This article offers a 10-step approach for creating a business strategy to monetize your intellectual property.
Wondering why you should do this exercise?
Your intellectual property can make up 70-80% of your business’ value if strategically optimized. By completing this exercise, you might find untapped resources right under your nose.
Step 1: Broadly Assess Your Business
Before you can devise a great monetization strategy, you’ll need to complete an overall assessment of your business. Start by critically assessing (i) the strengths, (ii) the weaknesses and (iii) the opportunities within your business.
Step 2: Assess Your Business’ Intellectual Property (IP) Assets
Then conduct a similar analysis of the business’ intellectual property assets. This should include a review of the strengths, weaknesses, and opportunities presented by:
- issued and registered intellectual property assets (e.g. patents, trademarks, copyrights, industrial designs)
- intellectual property applications which are not yet issued or registered,
- unregistered assets (e.g. goodwill in unregistered trademarks, trade secrets, confidential information and know-how).
Your assessment should include the following details about your business’ IP:
- the lifespan of the IP;
- whether any oppositions or challenges from competitors will affect your IP’s value;
- are any maintenance or other fees associated with upkeep of the asset;
- whether there are any monetization offers pending that need to be considered (e.g. a licensing offer); and
- whether there are untapped monetization opportunities that should be explored.
Step 3: Determine the Value of Your IP
To fully understand the role your IP is playing in your business, you need to understand its value. Quantitative and qualitative methods of evaluation can be helpful here.
Quantitative valuations rely on measurable data to produce an estimate of asset value. Qualitative valuations provide a non-monetary estimate of value through intangible metrics (e.g. strategic impact, brand loyalty and impact on future growth). These two types of valuation should not be treated as mutually exclusive. You can read more on the methods of quantitative and qualitative valuations, as well as how to conduct them, in this IP valuation primer.
Step 4: Select Monetization Tactics
Once you determine estimated values for your business’ intellectual property assets, it may suggest which assets are best suited to be further monetized. You can then assess various monetization strategies to determine which one yields the greatest short and long-term profits.
There are a number of common monetization strategies that can be explored, including commercialization within the business, co-development, licensing, securitization, and spin-out.
Each option should be subjected to a carefully executed cost/benefit analysis before settling on the right approach for your business. You will also want to consider some of the less tangible benefits of each monetization strategy (e.g. will the strategy result in a potential draw for investors, new hires or being able to enter R&D networks that were previously closed to you).
Step 5: Set Short and Long-Term IP goals
Unlike your broader strategy, your IP goals need to be precise, quantifiable and sensible to be actionable and easily assigned for achievement. Every goal that you set related to IP within your overarching strategy should be SMART: Specific; Measurable; Actionable; Rational; and Timely.
Step 6: Integrate Your Monetization Decisions into the Big Picture
Having established your goals, it should also be clear how they will help you achieve your company’s objectives. This is a perfect opportunity to integrate your IP goals and the effect of their outcomes into your company’s mission or vision statement to the extent that they are not already reflected there.
If as a result of completing the first 5 steps of this exercise your mission or vision has changed or needs to be reconsidered you may want to think about the following to help you reformulate it:
- What do we do better than our competitors?
- How can we secure and monetize our competitive advantage?
- What value do we bring to our consumers?
- What are the associations that we want consumers making with our business/brand?
- How can we use our assets to overcome obstacles in the way of our company’s growth?
Step 7: Set Timelines
Without SMART goals with a definite foreseeable outcome, it is difficult to create a fully functional monetization strategy. It is also important to setup a timeline by which your strategic objectives are to be accomplished.
Step 8: Communicate Strategy Only to Relevant Parties
Remember that your monetization strategy itself is an intangible asset, and as such should be kept confidential from competitors and other entities not involved in your business. Reveal to others only as much as they need to know to be effective in their role.
Step 9: Implement Performance Tracking Systems
Tracking key performance indicators in your day-to-day operations will allow you to catch when you are off course in moving towards your goals and give you the opportunity to make corrections. Performance measurement should involve tracking milestones (i.e. whether goals have been accomplished and whether they have been accomplished by the deadline set). Relevant metrics can include profitability, market share, month-by-month and annual growth of revenues for the commercial goods backed by the IP asset, and in some cases growth of royalty payments from licensees involved in commercializing the asset.
Step 10: Adopt an IP Review Process to Maintain Value and Identify New Opportunities
For your intellectual property to continue to bring value to your business, it must be constantly reviewed and maintained. This includes not only administrative items like timely paying maintenance fees, but also seeking and seizing opportunities to file new applications for IP rights and subsequently monetizing those IP assets.
Christopher Heer is the owner and founder of Heer Law. He is an intellectual property lawyer, registered patent agent, registered trademark agent, and is also certified as a specialist in intellectual property law (patent) by the Law Society of Ontario. He believes that intellectual property rights add tremendous value to businesses by enabling them to raise capital, build asset value, and grow faster under the protection that these exclusive rights give them.
Toba Cooper is an associate lawyer and registered trademark agent at Heer Law. She has a blended intellectual property prosecution and litigation practice in trademark and copyright law. She frequently provides advice on IP clearance and availability and brand development and enjoys working with her clients to integrate IP monetization strategies into their businesses.