Intellectual Property, Technology Transfer and Licensing, Innovation, Entrepreneurship and Management

Successful Licensing Negotiations

Mar09
2012 Leave a Comment Written by Raghid Shreih
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There are many motivations for licensing Intellectual Property (IP). These are mainly business motivations, and are often closely linked to a corporate IP strategy. For example, a company may own a successful technology that they have commercialized in a specific market and geographical area. If the technology is applicable outside of the areas the company is able or willing to operate, they may opt to license their technology to another company that will enter those markets. By licensing their IP, they are able to expand beyond their core business and into new markets and generate new revenues that they would not have had otherwise. On the other hand, the company that takes the license gets a technology that can be successfully commercialized and which they would not have been able to legally practice without taking a license.

The “open innovation” paradigm (see this for an introduction to open innovation) encourages IP licensing between companies rather than relying solely on internally developed technology. As open innovation gains wider acceptance among executives of various industries, licensing activity will continue to grow, and an understanding of IP licensing will become critical for business success. This article focuses specifically on successful licensing negotiations, which is one of the most important steps in the IP licensing process.

There are two sides to a licensing agreement. The licensor is the IP owner seeking to generate revenue from a license. The licensee is a company that wishes to “in-license” a new technology to complement its own. Many licensors are pro-active in advertising their IP to potential licensees, and in particular universities and government labs, and increasingly corporations as well. In fact, there are now companies that specialize in building large patent portfolios, whether through acquisition or internal R&D, solely for the purpose of licensing them to other companies to commercialize. Another scenario is the case where an IP owner detects or suspects infringement of their IP by another company, and approaches the infringer seeking a license agreement, often backed by a threat of litigation.

In any case, once the two parties agree to discuss a licensing agreement, the process of licensing negotiation begins. This can be a very complex and difficult experience for the negotiators. The stakes are often high, and there is pressure from management on the negotiating teams to achieve the best possible outcome. While each situation is different and hence there can be no recipe for succeeding in a licensing negotiation, the following points illustrate some issues to consider when developing a strategy for successful licensing negotiation:

1) Aim for a Win-Win situation: It’s critical to understand what the other side wants and needs to get from an agreement, and what your side needs as well. This will help guide the negotiation towards a successful conclusion. If you offer the other side what they need to be able to sell the agreement as a “win” for their side, you are more likely to be able to get more out of the negotiation for your side as well.

2) Being Prepared: Perhaps the most important factor for success in licensing negotiation is to be very well prepared in advance. In addition to understanding the needs and wants of both sides as mentioned in point #1, it is also important to understand strengths, weaknesses and priorities of the opposing side. What is the purpose of the agreement for both sides, and what are they looking to get out of it? If possible, obtain license agreements that the other side has entered into previously and review them for possible clues into what they may be willing to accept.

3) Develop a Strategy: Once you have gathered all the information needed, you must develop a strategy for the negotiation. Understand who you are negotiating with, and who the real decision makers are. Do a background check on the other side to understand their financial situation and their place in the market. Determine your time-frame for concluding an agreement. Determine what the decision makers from your side want and have it written down and agreed upon. Understand the technology, the market and the competitive landscape. Given all of these factors, you will start to be able to put together a negotiating strategy.

4) Your Negotiating Team: Having too many people on a negotiating team does not usually work very well. Two people is probably ideal, but it is very important to negotiate with one voice, so you must designate one person to lead the discussions. Decide the role of each person on the team. For example, decide who will discuss technical aspects, and who will address legal issues, and who will take notes, etc.

5) Negotiate with the Decision Makers: Avoid negotiating with a team that has no authority to make a deal. The worst situation to be in is to have the other side come back to you after reaching an agreement to say that their boss did not agree to certain terms. It will be very difficult to rewind the negotiation and get back some of what you had already previously conceded to make the deal. You need to understand very early on whether or not the team you are negotiating with has a strong mandate and authority to negotiate on behalf of their side.

6) Negotiation Tips: Be well prepared, listen to the other side very carefully, and really understand where they are coming from. If there are multiple sessions, summarize the previous session and set a goal for where you want to be at the end of the current session. Negotiations often take longer than expected, so be prepared but don’t leave it open ended. Prepare some items that you can “grudgingly” concede when nearing agreement to close the deal. Separate emotions and your feelings about the people involved from the work that you are doing, as it can cloud your judgement and impede an agreement. Finally, and going back to point #1, you will reach your goal much more efficiently if you keep the interests of the other side in mind. Give them a “win”. The deal has to be “good” for them, otherwise it won’t happen. But try to make it a “great” deal for your side!

 

 

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What is Open Innovation?

Feb29
2012 1 Comment Written by Raghid Shreih
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Recently, there has been a lot of talk about open innovation. It has become an important buzz word, but what does it really mean? Dr. Henry Chesbrough has developed the idea of open innovation, and is a promoter of the concept. His book “Open Innovation: The New Imperative for Creating and Profiting from Technology” is perhaps the best book on the subject, and is a very good read.

