Thursday, October 22, 2009

What a typical patent licensing company does

In a previous posting, I talked about a standalone intellectual property commercialization unit. This post gives examples of the typical skills and activities involved in a patent licensing company. It can equally apply to other forms of IP, such as copyright and trade marks.

Market investigation

This work involves identifying possible infringers. It could (for example) mean attending trade shows in China, secret buyers visiting superstores in France, performing internet searches and contacting suspected suppliers of infringing goods.
The work involved does not just involve market research skills. It requires technical understanding of the intellectual property and an understanding of the finer legal details of the protected patent claims.

Warning letters

As a result of the market investigations, warning letters may be sent to the manufacturers, distributors or sales outlets asking them to “cease and desist” and requesting compensation for damage already done by the infringement.

These warning letters need to be followed up systematically and may lead to a satisfactory conclusion on their own.

Legal actions

If the warning letters do not achieve their aims, stronger action may be necessary. This can include managing litigation, obtaining injunctions in urgent cases and co-operating with customs in seizures of infringing product.

This may seem like a very negative part of the job, but bear in mind that the license is a covenant to not sue. If the prospect of being sued is not credible, the license has little value.

Contract Negotiation

Despite some highly-publicised court awards, typically the objective of the legal actions mentioned above is not just to collect awards. I contend that the main aims for relationship-focussed licensing firms are: to stop the infringement and to possibly negotiate a license.

Because the patent is a legal document, it is important for the negotiator to understand the legal complexities. Similarly, the end result is a licensing agreement, which is a complex legal document. Lack of sensitivities to legal issues will increase risk of an unsatisfactory outcome.

The underlying subject matter is technical, so the negotiator will have to understand the technical concepts and be sensitive to how the infringement may manifest itself in the target licensees.

Above all, the negotiator needs to be commercial. Often intellectual property negotiations are very emotional. The licensor is giving access to “his baby” and the licensee is being forced to pay fees that he does not want to pay. A skilled negotiator will understand the business of the potential licensee and propose solutions that are compatible with his business.

Licensee management

Despite all the talk about licence negotiation, signing the agreement is not the end of the job; it is the start of the relationship. The licensee needs to be managed to ensure that he is complying with the terms of the agreement. This includes royalty audits to confirm that he is reporting correctly.

It also involves keeping a close communication and bring suggestions of new technology. Apart from keeping the licensee loyal, it has the potential benefit of introducing new developments and expanding the scope of the licensing relationship.

Technology transfer and training

Often licenses include a requirement for technology transfer. As part of the licensee management process, this can be coordinated by the licensing company. It ensures that there is no immediate post-signing “buyer remorse”. It also ensures that the technology is applied in the intended way without debasing the brand value.

Other possibilities

When the licensing company has proven its proficiency at managing intellectual property commercialization, it may expand its activities into other related areas.

  • Driving the IP portfolio strategy. Advising which of the parent company’s patents should be abandoned (to save future maintenance costs). Identifying other candidate IP for assignment (i.e. selling) or licensing.
  • Mining other IP within the organization. Searching the parent organization for other IP which has potential for exploitation.
  • Guiding R&D directions. Suggesting which R&D should be prioritized for development and optimising it for potential commercialization.
  • Performing IP commercialization services for other patent holders. When the company has established a reputation for commercializing intellectual, that competence can be marketed as a service to other related, but non-competing companies.


  1. Thank you very much- that was very helpful! We are about to start issuing licenses for our technology and that offered a good perspective.

  2. Thank you for the feedback.

    Very often, the biggest hurdle is the decision to open up your technology for licensing.

    I look forward to hearing about your success.

  3. Thank You because I was enlightened by this article. I will like to discuss with you how can I go about hiring a company such as yours.

    I am in the about to start looking for a paatent licensing company to work with me on licensing my Financial Product using a non-Exclusive Agreement to as many Banks as possible; How can you Help me?