Licensing Out Technologies From An SME's Perspective

While companies have traditionally seen Intellectual Property rights protection as a defensive means to secure competitive advantages on the technology front, large corporations, but also more and more small and medium-sized enterprises (SMEs), have realized that IP management goes far beyond the pure protection of IPRs and aim to utilize their rights proactively.

Certainly, the question how to generate the highest benefits from a company's IP portfolio arises mostly after building up a solid protection base, but IP exploitation can also be an integral part of the business plan from the outset. IP is a broad concept and includes many different intangibles (e.g. patents, copyrights, trademarks, trade secrets, know-how). However, this article about technology licensing sets the focus on patents and utility models.

There are several ways of extracting value from a patent, such as using it as a bargaining chip in negotiations with cooperation partners or banks, selling it and granting licenses. Particularly licensing out technologies is a preferred way to commercialize and exploit IP, because it allows the owner to generate income, but still keep the greatest possible control over the IP and related technologies. The classical explanation for licensing out builds on the idea that companies either recognize that a licensee has better capabilities to exploit a certain innovation than the IP owner, or they aim at establishing their technology as a de facto standard, for instance when network externalities are important to penetrate the market with the product. Other motives to license out beyond direct revenue generation are to collaborate with others and develop new products and services jointly or to expand the business into new sectors and geographical zones while saving costs and minimizing risks but maintaining control over the quality of the products that utilize the licensed IP. Granting an equitable and affordable license may also be reason enough to keep off new entrants from inventing competing products if the license is less costly, time-consuming and risky than investing in research and development (R&D) themselves.

Besides, the importance of licensing out technologies increases, because nowadays we operate in a digitized and highly integrated, fast-moving environment. Offering up-to-date solutions and products often includes a combination of diverse disciplines and technological fields, especially those which enable communication and...