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Table 1
How firms use Intellectual Property to create value
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Function |
Activities
|
Comments
|
|---|---|---|
| Revenue generating | Licensing IP out to individual firms for a fee. | This is the preferred method of technology transfer, but ‘grant-back’ provisions and leakages are of concern. Some countries offer IP owners incentives, such as lower patent renewal fees, to promote technology transfer. |
| Participating in a patent pool or exchange. These are often set up in ‘patent thickets’—one-stop places for all patents needed to produce a product—where the risk of inadvertent IP infringement is high. These thickets negotiate licence fees favourable to users. | Patent thickets are generally found in information and communications technologies and biotechnologies. Pools function smoothly when participating technologies are complementary, not competitive. | |
| Strategic | Licensing it out without a fee to get the underlying technology established as the industry standard. | This establishes the corporation as technology leader in its industry and positions it for long-term advantage. |
| Offering non-exclusive royalty-free licences in order to foster development of complementary product and business lines. | Diversification of applications of a base technology increases its commercialization potential. | |
| Patenting a technology to pre-empt competitors, form strategic partnerships, and use it as a bargaining chip in business and financial deals. | Pre-emptive patenting is one of the reasons why some patents are not commercialized. | |
| Financial | Attracting venture capital in order to expand business. | Patents and copyrights are said to be among the most important factors in the investment decisions of a venture capitalist. |
| Using IP as collateral to borrow money from financial institutions. | Some institutions accept patents and copyrights and insurance policies on IP as sole or additional collateral for loans. This type of activity is in a very early stage. | |
| Securitizing IP to raise capital. This activity is very limited and usually requires a portfolio of patents to mitigate concerns over piracy, technological obsolescence and litigation over the underlying asset. | IP-backed securitization is beginning to gain some ground in the music and pharmaceutical industries. | |
| Sources: Atuahene-Gima and Patterson 1993; Hamburg, Kiel and NRC 1996; and Kamiyam, Sheehan and Martinez 2006. | ||
