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Licensing Strategies
Assessing the Patent Landscape
Licensing your patent portfolio requires an understanding of your own patents as well as the other company's patents. You have to understand the implications of starting a negotiation. Even when the other side has no patent rights, consideration has to be given to the potential that the negotiation may lead to litigation.
Generating Leverage
The best way to build leverage for your licensing program is to have a large portfolio of relevant patents. Numbers definitely count, but the patents also need to be of high quality. A 'large' portfolio is one that is one that stands out in the patent landscape. It's a relative measure that compares your patent stack to the other patent stacks in your field. This gets us back to generating a portfolio that is properly aligned. Patent landscape studies should inform you of how much value you can build.
Negotiations
There are a few school's of thought on how to start a patent licensing negotiation. Some like to file a patent suit as a first step so the Court timeline helps push it along. Others approach it aggressively without litigation by sending a cease and desist letter, which is usually followed by a trading of letters before getting to the table. Yet others prefer to walk softly and carry a big stick by being transparent and focusing on the business objectives. No business wants litigation for no reason or for little gain and the softer approach allows the two parties to learn about each other before unnecessarily going to Court. Your approach depends on your goals and portfolio, but it also depends on the other company's goals, portfolio and reasonableness.
Cross-Licensing
There are times when you and another company have patent rights in the same field. You can leave each other alone, or you can negotiate a cross license if it makes more sense. A cross-licensing arrangement can make your overall patent licensing more effective. The market generally does not operate very well if two companies are separately attempting to enable the same companies with licenses. Each tends to ask for too much in fees because there is no 'stack' reconciliation.
You must analyze your patents and their patents to figure out who's patents are more valuable and why. This is a key to winning the negotiation so you end up with royalties coming to you rather than you paying the other company. There are times where the two companies cross license for no fees either way, but generally speaking, the patents can be assessed to find the winning portfolio.
In-Licensing
Of course, there are times when it is not you that is choosing to start a licensing negotiation. Some company may come to you and demand a royalty. This interaction requires careful preparation. You have to understand what, if any, leverage you have to turn the situation around. This is another situation where having a large aligned patent portfolio creates value. If the asserting company is a direct competitor you may have patents to assert against them. This could change the situation from you being on the defense to being on the offensive. These situations also tend to involve an examination of the prior art and the patent(s) being asserted against you to find legal remedies for invalidating or limiting the breadth of their patents.
Experience Matters
We, at Nortrup Patents, have developed many licensing programs, built patents to bolster the licensing plans, and negotiated many patent license agreements. This is complex and it requires professional preparation with a Patent Attorney involved to achieve the best results.
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