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Licensing and Intellectual Property Tips
In the eight months that Industry Insights have been live on the yet2.com Web site, we have collected commentary from some of the leading minds in technology licensing and intellectual asset management. We have heard from executives in the world´s leading technology companies, from some of the foremost industry consultants, and even from yet2.com´s own management team. By sharing their knowledge and experience, we hope that these individuals have provided informative content for yet2.com´s users.
This month´s Industry Insight is not a new article, but rather the compilation of the pearls of wisdom from our existing articles. We have pulled some of the best quotes from the existing literature into this month´s addition. This article will allow users to quickly browse some of the collected learnings we have compiled so far. By collecting the wisdom from a variety of industry experts, we hope to provide our users with some food for thought as they continue with the process of technology transfer.
Invest in Understanding Internal Technology Resources: Without portfolio management, companies can´t easily determine if licensing a technology today will cause strategic problems in the future. Large and diverse conglomerates often don´t understand what technologies they have across the organization. We´ve worked with clients where we´ve found that one division had a need that another division could solve. Companies would benefit from getting a handle on their internal technology portfolios before trying to look outside. -- Laura Schoppe, Commercial Programs Manager, Research Triangle Institute
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Beale
Burton
Christensen
DeBleser |
Look for Ways to Disaggregate Existing Business Models: Liquidity of technology transfer will have serious effects on the overall R&D and technology strategy of companies. Almost all large companies have linked the need to develop technology with the ability to commercialize that same technology. Efficient markets for technology allow companies the opportunity to disconnect this linkage. [These] markets for technology will allow companies the opportunity to disaggregate their business models. Instead of linked R&D and commercialization efforts, companies will begin to focus on their particular area of competency.
Companies must evaluate their research and commercialization strategy, invest in understanding their technology portfolio, and invest in developing a solid technology transfer and licensing organization. As the market for technology transfer becomes liquid, companies cannot assume that they need to continue to devote their research and development resources along traditional avenues. They should find areas of technology development competency and ineptitude, and evaluate how to distribute their resources to take advantage of the strengths and minimize the weaknesses. -- Phil Stern, Executive Vice President of Operations, yet2.com
Through in-licensing, companies are able to conserve resources. -- DeBleser
Focus on High Margin Activities: For companies today, the prevalent trend is to move away from functions that offer a lower return on investment, and companies have made efforts to rid themselves of such functions through divestitures and spin-offs. As an example, many companies are taking their manufacturing concerns and spinning those off. In the place of those functions, companies are focusing on higher return on investment projects, such as research and development activities, thereby concentrating on creating cutting edge technologies and developing the next generation product or service. These are higher margin activities, and companies have recognized the need to focus on them, because they add the most value to the marketplace, both in terms of returns for shareholders and overall company value. -- Brian Napper, Partner, Deloitte and Touche
Concentrate R&D Efforts: We have a large pool of technology, patents, and know-how that have no purpose within the company. Over the years, we have been able to spin out technologies to other companies who have been able to make very good use of those technologies and create value for both of us. Basically, we have focused [development efforts] on the high-growth technology areas; we have kept investing in [these areas of technological expertise] because we realize that the growth of the value of Philips as a whole can mostly be traced back to technology. Our strategy has been very focused. We have concentrated on in-house exploitation of R&D for high-growth areas where we want to excel and then spinning out non-core technologies to third parties and have them bring it to market for mutual benefit by building value. -- Jelto Smits, Vice President, Corporate Strategy, Philips Electronics
Use Licensing to Transform Product Development: Through in-licensing, companies are able to conserve resources and get products to market faster, leaving them free to concentrate on core innovations and giving them increased competitive advantage in an era of rampant technological change. Not only is in-licensing saving time and money versus in-house development of non-core technology, it often provides access to more advanced technologies which in-house development would never be able to deliver. Joe Miller, Chief Technology Officer of DuPont, has acknowledged that "[sourcing external technologies] will change my business model. We will use this access to the world of available technologies to bring new products to market." DuPont is not alone; in industries as diverse as automotive and pharmaceuticals, companies are looking to find available technologies to augment their product development process. -- Chris De Bleser, CEO, yet2.com
Obtain High-Level Support to Drive Activity: The key is not just to set up [the technology transfer] function, but to give it real bite, authority, and responsibility. If you build it they may not come, so you need to have some kind of system of authority established where the CEO or CTO are able to step in to push the project forward and set goals. It is important for these high-ranking executives to make sure that not meeting goals is recognized as a collective failure, and not just the failing of the IP group. High-level buy-in is absolutely important, and often dictates the success of the endeavor. -- Brian Napper, Partner, Deloitte and Touche
