When to License Technology or Patents – Strike When Your IP Is Hot

Some companies build their entire business on licensing. But most don’t.

Instead, most companies invest in developing technology and IP to power and back up their own products and services. Then licensing, specifically out-licensing, enters the picture only when something changes: the strategy, the product roadmap, or simply the realization that some assets aren't being used to their full potential. IP team is always tasked with IP protection and portfolio development, and this is where they will focus on. Monetisation may not be the core focus or the skill set of the IP team. When a company has more urgent priorities and licensing revenue isn’t yet embedded in strategy or linked to a concrete action plan, it’s the kind of task that gets postponed indefinitely.

And of course, if you hire people to protect IP, that’s exactly what they’ll focus on, protection, not monetisation. It’s understandable: when a company has more urgent priorities and licensing revenue isn’t yet embedded in strategy or linked to a concrete action plan, it’s the kind of task that gets postponed indefinitely.

This article isn’t about in-licensing (a universe of its own). It’s about the moment when a company should ask: Should we be licensing this out?

The Scenario: Assets with No Home

One of the most common triggers is that something of value was developed, but is no longer used internally. Think of technologies tied to discontinued products, or tools developed for internal use that others might find useful. These assets just sit there, protected by IP, costing money to maintain, yet creating no value.

That's your signal. But it’s not the only one.

In turbulent times, companies increasingly ask how to generate new revenue and make better use of their R&D investments. A structured look at your IP portfolio and technology landscape; what you have, who else is using similar technologies and where adoption is heading, can surface real opportunities to create licensing income.

Sometimes licensing is sparked by outside interest. Another company wants to use your technology. But more often, licensing is driven internally by the realization that there’s untapped value in the portfolio.

Why License?

At its core, out-licensing is about revenue or relationships.

• Revenue provides both reward and reinvestment for innovation.

• Partnerships and ecosystems can grow usage, reinforce your competitive position, or enable joint IP monetization.

In some cases, collaboration with other IP holders can strengthen the collective position and bring more returns for everyone involved.

Timing Is Everything

Too early and there’s nothing to license. The technology isn’t proven or complete enough to be valuable. Nobody is using it yet. The pitch to licensees isn’t compelling.

Too late and the value is gone. In patent licensing, expiry plus the tail for past damages defines your deadline. In technology licensing, the value may last longer—if you’re continuously developing the technology and bundling trade secrets, know-how, or other non-expiring assets.

The sweet spot is when the technology is usable, protected and aligned with current or emerging market needs.

Common Missteps

• Underestimating value: Companies often think licensing is too hard, too costly, or not worth it. Sometimes it isn’t, but a strategic review will give a real answer.

• Overestimating value: Creators of the technology may believe it’s uniquely brilliant. The market may disagree. Landscape analysis helps avoid heartbreak (and wasted effort).

Does This Work in My Industry?

Most likely, yes. Licensing happens in every sector. But it’s especially visible in industries built on shared standards and interoperability, like connectivity, automotive, IoT, streaming and consumer electronics.

Is a Patent Needed?

That depends. Many software or technology licenses work without patents, relying instead on know-how, trade secrets, or code.

But patent licensing is often simpler. It can be based on a clearly defined legal right: a specific patent or set of patents. Unlike in technology licensing, there’s no need to negotiate issues like ownership of improvements, development responsibilities, or transfer of know-how.

What’s more, having patent protection makes it easier to find a licensee, especially for non-core assets. If you're offering a patent license, it's easier for the licensee to evaluate, adopt and justify the deal with patent involved. In contrast, licensing unprotected software, trade secrets, or know-how, especially if they're non-core, often raises questions of risk, enforceability and competitive advantage.

What Makes Something Licensable?

Simply put, a technology is licensable when:

• It has value,

• It’s defined and transferable,

• It’s usable by others,

• And it’s protected, legally and/or practically.

Why would anyone pay for something that not valuable or usable, or which they can use for free?

What Kind of Culture Supports Licensing?

