Cola or KFC) is based on a secret formula. Like all other types of intellectual property, trade secrets can be sold or licensed to others by its owner.
What Is IP Licensing?
IP licensing is an agreement that allows a company (the licensee) to use and market the IP of another company (the licensor). In exchange for being able to use the IP, the licensee typically pays the licensor a fee or royalty for the products sold. A recent IP for business example is Nestle’s licensing of the Starbucks name for a line of bottled and canned coffee-based drinks. Nestle uses its global manufacturing and distribution network to make and sell the products, while Starbucks receives royalties from these sales.
How IP Licensing Empowers Companies
There are many ways that IP licensing provides a distinct advantage to companies. These include:
- Speed To Market: The licensor is able to take advantage of the licensee’s distribution network and penetrate new markets quickly.
- Cost Savings: The licensor doesn’t have to stray from its core competencies by making capital investments into distribution.
- Earning Royalties: The licensor will continue to earn passive revenues throughout the course of the deal.
Strategies for IP Licensing
Of course, it’s all about your IP portfolio. You need to identify what your IP consists of then choose which parts of it you plan on licensing. You will want to position your company as a leader in the marketplace, partnering with a licensee who has the mechanism in place to make the licensing an effective partnership. Establishing a corporate licensing team is a must; this team must be pros at understanding the value of your brand. And the details – the numbers – must be able to provide a win-win for all parties involved in the deal.
Evaluating IP Licensing Opportunities
As with any business transaction, it’s important to perform due diligence when evaluating licensing opportunities. It’s vital to select partners who have a proven track record, are experienced in the field and share your organization’s core values. Needless to say, there are several areas that need to be agreed upon, and these include:
- Revenue Model
- Any Sub-Licensing Possibilities
- Reporting Requirements
In addition, there should be agreed-upon benchmarks for success. These include numbers, royalty rate (and type) and length of the contract.
How a Virtual Data Room Helps Your Company’s IP Deals
Top-tier security is a must for any company involved in an IP dealing; security and confidentiality are paramount. So, being able to protect your IP deal documentation is important here – using a service that provides robust encryption will help protect all parties involved. There are multiple flavors of data encryption, but they all have one thing in common – they all protect your data’s confidentiality.
And when you’re involved in an IP licensing transaction, there’s no better way to maintain control of the documentation than by employing a Virtual Data Room (VDR). A VDR is a secure online document “workspace,” a storage and sharing facility commonly used in business deals. In today’s cloud-based, file-sharing world, a virtual data room is a necessity.
When it comes to selecting a company to host a virtual data room for your organization’s IP dealings, there are many features you should look for, including:
- Security: Your trusted virtual data room partner must offer enterprise encryption, a necessity that will keep all your data safe.
- Easy-To-Navigate Interface: An interface that enables you to access all areas of your virtual data room, monitor all activity and view activity logs.
- Simple Data Management: The ability to seamlessly upload data from your workstation to your virtual data room, update and edit files that reside in your workspace.
The CapLinked Advantage
Finding a VDR partner to help you secure and manage your IP data is paramount. Not only a company that provides world-class security but also one that has the tools to allow you to easily manage your data and has a reputation for uptime and 24/7/365 customer service. CapLinked, an industry leader in the VDR space, offers all these features and more. Try a free trial today to see how CapLinked can help securely expedite your IP deals (and keep costs down).
Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.
World Itellectual Property Organization (WIPO) – What is Intellectual Property?
Wells Fargo – Four Examples of Intellectual Property
USA Gov – U.S. Patent and Trademark Office
Bredenkamp IP – What is IP Licensing
Industrial Designers Society (IDSA) – What Is Industrial Design?