Before discussing the concept of open innovation, it’s useful to first briefly talk about innovation itself. Innovation is about more than just invention. It goes beyond invention, to actually commercializing a product and taking it to the marketplace. Many inventions, even those that are patented, never make it beyond the lab, even though they may be ingenious ideas. Innovation requires not only innovative technology, but also innovative business models to take it to market and make it successful. The concept of disruptive innovation is used to describe innovation that not only reaches the market, but changes it completely, such as the car, the telephone and the internet.

Innovation is vital for companies in order to stay ahead of their competitors, by offering new products and improving their business models. The traditional way that companies performed innovation over the past century is often termed “closed innovation”. Under this paradigm, the most successful companies were those that made large investments in performing internal research and development. This allowed them to have a constant stream of innovative ideas that they used to develop new product offerings. They also invested heavily in Intellectual Property protection to prevent their competitors from benefiting from this internal R&D. The leading companies in each sector were those that spent the most amount of money on research activities, including running state of the art labs and hiring the best technical resources. It was difficult for smaller companies to compete with the established players.

This paradigm started to fail towards the end of the twentieth century, for a number of reasons. Highly skilled and qualified employees were becoming more mobile, moving from one company to another and taking their wealth of experience with them. Furthermore, the availability of VC (venture capital) funding to startups encouraged more employees to leave large research organizations and start their own companies. Large companies could not commercialize all of the technologies developed in their labs. Skilled workers, often after gaining many years of experience working in research labs of large companies, could simply leave and take their knowledge to create a new company to commercialize these neglected technologies. Even worse, these employees could go to an established competitor, and the original company that funded research into these technologies would get no return on their investment.

Furthermore, new technology development tools allowed small companies to better compete with large research labs. Improving communications technology permitted easier sharing and distribution of information and knowledge. The result of all these changes was that startups and small companies were now able to compete and succeed against the incumbents. The closed innovation paradigm was no longer working, and a new paradigm for innovation was starting to develop. This is what is called “open innovation”.

Open innovation embraces the idea that not all technology needs to be internally developed. External ideas can be brought into a company and successfully used in their products. This could be done through licensing technologies, or simply acquiring the technologies, or even the entire companies developing these technologies. Similarly, internally developed technology can be shared externally to generate additional revenue. This can be done through start-up companies, or by licensing technology to external entities.

The open innovation paradigm recognizes the complexity of the world and the wealth of knowledge and technology that is now available from many sources. No longer is cutting edge research limited to a few leading labs, which compete against each other to innovate new products. Research and technology is now available from many sources, and skilled workers move frequently between companies and research organizations. Given these new realities, it is no longer possible to maintain the closed innovation paradigm described earlier.

It is rather inevitable to move towards open innovation, and companies are slowly and cautiously moving in this direction. However, they are understandably very careful so that they don’t damage their existing business models. While it may take some time, the shift towards new and innovative business models is underway. Companies that fail to innovate will likely not be able to compete with the fast paced developments happening today. This is why it is critical to understand open innovation, embrace its teachings and learn how to use it effectively.

 

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Technology Transfer Basics

Jan21
2012 Leave a Comment Written by Raghid Shreih
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Technology transfer is an important tool for economic development. Although the concept is well known and quite mature in the advanced economies of North America, Europe and East Asia, it is still not well understood in developing economies. However, if practiced properly, technology transfer can contribute significantly to those developing economies, not just in job creation and increased gross domestic product, but also in promoting innovation to make those economies more competitive globally.

So what is technology transfer anyway? Well, the Association of University Technology Managers defines technology transfer as:

… the process of transferring scientific findings from one organization to another for the purpose of further development and commercialization.

This definition is properly board, because technology transfer can occur between any two organizations, whether they are government, university or private entities.

The process of technology transfer starts with identifying new technologies that are developed as a result of research activities. Particular attention is paid to research activities that result in new technologies that can be commercialized by being developed into products to be sold in the marketplace. Such technologies are valuable, because once a product idea has been developed, it is easier to commit the required investment funds to develop the product. Early stage research that is still far from commercialization is more challenging, since there is more risk involved. However, it can also be successfully transferred in some cases.

Once a candidate technology has been identified, it is protected through the use of Intellectual Property protection tools such as patents and copyrights. Such IP protection gives a much greater value to the technology, since it confers upon the owner of the IP the right to prevent others from making, selling or importing the technology. The resulting IP can then be sold or licensed resulting in economic benefits to the researchers who developed it, and at least partially covering the costs of developing the technology.

