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Daily Bulletin

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  • Written by Anton Quintos



Let’s be frank: Your intellectual property can potentially make you a lot of money. What is intellectual property? Well, there isn’t necessarily a single definition for this important term but as a general matter, intellectual property is comprised of those things, which are “works and products of the mind”. Songs, books, names, logos, slogans and car engines are all examples of “Intellectual Property.” Intellectual Property, or IP, is categorized differently according to what the IP consists of and so while a company name may be protected with a trademark, a patent protects a new air conditioning unit and J.K Rowling’s next book will of course be covered and protected by Copyright law.

Intellectual property is valuable for a number of different reasons. Some intellectual property is inherently value generating, which is to say, its worth is a direct function of the utility of the idea itself (certain car engines can quite literally save energy and therefore money) while other types of IP are valuable only because of the intangible beliefs associated with the IP (the name APPLE when stamped on a computer can exponentially increase the price of that computer).

Thus, IP, for the sake of the IP, can be the main reason for a company’s growth while other forms of IP can simply used to supplement earnings through monetization.

Examples of Intellectual Property

Intangible intellectual property assets include the following:

  • Trademarked logos, slogans, jingles, or words

  • Patents for technical innovations and inventions

  • Copyrighted content or materials, including written books, computer codes, or drawings

  • Designs that represent industrial sketches of products

  • Domain names for website addresses

  • Trade secrets, or techniques know by only certain people

  • The good will and favorable relationships associated with a brand

Types of Monetization

Intellectual property can serve a company well, both on an immediate financial level and as a long term strategic investment. IP is timeless and may not need to depreciate, over time, like traditionally tangible assets like physical devices or real estate investments (think apartment buildings). Therefore, efforts to monetize intellectual property in indirect ways are increasingly popular (this is certainly true in the tech space) and can be structured in a number of different ways including:

  • Co-development projects;

  • Licensing deals;

  • Producing sale-leaseback agreements;

  • Collateralizing assets; and

  • The securitization of product lines

Intellectual property is fluid and malleable, bound only by the creative imitations of those who wield it.

Co-development

There’s no “I” in teamwork!

The Co-Development of Intellectual property is tremendously useful in dividing up challenging technical problems and spreading out risk. Using existing intellectual property to form co-development arrangements allows a crafty entrepreneur to combine existing resources with another partner so you can realize common objectives. Ultimately, Co-Development of novel IP allows for an injection of creativity from a diverse group of creators and hopefully investors.

With respect to risk, the formation of a partnership, may help crafty entrepreneurs overcome liability or indemnity problems, should they arise. If you do decide to partner with another company, you will need to outline the ownership rights of each party with respect to property holdings. This can be set forth in an operating agreement that can be used, if needed, to resolve any internal disputes. Co-Development deals fundamentally minimize risk and increase earning potential, successfully supporting otherwise unattainable growth while distributing and lessening risk.

Licensing

To meet the needs of a global marketplace, the licensing of intellectual assets in both non-competing and competing venues can be tremendously powerful and serve as a true force multiplier. The crossover of industry activities makes licensing helpful in leveraging the upfront costs on research and development.

Moreover, licensing allows an intellectual property owner to enjoy more financial upside, as he or she, as a licensor, can collect a royalty from the licensee. The royalty represents a percent of the gross or net revenue made by the asset on a recurring basis. The royalty may be paid monthly, bi-annually, or yearly.

Creating a Licensing Agreement: Establishing Agreed Upon Rights

It would not be hyperbolic to suggest that licensing deals quite literally account for billions and billions of dollars in industry revenue across various commercial verticals both nationally and in the Global Markets. When creating a licensing agreement, please make sure to negotiate and expressly delineate the following details:

  • The scope of the ownership of the product being licensed and its exclusivity

  • Territorial boundaries

  • The transfer rights or sublicensing stipulations

  • Termination Dates

  • Early Termination Clauses

Every detail really does matter in a licensing deal. This is not a time to be lazy. Sit down with an IP Attorney and make sure the deal is structured exactly as suits your needs.

Using Collateralization to Secure Capital

Perhaps a more exotic and less understood leverage point with Intellectual property is its utility in negotiating and developing an otherwise difficult to attain finance raise. Investors love securitized intellectual property and are often very willing to use IP assets as collateral against capital raises.

Intellectual Property Is Fluid and Dynamic; You Should Be Too

As intellectual property is fundamentally intangible, entrepreneurs can and should continuously strive to move and transition IP rights and applications to different business ventures. Again, intellectual property is limited only to the creativity of the entrepreneur who owns and manages it.

What approach would you take to monetize your intellectual property? What would you like to see happen? Take some time to think about the opportunities you can pursue. What do you possess in intangible assets that could be making you money? Remember, you don’t ask – you don’t get.

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