Related Attorney: Mark B. Mizrahi
by Mark B. Mizrahi
You can appreciate the value of IP rights by looking at some of the most well-known and successful companies in the world, such as Samsung, Apple, Facebook, etc. In many cases, the product, be it hardware, software, or a business method, can be easily replicated or reverse-engineered by any person with skill in a particular field. Likewise, absent legal barriers, it doesn’t take much effort to replicate a company’s trademark.
Knowing the value of IP
Without patent protection for the product and trademark protection for the trademark, the company has no way to keep its products and trademarks proprietary. In other words, they would have no way of setting themselves apart from others and would be wasting much of the resources spent on research and development and advertising/marketing of products or services that could be co-opted by third parties without consequence.
In addition, oftentimes when a person acquires another company, the IP assets are the most valuable. For example, the business entity that bought Gibson Guitars out of bankruptcy would have paid much, much less to acquire the company’s assets had the assets not included the Gibson trademark. In fact, in all likelihood, Gibson’s trademark was the most valuable asset acquired.
Creative methods for businesses to use their IP to their advantage
We all have a basic understanding of IP rights, i.e., ownership of a patent, trademark, or copyright, and the ability to keep others from copying them. But IP rights provide other benefits. For example, once an IP asset gains some market exposure and traction, there may be other industries outside of the company’s marketing and sales channels that may be interested in using that IP. Those opportunities present untapped revenue for an IP rights holder.
For instance, one may have developed and patented a technology that was intended initially for a particular industry and application that has a much broader appeal. In working with a good patent attorney, he or she will help the inventor realize the broader applications for the technology and work with the inventor to expand the scope of the patent to make sure that it covers all of the potential applications. Then, the inventor can attempt to license that technology to other Industries where the innovation would be applicable. For instance, a patented security device initially invented for tracking lost or stolen computer hardware could be used across numerous industries to track lost or stolen valuables, such as artwork, etc.
An IP holder can also explore licensing opportunities within its own industry. Oftentimes, companies have limited capital and cannot exploit their IP rights to their fullest, even within their own Industries. This gives rise to licensing opportunities, even to competitors, in exchange for a royalty. That way, the IP rights holder can maximize its revenue and not only recoup its investment in the development and protection of the IP rights, but also generate a profit stream from the IP rights. For instance, a skin care company may not have the scope of distribution that some of its competitors have. Rather than try to keep its patented formulations proprietary, it could consider licensing the formulations to other skin care brands and not only receive a revenue stream, but even some cobranding opportunities that could bring greater customer recognition.
When it comes to trademarks and copyrights, Coca-Cola is an excellent example of monetizing IP. Coca-Cola may be in the beverage industry, but it licenses its trademark to third parties who produce and sell numerous non-beverage products, such as clothing. This presents a supplementary income stream to the IP rights holder. Obviously it depends on the fame of the mark: no one’s going to want to license a trademark for use in a completely different industry unless the mark is well-known.
Using IP as a litigation vehicle
In some instances, one can use litigation, or the threat of litigation, as a means to obtain licensees and revenue. This approach does not fit every IP asset or every IP asset holder – much will depend on the strength of the IP asset and the infringement case. If the IP asset is both strong and the infringement case straightforward, a law firm may take on the enforcement of the IP rights on contingency, which will allow the IP asset holder to minimize its capital outlay and risk.
Also, where the asset is strong and the infringement clear, even without engaging the services of a contingency law firm, an IP rights holder may have a relatively easy time convincing third party infringers to take licenses, short of litigation.
Litigation is very expensive and time-consuming for the IP rights holder, so one must closely consider those factors before pursuing litigation. At the same time, if one lets its IP rights be trampled upon without consequence, one would likely be rendering the IP asset worthless. As with any business decision, all the pros and cons must be weighed before deciding on the appropriate strategy.
All in all, businesses should not overlook the value of an IP right as an opportunity to generate an additional revenue stream.
This article is made available for educational purposes and to provide general information on current legal topics, not to provide specific legal advice. The publication of this article does not create any attorney-client relationship and should not be used as a substitute for competent legal advice from a licensed professional attorney.