Licensing requires risk tolerance and long-term vision. Revenue doesn’t appear overnight. In some cases, licensing includes enforcement and not every company is ready for that. But whether you enforce or not, you signal to the market what kind of IP owner you are. That perception matters.

Licensing vs. Selling

Licensing can be slower, but you retain ownership and upside. Selling is quicker, but the price reflects the buyer’s risk and discounts future value. One isn’t better than the other. The best path depends on your strategy, your timeline and your capabilities.

Where to start?

If you’re reading this and wondering whether your company has something licensable, it probably does. Licensing starts with awareness. It doesn’t require a perfectly packaged opportunity, just a willingness to review what’s already there. That review doesn’t need to be complex or expensive, but it does need to happen. Whether you talk to a trusted advisor, an experienced licensing partner, or even someone in your own network who’s seen this before, make the conversation happen. Good licensing strategies don’t start with forms. They start with people asking the right questions.

Dare to Look Around and See the Opportunities

Licensing is a way to make your IP work harder. It’s not always the right path, but it’s always worth asking the question: Do we have something of value that others would pay for?

That’s when licensing becomes tangible.

Navigating Technology Licensing for International Manufacturing Businesses

This article has been published in IP Briefs® in February 2024. Read as a Pdf.

In the rapidly evolving landscape of contemporary manufacturing, keeping pace with competitors demands commitment to innovation. As companies strive to incorporate cutting-edge technologies into their manufacturing operations, accessing the new innovation may become complicated. While traditional procurement methods involve obtaining parts from the supply chain, technology licensing emerges as alternative way of acquiring innovative solutions. In this article, we dive into the unique advantages of technology licensing and why it plays a growing role in the manufacturing industry.

Going beyond Traditional Procurement with Technology Licensing

In the conventional manufacturing industry, companies primarily rely on their supply chain for materials and components. Traditional way of purchasing is well known operation and agreement concepts are familiar to lawyers and business leaders. It is relatively easy to understand the warranties and liabilities given by a part supplier. However, this conventional and transactional approach does not work when manufacturers are willing to integrate transformative technologies into their business. Unlike the straightforward acquisition of physical goods, adopting technology requires a deeper level of collaboration and comprehension of the underlying intellectual property and the technology assets in question.

Unlocking Business Potential through Technology Licensing

Technology licensing enables businesses to get access to various strategic benefits. Here are a few key elements to consider.

Access to Specialized Expertise and Know-How. Technology licensing is more than that purchasing of products. Licensed technology assets often include specialized expertise and knowledge (know-how) developed by technology vendors over a long time. Through licensing agreements, licensee companies gain ongoing support, training, and updates to technology which ensure comprehensive understanding and optimal utilization of the technology they adopt. This collaborative relationship goes beyond traditional purchasing, and often requires mutual investment in the successful implementation of the technology.

Flexibility and Customization. In contrast to traditional procurement's standardized components, technology licensing offers potentially a higher degree of customization of products. Often technology assets can be applied to improve current manufacturing technologies and enable making of completely new applications, creating new business opportunities and revenue streams.

Risk Mitigation. Innovation is inherently risky, involving uncertainties like technology maturity and market shifts. Innovators face the dual challenge of potential market loss to alternative technologies and the risk of developing technology suitable for business applications. Licensing technology from innovators mitigates both technology and market risk that manufacturer would have if they developed technologies themselves. Further, by leveraging the innovator’s technology and their expertise during implementation, licensees can significantly reduce disruptions and setbacks. This kind of strategic collaboration effectively mitigates risk, providing benefit for technology licensees.

Cost-Effective Innovation. No-one can innovate on behalf of the whole world, often not for even a specific industry. Developing new technology in-house demands substantial investments. Therefore the innovator would have paid for costly development, which would be compensated by licensee only after the technology was mature enough to be licensed. This decreases also manufacturer’s investment risk. Thus, technology licensing offers a cost-effective alternative, allowing companies to leverage existing innovations, without investing time and resources for long-term development.

Accelerated Time-to-Market. In the fast-paced business landscape, time is a critical factor. Technology licensing enables manufacturing companies to bypass lengthy development cycles they would need in-house and swiftly integrate technologies already tested and proven. This approach provides a competitive edge, allowing for the rapid delivery of new products.

