Patent Monetization

Introduction

In the present era of knowledge economy, the ways for protection, management, and use of intellectual property or IP are a fundamental aspect for most of the business organizations irrespective of the field in which they operate. Of all the forms of IP, patents are considered to be one of the most effective means of both protection of inventions and the promotion of business development. However, just having patents is not good enough; the next problem is how to deploy those assets in a successful manner to get the required revenues and build up the strategic strengths. This blog post looks at an intricate subject of patent monetization; it briefly discusses different approaches, risks, and opportunities that are available to companies to get the most out of their patents.

Understanding Patent Monetization

Patent monetization is a complete set of processes using which an individual or an organization can generate commercial or economic value out of patent assets. It differs from a simple strategy of protecting new products and services through patents and aims at making the most of these IPRs as business assets that can bring income or create other values. IAM Market identified the global patent monetization market size at $180 billion in 2020 and will grow at 21% CAGR. 9% from 2021 to 2028
There are several reasons why patent monetization has gained significance in recent years: There are several reasons why patent monetization has gained significance in recent years:

Increased competition: Diversification becomes an important issue for managers as more competitors enter a market and various barriers are created to prevent the newcomers from gaining great market share.
Rising R&D costs: Commercialization of patents ensure that the huge capital invested in research and development is recovered.
Changing business models: In innovation ecosystem environment, open innovation has given fresh possibilities for patent-based value creation.
Investor pressure: It was noted that shareholders’ expectations are rising and they wish to see more appropriate returns on all forms of assets including patent assets.

1.Key Strategies for Patent Monetization:

Licensing: Licensing is arguably the most common and easily understandable method of flowing with patent monitory. It is the legal right given to the owner of the patented technology to allow third parties to utilize them in return for some form of consideration. According to LES, a survey of the licensing revenues indicated that licensing made up more than 40 percent of the total income from patent monetization among the surveyed firms .

There are several types of licensing arrangements:

Exclusive licensing: Authorization of rights to a single licensee, usually on an exclusive basis for a particular exercise or area.
Non-exclusive licensing: Giving permission to many people to utilise the patented technology.
Cross-licensing: Cross licenses are when two firms agree that they can use each other’s patents and this is mostly used to settle legal matters or gain access to related technologies.
Patent pools: Patent pool in which many patentees combine their patents in a bundle especially used in standard essential patents.

2.Patent Sales:

Another type of monetization in patents is the sale of patents, which is highly appropriate for cases when a company wants to get rid of unprofitable assets, or in need of immediate cash inflows. Referring to the statistics of Allied Market Research, the IP trading market size across the globe was approximately $7. 4 billion in the year 2020 and is expected to touch the figure of $34. It predicts that by 2030 alone the figure will have grown to at least 7 billion .

Key considerations for patent sales include:

a) Valuation: Correct judgment of the viability of patents in the context of market opportunity, effective patent period and strength of assertion made in the patents.
b) Identifying potential buyers: These could be from the competition, other industries but closely related industries or even specialized companies that deal with the buying of the patents.
c) Negotiation and deal structuring: Around multiple components that elaborate areas such as upfront payments, earn-outs, and royalty payments.

Patent Monetization — [Image Sources: Shutterstock]

3.Litigation and Enforcement:

As many have claimed, litigation may be the last resort of patentees but if aimed at wilful infringers it is a potent monetization technique. PwC made a discovery with research which revealed that the average of patent infringement damages award in the United States was $10. 2 million for the years 2015 to 2019 respectively.

Effective litigation strategies include:

a) Preadjudication investigation that provides proponent a solid ground to infringe.

b) The ability to examine different jurisdictions premised on aspects such as the speed of the case proceedings and previous damages awards among others.

c) Compromise to seek for legal representation with an aim of seeking for a civil redress through mediation or arbitration.

