Commercialising your IP
Commercialisation Intellectual Property (IP) rights is putting your invention into practice to reap economic benefits.
Commercialising IP is the process you undertake to get your products or services into the market place. Your strategy depends on your business.
How you commercialise your IP depends on your particular IP
It depends on your circumstances, business capabilities, understanding of the market and your ability to generate finance.
Licensing is the most common commercialisation method, but it is just one of many options for taking your IP to the market place. You need to consider questions such as:
- Do you want to commercialise in-house or with a partner?
- Do you want to manufacture, market or sell your product?
- Do you want to outsource?
Summary of key concepts in commercialisation
- Commercialisation is the process of getting your IP to market.
- You can commercialise on your own, through a partnership or a combination of the two.
- Make sure, regardless of how you commercialise your IP, you maintain confidentiality arrangements with all parties.
- There are a number of options available when commercialising with partners. In licensing, the owner might give up the right to commercialise, but not the ownership of the IP itself.
- Exclusive licences are the most common commercialisation mechanism used.
- There are a number of shades of exclusivity - product, field, territory restrictions or a combination of these.
- Licences include trade mark licences and franchises.
- Assignment is not licensing, it involves transferring or selling the IP - the owner retains no rights to the IP.
- Another mechanism for commercialising IP is a start-up company involving a venture capitalist or a joint venture with other parties or established companies.
- Royalties are payments associated with licences and they can be calculated in a number of ways.
- Further support
- Once you have decided the best approach to commercialise your IP, you can consider the potential for international expansion.
Licensing, Franchising and Assignment
Licensing is a common strategy to commercialise IP. It simply means that permission is granted by the owner of an IP right to another person or organisation to use it on agreed terms and conditions.
There are different types of licencing available. A franchise is a form of licence, while assignment is the outright sale of IP.
IP licensing gives the licensee the right to use (but not own) the copyright, patent, trade mark, design, technology, technical know-how or specific marketing skills to their advantage. They can use the IP right for a defined purpose, in a defined territory, for an agreed period of time. The licensee isn't paying for a product; they are paying for access to legal exclusivity.
The value of the IP rights is negotiated and is based largely on the strength of the IP rights in the creation or invention.
Licensing your IP to another party can be an effective way to exploit IP, particularly if you don't have the resources or experience to develop and market your product or service. Licensing arrangements are common involving copyright, patents, design and trade marks, but any type of intellectual property can be licensed.
Key points on licensing:
- A licence is a contract where the IP owner gives permission to a licensee to commercialise that IP.
- A licence can cover product development, manufacture, marketing and selling products.
- The owner of the rights will usually receive payments in the form of royalties in return for their use. The value of the rights is an agreement based largely on the type of IP involved.
- An exclusive licence is the most commonly used mechanism to commercialise IP with a partner, but there are many other types of licences, including know-how, trade mark and non-exclusive.
- Taking out a licence is a cost-effective alternative to investing in development that has already been done.
- If you think licensing is for you, learn more about the specific licence conditions you need to consider. We recommend you seek the advice of a licensing expert to help you in negotiations.
Franchising - a form of licence
When the owner of a successful business wants to expand without borrowing capital to develop, they can license IP to franchisees. This generally includes trade marks, logos, promotional material, the business system, various processes and shop fit-outs.
Key points on franchising:
- Franchising is a method or system for distributing goods and services.
- The franchisor owns the IP rights over the marketing system, service method or special product.
- The franchisee pays a fee or regular royalties for the right to trade under the brand name.
- The franchisee benefits from coordinated marketing efforts and a developed business system.
Assignment - selling your IP
An assignment is an outright sale of IP. You transfer your ownership to another person. This can be a viable business strategy if you prefer to receive a substantial up-front lump-sum payment instead of smaller royalty payments throughout the commercialisation period.
An assignment must be recorded in the CIPC Patent, Design or Trade Mark Register, as the case may be, in order for that assignment to be valid with regards to 3rd parties. If an assignment is not recorded in the relevant Register, it is valid only between the parties to that agreement.
When IP owners transfer their ownership, they cannot impose any performance obligations on the new owner. This is different from licensing.
The lump-sum payment for an assignment should be regarded as a purchase price. The owner should factor into the purchase price:
- all costs, including direct and indirect costs of research and development, materials, any outsourcing and the cost of protecting the IP
- a profit component
- the potential market value of the technology or IP.
The IP purchaser, however, may seek to pay royalties instead of a lump sum (or a combination thereof) for the assignment of title to the IP in question. In this way, the purchaser's initial capital outlay is less and payment for the IP in the form of royalties becomes conditional on the IP product being successful in the market place. In this case, if there is no success there is no payment.
Differences between trade marks, business names and and domain names
Registering a business, company or domain name does not give you any proprietary rights. Only a trade mark can provide that kind of protection. If you register a business, company or domain name, you do not automatically have the right to use that name as a trade mark.
The same word(s) may be registered by different people as a business name in other states and territories. However, if you have a registered trade mark in South Africa, you can take legal action for infringing your trade mark if the business name owner uses it for goods or services like those covered by your trade mark registration in South Africa.
Trade mark: Used to distinguish your goods or services from those of other traders. When you register a trade mark you obtain exclusive use of the trade mark in the country where your trade mark is registered.
Business name: A business name is the name under which your business operates. Registration identifies the owners of the business. Unlike trade marks, company names do not necessarily provide proprietary rights for the use of the trading name.
Domain name : All computers on the internet have a unique identifying number - an Internet Protocol address. Because Internet Protocol addresses are difficult to remember, we use a domain name - a unique name that corresponds with an Internet Protocol address (www).
The rules and policies for registration of domain names in South Africa can be viewed at http://co.za You can trade mark your domain name if it meets the requirements of the Trade Marks Act.