Patents can be among a corporation’s most valuable assets, but many corporations fail to exploit the value of their issued patents (perhaps because the maintenance of a large patent portfolio can be expensive and time consuming). Nevertheless, when a company implements a successful outlicensing strategy, forgotten patents, instead of simply gathering dust, have the potential to increase revenue and stifle competition.

A Valuable Commodity

A successful outlicensing strategy maximizes the monetary value of an intellectual property (IP) portfolio. Unfortunately, many companies view the expenses associated with research and the protection of intellectual property as ordinary and unavoidable business costs. However, an average product line uses only 20% to 40% of a company’s research results.1 A business that shields its intellectual assets from external use loses money on the remaining 60% to 80% of its development efforts.2

A company should consider whether its IP portfolio can be a valuable commodity rather than viewing it as a burden. By carefully protecting and licensing its intellectual property, a business can maximize the value of these assets.3 IBM’s aggressive outlicensing program increased its licensing royalties by 3,000% over the last decade (Jones, 1). IBM currently generates nearly $2 billion annually in licensing revenue.4 Prior to its acquisition by AT&T, BellSouth’s licensing program reportedly earned “tens of millions of dollars a year” (IAM, 7).5 By following the lead of these companies, American businesses generate over $100 billion in cumulative licensing revenues per year (Jones, 1).

These figures illustrate how licensing can do more than offset the expenses associated with maintaining a large intellectual property portfolio. If properly executed, outlicensing can generate new revenue streams and increase shareholder value (IAM, 2). Carol Beckham, former vice president of BellSouth’s licensing corporations, believes that “licensing out one’s innovations in the form of IP to other companies is part of the value proposition” (BellSouth). General Electric’s (GE) legal group uses licensing fees to pay for “all of the patent maintenance, prosecution, and preparation fees, and to make a profit beyond that.”6 GE’s goal is to replace the “traditional business funding” of technological efforts with excess licensing revenues.7