Part 3: Matching your IP strategy to your commercial plan – ‘technology licensing’

In any business, the spend on intellectual property (IP) legal advice needs to be commensurate with the value and importance of IP to the business. There is no “one size fits all” model. In the first two articles of this series, we provided an overview of IP strategy considerations, and then applied them to a company that produces and sells its own products.

In this third article, we explore how those practical considerations might be applied in the case of a company that develops technology for adoption by other businesses around the world.

For a more detailed discussion specific to you and your IP, please do reach out to us or one of our Abel + Imray colleagues.

IP at the heart of the business

This company makes its money by developing technology that it sells or licences to other businesses around the world. Here, the IP may be the most important, and possibly the only, commercial asset of the business, and IP protection is likely to take centre stage.

Many businesses operate successful licensing regimes which encompass both registered IP rights (such as patents and trade marks) and unregistered rights (such as know-how/trade secrets). Nevertheless, if know-how is to form part of the licensed IP, it is important for the business to understand how confidentiality will be maintained.

Is a wider geographical coverage required?

In such a scenario, there may be a need for patent protection across a wide geographical area, and particular attention should be paid to the countries in which target licensees (and their competitors) operate.

Say, for example, the company has found that addition of a commercially available chemical additive previously used in treatment of waste water streams turns out to be surprisingly effective at boosting extraction of contaminant materials during mechanical recycling of PET plastics. The economics of plastic recycling tends to result in processing taking place locally, and so there may be demand in a large number of countries. In this example, it may be appropriate to incur the relatively high cost of seeking patent protection across a broad geographical area.

Often, licence agreements with third parties include know-how, such as scale-up information, optimum processing conditions, and improvements made to the method since the patent application was filed. In a business model based on licensing, it may be that such ‘know-how’ can help to add value to a patent licence, while the underlying patent can provide the licensor company with a more powerful deterrent against misuse of its technology than confidentiality agreements alone (which can be particularly hard to enforce).

Accelerating applications

Patents only become enforceable once granted, and so it may be useful for the company to push patent applications through to grant relatively quickly. In many cases, having a granted, enforceable right may well help with negotiations with potential licensees.

There are many ways of accelerating the processing of patent applications in order to get a patent more quickly. In the UK, the ‘Green Channel’ for accelerated examination of environmentally friendly technologies would be an attractive option for inventions improving polymer sustainability. An invention that improves plastic recycling is every likely to be eligible for accelerated processing under the Green Channel. At the European Patent Office, accelerated processing under the PACE scheme is possible. The Patent Prosecution Highway is a worldwide scheme that allows patent offices to rely on patent search and examination work performed by other patent offices, thus speeding-up patent application processing, and in many cases reducing costs.

Obligations to licensees

In your licensing model, do you expect to provide any undertaking to your licensees that they will have freedom to operate when using your technology? The time and resources that you devote to freedom to operate analysis is likely to depend heavily on the answer to that question. Any potential licensee will, at the very least, want an undertaking that you are not aware of any third party rights that are infringed by the working of your technology.

On the other hand, where the technology you are licencing forms a relatively small (albeit important) part of an industrial process, it may be reasonable for your licensees to take responsibility for ensuring freedom to operate the rest of the process. In this example, the technology being licensed may relate only to the decontamination step. If you are not building or operating equipment yourself, there may be no need for you to spend your time and resources on checking for third party IP relevant to other aspects of the process (such as material screening, sorting, shredding and re-moulding).

Other business objectives

In the next article of this series, we will consider strategies that may be adopted by a start-up company trying to make itself attractive for take-over.

We are a European firm and assist our clients to protect their IP rights in the UK, Europe and worldwide from our offices in the UK and The Netherlands and through our international network of trusted local attorneys. Get in touch if you would like to discuss your innovations and brand protection further.

This article is part of a series, read more here:

Part 1: Matching your IP strategy to your commercial plan – making the most of your resources

Part 2: Matching your IP strategy to your commercial plan – ‘in-house commercialisation’

Part 4: Matching your IP strategy to your commercial plan – exit through acquisition

Part 5: Matching your IP strategy to your commercial plan – efficient decision making