Focus on Core Competencies. Manufacturers excel in producing goods, not necessarily in developing every component or process. Technology licensing allows companies to focus on their core competencies while outsourcing the development of specialized technologies to those with expertise in those areas. This strategic division of labor enhances overall efficiency, with each party contributing its expertise to the partnership.

Market Differentiation. In an era where OEMs wish to provide for consumers’ demand of constant innovation, companies embracing new technologies will stand out in the market. Technology licensing enables manufacturers to differentiate themselves by incorporating cutting-edge solutions that align with evolving consumer preferences. This differentiation not only attracts customers but also positions the company as an industry leader.

Scalability and Global Reach. Technology licensing facilitates scalability of innovation without the need to scale up internal research and development capabilities. Manufacturers can tap into a global pool of technological advancements without geographical constraints. This access to a broader range of innovations enables companies to expand their operations and remain competitive in their respective industries.

How to Navigate the Technology Licensing Landscape

While the benefits of technology licensing in manufacturing are self-evident, legal and business professionals must navigate the landscape with diligence and foresight. Thorough due diligence is crucial before entering any technology licensing agreement. Licensee’s business teams should assess the innovator’s technology solutions and their own business case for the technology. Licensee needs to understand which technology assets are needed and what kind of business benefit they provide for. Analysis should be done on the portfolio of intellectual property rights holistically, not only understanding the patents but also the know-how, software and other technology elements. Developing general understanding of the technology landscape would be useful homework for both parties. Finally, licensed technology should be enabler for company's strategic objectives. Understanding the potential risks and rewards is essential for making informed decisions.

It's essential for legal and business professionals to recognize that, as explained above, licensor has made significant investments into technology development. Technology mature enough to be licensable has over time incurred substantial investments in development, productization, testing, expert personnel, and intellectual property creation. Consequently, licensed technology always comes with a price tag. Licensee should understand that accessing technology which enables significant advancements or new business does not come for free. Payment for access to technology should be viewed as investment, not as cost.

Licensing arrangements often include various intellectual property rights, including patents, copyrights, trademarks, databased and trade secrets. Both legal and business professionals need to be aware of the specific rights granted under the agreement and any restrictions imposed. As technology assets may vary, it is important to understand that intellectual property protection and license grants works in different ways for different assets. Understanding these distinctions is crucial for legal compliance and successful integration of technology into business operation.

The success of a technology licensing agreement depends on whether a win-win agreement with clarity of terms have been achieved. Legal and IP professionals should negotiate a comprehensive agreement that should address concerns of both parties. Licensor typically needs to maintain control and transparency of the usage of its valuable technology assets and ensure compliance in licensee fee and royalty payments. Licensee typically wants to ensure business continuity and manage the relevant business risks. It goes without saying that well-defined agreement minimizes the risk of misunderstandings and disputes going forward.

Effective communication between the technology licensor and the adopting company as licensee is vital for the success of a technology licensing arrangement. Regular updates, collaborative problem-solving, and a shared vision for the technology's evolution contribute to a positive and productive relationship.

Given the complexity of licensing arrangements and expertise required to handle intellectual property questions, both licensors and licensees are strongly advised to engage with expert intellectual property professionals. Whether in-house or external consultants, they bring a depth of knowledge and experience to the negotiation table and help each party to do their homework before negotiations and finally successfully close the licensing deal. They can guide the parties through the complexities of intellectual property law and strategy, ensuring that the final agreement is not only legally sound but also aligns with the strategic goals of both parties.

In conclusion, technology licensing stands as a dynamic and strategic alternative to traditional procurement methods, offering manufacturers access to innovation that goes beyond merely acquiring physical components. By embracing technology licensing, companies can tap into specialized expertise, achieve flexibility and customization, and mitigate technology and market risks associated with innovation. Further strategic advantages include accelerated time-to-market, enabling focus on core competencies, market differentiation, and the scalability required to address global markets. Successful technology licensing arrangement can be key strategic enabler for successful and sustainable innovation in manufacturing.