Commercial strategy

• What is important for you to ensure effective IP-commercialisation?
• Commercialisation choices
• Collaboration and licensing

What is important for you to ensure effective IP-commercialisation?

Commercialisation should be realised at the outset that there are certain basic factors which are vital in the successful creation of valuable IP. These include for example:

• Innovation and technological R&D should not be undertaken in isolation from commercial market realities. A technological development should always be assessed in terms of the market or its commercial merits.
• IP creation and protection should be balanced by similar efforts in commercialisation.
• Successful exploitation of IP will require a competent and responsible person in the organisation giving continual attention to the management of the IP portfolio.

Also there are a number of things which need to be in place in the company if real benefits are to be achieved:

• Develop awareness of the role of IP,
• Create a common language within the organisation,
• Develop indicators for measuring IP,
• Develop a measurement methodology,
• Use experienced advisors.

You have different options to commercialise your IP-rights

Commercialisation choices

If the company which has carried out or commissioned the research and owns the IP is not itself in a position to exploit the results, there are several other methods which may be used. These include:

• Creation of a new start-up company to exploit (i.e. manufacture, market) the products and/or services covered by the IP,
• Establishing a joint venture or a co-operative agreement with a suitable existing company,
• Licensing the IP rights to an existing company or other entity with the capability to exploit them,
• Selling the IP.

In order to decide which is the best approach to follow, you should analyse each method by taking into account:

• The scope and strength of the IP, technically and commercially,
• The market conditions,
• Your financial position,
• Your experience and skills.

Collaboration and licensing

Direct full exploitation of IP rights by their owners on their own or by means of a joint venture may for many reasons not always be possible. In such cases in order to exploit the financial potential of an innovation, the IP owner generally considers the licensing approach. Relevant factors in choosing the licensing route are:

• Immediate cash flow,
• Further development of technologies based on IP,
• The technology is outside the firm's core line of business or interest area, The product is not suitable for export due to e.g. unit volume, regulatory differences, lack of expertise in foreign markets,
• There is a lack of the amount of time and effort needed for commercialisation. It is important that a very extensive and careful search is carried out to identify a suitable license partner. The IP owner must be satisfied that the partner has the expertise, resources and commitment to exploit the particular product or service. One may start with an option arrangement whereby the potential licensee is given an opportunity to research the market and satisfy the IP owner that a fruitful partnership could ensue. A license agreement will then be entered into.

Licensing:

• License agreements are arrangements where the right to use a technology is formalised contractually.
• A License agreement does not transfer ownership of the IP rights involved and the proprietor may wish to place limitations and obligations on the licensee.
• Collaborative R&D and licensing offer the prospect of resource and information sharing and the speedy translation of the IP into highquality products. Furthermore, it can offer the ability to share skills and technology and to enter markets which would otherwise be inaccessible.
• Licensing as a component of a technology transfer arrangement is attractive where the venture is viewed in the context of a long-term relationship between the parties involved.

It must be remembered that licensing is a two way process and can involve any type of IP rights. Terms and conditions for licensing agreements are usually negotiated on a case-by-case basis.

Because licences play a great role particularly in the operations of high-tech companies, it is important for corporate decision-makers to understand the basics of licensing and the strategies implemented through license agreements.

Various types of licences are used. Some common considerations apply to all types, while other issues arise only in particular types of licences.