Managing a patent portfolio strategically can significantly boost bottom line profits. In this blog post, we list 3 creative ways to use patents for profit. Patents can be easily overlooked to generate profit once they have been secured because they are intangible assets. However, the commercialisation of a patent portfolio can generate cash flow directly to the bottom line through licensing, sale, or trade.
Patents as collateral for business loans in financial downturns
Did you know that patents can be used as collateral for business bank loans?
According to the Financial Times, this strategy first surfaced among borrowers during the dot-com bust in the early 2000s and grew to be more widely accepted by lenders after the 2008 financial crisis. FT predict that the financial distress and strained credit lines created by the Covid-19 pandemic could give this collateralisation strategy another boost.
William Mann, Assistant Professor of Finance at Emory University in Georgia, US, estimates that the use of patents as collateral has increased significantly in the past 5 years based on data from the USPTO (United States Patent and Trademark Office), almost doubling to 400,000 instances in 2019 compared to the 4 previous years.
He explains that “negative pledges” are increasingly popular among start-ups to structure financing deals. These negative pledges commit borrowers to relinquish their IP assets to the lenders in the event of bankruptcy. In a time when cash is king for many small businesses, these risky agreements can provide the last lifeline to pull through in a financial downturn.
Other commercialisation options
It is never an inconvenient time to consider what commercialisation options are available to extract value from your IP. Patents can be an invisible profit generator if properly utilised. Negative pledges may be too risky for some businesses. However, there may be unexplored avenues to generate additional value by selling, licensing, or using existing IP.
According to the Harvard Business Review, “99% of patent-licensing revenue in the US is generated by companies that own 40% of all US patents, therefore, the remaining 60% of patent holders are receiving just 1% of the revenue – there is a lot of money to be made here!”
Minesoft’s “Introduction to Commercialising IP” webinar provides a good foundation to understanding patent commercialisation and how to use a commercial patent database, such as PatBase, to fully evaluate your patent portfolio. PatBase is a leading global patent search and analysis platform created by Minesoft in collaboration with RWS. To learn more about PatBase and register for a two-week free trial, visit the PatBase page.
Standard Essential Patent Strategy
The latest update to PatBase is the introduction of searchable Standard Essential Patent (SEP) information. An SEP is a patent that claims an invention or inventive step that must be used to comply with a particular technical standard. SEPs give holders many potential licensing avenues as they provide hard evidence of patent infringement when a competitor’s technology is compliant with an industry standard and are therefore easier to leverage in licensing negotiations.
Especially in high-tech industries, obtaining an SEP may be another consideration in patent commercialisation strategy. According to Juliette Hibbert, Counsel at Kilburn & Strode, “the SEP strategy [is to] carry out R&D, protect your R&D, be a member of the standard-setting organisation, influence the standard-setting organisation, get a standard essential patent, get licensing (cross-licensing or one way licensing).” As the world becomes even more digitally interconnected with the Internet of Things (IoT) networks infiltrating our private and public environments, technology standards will drive-up IP value for SEP owners.
Minesoft is a leading global patent information solutions provider. To find out how Minesoft can help you make the most of your patent portfolio with sophisticated patent searching, alerting, and workflow solutions, contact us by email at [email protected] for a free consultation with one of our global team members.