4.Strategic Partnerships and Joint Ventures:

Strategic Partnerships and Joint Ventures:

Patents are also contractual in nature and thus can be used as strategic tools when making strategic partnerships. By contributing patented technologies to joint ventures or partnerships, companies can:By contributing patented technologies to joint ventures or partnerships, companies can:

It will achieve the following:

b) Integration of different complementary technologies in order to form new products.
c) Distribute the risks and expenses connected with commercialization.

One of the well-known examples is the cooperation between the IBM company and the Samsung company with cross-licensing of patents and the development of new technologies on their basis .

5.Patent-Backed Financing:

Another trend in the strategy of patent monetization is the ability to use patents as security for loans as well as to attract other types of financing. It is most suitable to companies with little tangible assets such as start-ups, SMEs with great IPs.

An article by Cipher has it that patent securitization deals were up by 86 percent between 2017 and 2020 . Some of the identified contributors to this space are IP-specialized funds along with some of the leading banks.

Challenges in Patent Monetization:

While patent monetization offers significant opportunities, it also comes with several challenges:

1.Patent Valuation:

Finding the right value of patents is still a major challenge as aspiring companies try to monetize on them. Unlike tangible assets, patents’ value can be highly subjective and dependent on various factors such as:

a) The scope and power of the patent claims b) Market demand for the technological product that is protected by the patent c) The remaining time under the protection of the patent d) possibilities to circumvent the invention.

Within the cost-based approaches, one may find the net realizable selling price approach, net realizable value, inventory are sold, retail inventory method, cost or market which is lower whichever method, and gross selling price method.

Others are market based approaches which include market value, market holding and selling price of each product sold, while under the income based approaches, there’s realizable value which less cost of completion andrients cost. However, each of the mentioned methods has its drawbacks and frequently it is necessary to use two or several of them simultaneously for a correct valuation.

2.Patent Quality and Validity:

Patents are not equal in value. Patents that are low quality or perhaps even questionable in validity can act as a drawback to monetization. RPX Corporation in its research established that about 30% of patents litigated in the U. S. are proved to be invalid . It is vital to achieve patent quality, which involves proper and intense prosecution and portfolio check on a frequent basis for proper monetization.

3.Regulatory and Legal Constraints:

The monetization of patents in particular and licensing consciousness in general, especially those which involve assertive legal action, are not always immune to legal probes. For example, in July 2013 the European Commission has adopted guidelines on licensing of standard essential patents as a way to avoid misuse of dominant position .

4.Technological Obsolescence:

Some industries where decorated technologies are normally patented are fast moving and thus the technology may soon become obsolete. This risk means that there is need to continue to invent and be innovative when filing for patents to ensure that you have a very rich portfolio.

5.Market Dynamics:

It has been determined that the dynamic market environment, where new competitors appear, or the consumers’ demand evolves, may affect the value for patents of technological innovations. One has to be especially attentive to what is going on in the market, when it comes to monetizing efforts and activities.

Best Practices for Effective Patent Monetization

To navigate these challenges and maximize patent value, companies should consider the following best practices: To navigate these challenges and maximize patent value, companies should consider the following best practices:

1.Develop a Comprehensive IP Strategy:

Patent monetization should not be a part of the last step but should be considered a strategic plan of the business firm. This involves:

a) Coordinating the patent and acquisition management strategies with the business goals b) Periodical portfolio analysis to determine monetization prospects c) Pursuing offense and defence patents(objective)

2 Invest in High-Quality Patents:

Concentration on getting patents that can be enforced and which define inventions that can significantly concern the commerce. This may involve:

a) Effective searches of the prior art before the filing of a patent application b) Writing of claims that are both extensive and yet fully definitive of an invention c) Valuable patent protection outside of the home country for core inventions

3 Conduct Regular Patent Landscaping

Subscribing to, reading and understanding the patents that have been filed in your business niche is crucial. Tools like patent mapping can help identify: Tools like patent mapping can help identify:

a) Other companies that may be interested in using your patented products and services b) Opportunities of developing new ideas that are demanded in the market c) Areas where your inventions may violate others’ patents

4.Build a Multidisciplinary Team

Patent monetization can be a complex process; hence, it should be done using a combination of technical, legal, and business skills. One should think about whether there is a possibility of having an internal IP team or cooperating with external consultants.