Of course, many companies that develop new technologies do not transfer the resulting IP, but rather commercialize the technology internally and develop competitive and innovative products. Another option is to create a new spin-off company to pursue commercialization of the IP. However, in some cases, companies determine that at least some part of their IP portfolio is underutilized or not utilized at all. This could be for a number of reasons, such as the lack of funds to commercialize the IP, or simply because the company had changed its focus and is pursuing a different field of technology. In such cases, companies can monetize this idle IP by either licensing or selling it to other interested parties.

In the case of government research labs and universities, the case for technology transfer is even greater, since they typically do not develop and sell products. Commercialization of their IP is done through marketing the IP to interested private companies, and then selling or more typically licensing it. Another option is to encourage the creation of new start-up companies that can take the IP and commercialize it.

In summary, technology transfer unlocks a huge amount of economic potential, by facilitating the transfer of IP between entities. Rather than IP remaining idle, it enables it to be put to good use in creating new and innovative products. Companies developing these products benefit economically by putting these new and competitive products on the marketplace. Research labs, whether government, university or private, benefit by recouping at least some of the costs of their research, which enables them to be involved in further research. All these activities create new jobs and stimulate the economy, as well as promoting innovation, which makes an economy more advanced and competitive.

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Introduction to Intellectual Property

Jan20
2012 Leave a Comment Written by Raghid Shreih
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Intellectual Property (IP) is a very important tool used by government to promote innovation and economic development. Businesses can use IP rights to gain competitive advantage in the marketplace. Therefore, it is important that business owners and managers have an understanding of what IP is, and how it can be used to their advantage.

WIPO, the World Intellectual Property Organization, defines Intellectual Property as:

Intellectual property, very broadly, means the legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields.

Protecting Intellectual Property recognizes the rights that a person has to the results of their intellectual activity. It also promotes creativity, and encourages the sharing of the results of creative work, by ensuring that the rights to these creative works is protected.

Intellectual Property is of several types:

  • Patents
  • Copyrights
  • Trademarks
  • Industrial Designs and Integrated Circuits
  • Trade Secrets

Patents are intended to protect new and useful inventions. They grant the inventor the right to exclude others from making, using, selling or importing the invention for a certain period of time, which is usually 20 years from the date of filing the patent. In exchange for giving the inventor a time limited monopoly to practice and benefit from the invention, full disclosure of the invention and how it works is required. Patents encourage inventors to innovate and create new and useful products by ensuring that they will economically benefit from doing so. At the same time, by requiring inventors to disclose their invention, patents promote innovation in general as other people can learn from and improve upon the inventions of others.

Copyrights provide protection for creative, intellectual or artistic works, such as literary works, music, movies, paintings, and even software. Copyrights do not protect the information itself, but rather the form in which the information is expressed. For example, copyright protects software code from being directly copied, but does not protect the ideas or functionality that the software provides if the software code is re-written in a new form.

Trademarks are defined by WIPO as: “a sign, or a combination of signs, which distinguishes the goods or services of one enterprise from those of another”. A trademark gives an owner the right to prevent unauthorized use of their mark, or a confusingly similar mark. This is intended to allow them to protect their brand and to prevent the public from being misled about products or services. Trademarks can be renewed indefinitely as long as the owner continues to pay the required fees.

Industrial Designs protect the ornamental or aesthetic aspect of a useful article. Industrial Designs must be reproducible by industrial means. By registering the Industrial Design of their product, companies can protect the visual appeal of their product which may differentiate it from other products on the market, thereby giving them a competitive edge in the marketplace. Industrial Designs must be new and useful to be registered.

Trade Secrets are a slightly different form of intellectual property. They are business secrets that provide an advantage in the marketplace. Trade secrets do not have a specified term, like patents for example. However, since they are not formally registered, no protection is provided if someone independently develops the same methods or ideas protected by a trade secret. Trade secrets therefore only provide protection from unlawful or improper methods such as industrial espionage.

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Welcome to NuvoPatents

Jan15
2012 Leave a Comment Written by Raghid Shreih
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Welcome to NuvoPatents! This web site was launched initially in 2007 to discuss issues related to Intellectual Property, and particularly patents. It has undergone several makeovers since then, and was relaunched in its current form in January, 2012.

The site is managed by Raghid Shreih, an Intellectual Property professional with more than nine years of experience in IP and the high tech industry. The goal of this web site is to discuss IP issues, and particularly those related to patents. Patent law, licensing, infringement, technology transfer, commercialization, innovation and entrepreneurship are all topics of interest, which I hope to be able to discuss and provide valuable insights to our readers who are interested in these topics as well.

Please enjoy the web site, and send me your feedback. If there are certain topics you are interested in and would like to see discussed, please let me know. Also, if you would like to contribute to this web site, let me hear from you.

If you are interested in IP, tech transfer or any of the topics discussed and would like to network with me, feel free to visit my LinkedIn profile (http://www.linkedin.com/in/raghid) and get in touch. If you send me an invite, I would appreciate a comment telling me that you have visited this web site. You can also follow me on Twitter (@shreih).

Best Regards,
Raghid Shreih.

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