Patent monetization is the process of generating revenue from patents. Patent monetization is the deliberate use of intellectual property (IP) rights for economic purposes, usually in the form of licensing, sale, or other exploitation. Patent monetization is an efficient procedure for inventors, organizations, and institutions to monetize ideas and innovation into a stream of money. Patent monetization allows organizations to realize value from intellectual property assets and gain competitive advantage.
There are several methods through which patents can be commercialized, and each of them is linked with advantages and disadvantages. The most common among these practices is the practice of licensing. Through this practice, the patent owner grants permission to an individual or an organization to use the patented innovation for payment of royalties or consideration of some advance payment. Licensing is a constant source of revenue and may be an appropriate choice for those firms that do not wish to venture into the business of production or commercialization itself. This is appropriate when a patent is too specialized or technical to be produced in mass quantities but is useful in one industry. The licensing agreements may either be exclusive or non-exclusive based on the terms of agreement between the patent owner and the license holders. The patent has only one owner when the licensing is exclusive, but when the licensing is non-exclusive, there are various owners licensed to utilize the patent.
The second most preferred option is selling the patent itself. In this case, the patent owner grants all rights to the third party for a prepayment of some amount of money. It is a short-run financial gain but ends future owner rights to the invention for the patent owner. Selling is more favorable when an inventor does not want any future involvement with the technology or cannot sell. But it is pleasant to be able to enjoy the long-term worth of the patent before going to this route because the consumer would be a tremendous loser of technology the owner no longer owns. Patent assertion is monetization and used in the classical sense by patent aggregators or specialty firms.
Either the patent owner or any other third party in the current scenario needs rights against infringers as per the patent and earns dollars. Patent assertion is highly lucrative if the patent is highly valuable in the market or the patent owner wins in courts. The option does come with costs and legal consequences and is therefore most appropriate for patent with high market potential. Patent litigation is a costly and lengthy process for a patent claim and not necessarily a win. The path is thus pursued in most instances when a patent is to be infringed and recovery chances are high. Cross-licensing is an agreement between two or more companies trading their patents for the cross-use of intellectual property. It is a method utilized in industries wherein more than one patent must be used to develop a product or service and it is cost-effective and patent court case-free and encourages innovation. Through cross-licensing arrangements, companies skip the cost of patent wars without indulging in courtroom wars and encourage collaborative innovation.
Patent pools is a method of monetization in which several patent owners come together and form an association, and license their patents as a group.
It is extremely common in the telecommunications sector, where there is an issue of standards and several technologies have to coexist. Patent pools reduce the transaction cost and facilitate the licensing of the companies that need access to large quantities of individual patents. P pooling patents also reduces litigation risk because everyone has agreed to the usage terms beforehand. Patent monetization overall provides a number of vehicles for turning inventive concepts into revenues.
Through licensing, selling, asserting, cross-licensing, or pooling, businesses are able to realize the maximum amount of value possible of their intellectual property. What is paramount in this case is to remain sensitive to the market, the potential of the technology, as well as the appropriate monetization strategy in an effort to earn the maximum returns possible. Both strategies are predisposed to be advantaged and disadvantaged by nature. A monetization approach can be advantageous to patent owners in acquiring significant value out of their intellectual capital in terms of return and innovation in their fields. Enhanced value for intellectual property in the emerging new economy represents the viability of return to business and inventor upon successful monetization of the patent.