Don´t Re-Invent the Wheel: Coca-Cola licenses technology both in and out. The overall licensing strategy is in line with Coca-Cola´s business strategy. I think the main factor that drives the licensing that we do is the simple fact that it has made good business sense for us to do so. It does not make much sense for us to try to "re-invent the wheel"...This strategy allows us to truly focus on the development of breakthrough technology for the beverage industry. -- Frank Landgraff, Senior Patent Counsel, The Coca-Cola Company
Find New Lines of Revenue for In-Use Technologies: [Philips] had a general laser technology which represented 25 million Euros in sales. [This technology was outside] our strategy to focus on only high-value fiber optic communications wavelength division multiplex lasers, a core ingredient of the broadband Internet. Philips made the decision to license the general laser technology, and the value gain here has been very spectacular. From our stake in one of the stars of the American stock market, JDS Uniphase, to whom we spun out this technology, we recouped around 3 billion Euros. -- Jelto Smits, Vice President, Corporate Strategy, Philips Electronics
High-level buy-in is absolutely important. -- Napper
Benefit from the Innovations of Other Industries: We have also licensed both in and out with companies outside of the beverage industry. Coca-Cola has "licensed out" technology to food companies as an example. From the "licensing in" standpoint, there are numerous examples. Many of the technological hurdles facing the beverage industry are ones that have been overcome in other industries. With the Internet, it is now much easier than ever before to uncover information on already existing technologies. Recently, we have conducted a significant joint development, which includes a licensing piece, with a supplier to the electronics industry. As the capabilities of the Internet expand, I think you will begin to see many more licensing deals between parties operating in completely different business sectors. -- Frank Landgraff, Senior Patent Counsel, The Coca-Cola Company
Allow Technology Transfer to Generate Revenue: On a global basis, companies are using technology transfer to generate income from a set of previously under-performing assets. The returns from this activity can be enormous; from 1994 to 1997, making a new effort to realize returns from its assets, Dow Chemical was able to raise its technology licensing income from $25 million to $125 million. -- Chris De Bleser, CEO, yet2.com
Employ the Internet to Defy Existing Barriers: The Internet is the perfect medium for matching buyers and sellers of technology. Those looking to extract value from their technology-based assets can post their technologies in a format designed to reveal the potential of the innovation; those looking to bring in technologies to augment their product development process can find never-before-seen technologies through the yet2.com site. All of the previous barriers preventing technology transfer between companies -- geography, industry, and company size -- are vanishing. Through our site, we have brought together Asian firms with North American companies, organizations from completely different industries have been introduced, and the smallest of companies have been matched with industry leaders. In all likelihood, none of these matches would have taken place without yet2.com. -- Chris De Bleser, CEO, yet2.com
Use Market Demand to Value Technology: We have a philosophy that we should essentially post all of our technologies -- core and non-core -- online. The reasoning is very simple: I do not believe that a good business decision can be made on whether or not we should license something until you know whether someone else values it. Too much time is spent internally having philosophical, theoretical debates on whether something should be made available... We simply say "post it all, and let the external market validate its value." -- Jeff Weedman, VP Licensing and Corporate New Ventures, Procter & Gamble
Use Internet Tools to Improve Efficiency: What do Internet technology transfer tools do for an R&D organization? For GE Industrial Systems, these tools provide global access, important for internal collaboration as well as externally maximizing exposure to potential licensees. These tools also help focus limited resources, giving shape and substance to what is usually a very fuzzy process... the yet2.com technology listing form has become essentially a product specification, which helps to initiate the process of technology transfer... The use of these tools provides only upside potential. -- Dave Christensen, Manager, Intellectual Property Process Team, GE Industrial Systems
Post it all, and let the external market validate its value. -- Weedman
Price Technology with Potential Applications in Mind: When considering price, the seller looks at how much was spent in generating the technology, with cost being the pricing parameter. And the buyer views price with an eye toward potential sales. But cost and price have nothing to do with each other. The seller or licensor needs to recognize that the development costs are now sunken costs and have nothing to do with the price of the technology sale or license. The only thing that should be considered is the value of the licensee´s potential products. Think of the technology as a drill: You´re not selling the drill, you´re selling the holes that the drill makes, and that´s what you have to value. How much are those holes worth? -- Laura Schoppe, Commercial Programs Manager, Research Triangle Institute
Be Flexible about Licensing Partnerships: We will license to our competitors... The major criteria driving our organization should be: are we bringing shareholder value to the bottom line? If we can bring shareholder value by licensing technology to direct competitors, why wouldn´t we do that? The deal itself needs to be attractive to us, but licensing to a competitor can also help to increase the size of the pie. To the degree that we as an industry can become better at meeting consumer needs through more rapid innovation, our company wins. Additionally, I think that licensing to competitors also drives our internal R&D efforts. The fact that we´re going to license technology means that we´re no longer simply competing with the innovations of our competition, but we´re also competing with ourselves. This forces us to run faster and innovate faster to stay ahead. -- Jeff Weedman, VP Licensing and Corporate New Ventures, Procter & Gamble
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