5.Leverage Data Analytics:

Maximize big data and AI to evaluate the patent portfolios, as well as the trends in the proceeding market and make rational decision to monetize them. To solve this challenge, there are companies such as Cipher and PatSnap for the provision of analytical tools .

6.Consider Alternative Dispute Resolution

When related to legal proceedings, it can be quite useful, however, it is almost always slow and expensive. One can suggest other options of solving disputes connected to patents like mediation or arbitration – these options often prove to be more effective and less expensive.

7.Stay Informed About Policy Changes:

It should be mentioned that within the sphere of patents and R&D there are various laws and regulations that change over time. Thus, those interested in the activities of these companies should periodically monitor changes in key jurisdictions to achieve the best results from the monetization of intellectual property.

Future Trends in Patent Monetization

As we look ahead, several trends are likely to shape the future of patent monetization.

1.Increased Focus on ESG

The Analysis of Environmental, Social, and Governance (ESG) factors is also gaining prominence in today’s corporate world. Sustainable technology or socially useful invention related patents might get more monetization chances.

2.Blockchain and Smart Contracts

Blockchain has an immense potential in changing the current patent transactions and licensing through offering unique and relatively effective means of tracking the ownership of patents and also how royalties are to be paid .

3.Artificial Intelligence:

AI is not only coming up with new patentable inventions but is also advancing how the process of patent monetization is done. AI can also assist in the business case that involves matters of initial judgment of value of the patented invention, identification of potential licensees, and the likely outcome of litigation.

4.Open Innovation:

Rise in the strategic partnering in organizations to create solutions will therefore lead to the development of new and flexible ways of patent monetization that are both open and protective.

Conclusion:

Patent monetization is one of the promising strategies that can be used by companies to capture value from the patents. Thus, with the help of licensing, selling patents, alliances, using patents in litigation, and other methods, companies can effectively transform patents into valuable assets and competitive weapons.

However, in order to achieve high results in patent monetization, the legal expertise of the issue should be complemented by business skills and deep technological knowledge. This is signifying a serious analytical approach, the focus on the quality of patents, a willingness to work in constantly changing environments.

With the world progressing more towards the knowledge economy the requirement for the correct management of patents along with their monetization is going to increase. Those organisations that have successfully grasped this art and science are the ones that are likely to be able to operate and innovate in the intensively competitive and innovations-led organisational terrain.

In this way, by extending the patent consideration to the ground of tangible business assets instead of pure legal documents, companies can open new income generating opportunities, accelerate development of new products and services, and guarantee the present and future markets’ key positions.

Author: Vanshika vashishat, in case of any queries please contact/write back to us via email to [email protected] or at IIPRD.

REFERENCES

IAM Market. (2021). Global Patent Monetization Market Report 2021-2028. Intellectual Asset Management.
Licensing Executives Society (LES). (2022). Annual Licensing Survey 2022. LES International.
Allied Market Research. (2021). Intellectual Property (IP) Trading Market: Global Opportunity Analysis and Industry Forecast, 2021-2030. Allied Market Research.
PricewaterhouseCoopers (PwC). (2020). 2020 Patent Litigation Study: Damages Awards, Success Rates, and Time-to-Trial. PwC.
IBM News Room. (2022). IBM and Samsung Announce Joint Development of Semiconductor Technology. IBM.
(2021). The Rise of Patent-Backed Financing: 2021 Report. Cipher Analytics.
RPX Corporation. (2020). NPE Litigation Report 2020. RPX Insight.
European Commission. (2013). Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements. Official Journal of the European Union.
Pat Snap. (2023). Patent Analytics and Intelligence Platform. PatSnap.com.