Selling patents to generate cash
Many small and medium sized high tech businesses own patents that describe inventions their company has created over the years but they don’t know how to extract actual cash from those patents by selling them. Frankly it’s a process that is very akin to an investment banking M&A transaction and can be fraught with gotchas and speed bumps throughout.
Even companies who have done it once, won’t really be able to escape a few surprises when they do it the second time or the third. Indeed, several 10’s of patent transactions should create an experienced ‘patent sales team’ which knows how to prepare the portfolio, position it and attract the most appropriate buyers, leading them through a process that maximizes the sale value while agreeing on terms that both parties can live with and therefore create a true win-win.
But even then, there can be new learning for all. It’s just an exciting space.
So why do it?
A well executed, effective sale of your patents provides you with:
- Extra high margin revenue to create products or develop further inventions and patents
- Savings in maintenance fees (or prosecution fees for apps) for granted patents
- A grant back license that still allows you to practice your invention
- Chance to be more strategic – jettison, unused, non-strategic patents and invest in or create more strategic, relevant ones
How do you do it?
- 1) Determine and agree your business objectives
- 2) Assess your patent portfolio
- 3) Find buyers – Either engage a successful broker or target industry buyers
- 4) Execute the deal
Business Strategy Questions to Ask
- Do we intend to be offensive or defensive with our IP?
- Will we assert these patents against other companies?
- Do we need these patents strategically?
– Do they align to our future direction?
- How old are these patents and how close are they to expiration?
– What value remains – is it best to extract the maximum value now or later?
- What return would we get if we were to sell the patents?
– High margin revenues with sunk costs reclaimed and defensive capability intact if grant back license retained
- What are the risks and downsides of selling?
- What does the cost benefit analysis indicate?
Assess your patent portfolio
Find buyers – Either engage a successful broker or target industry buyers
Execute the deal
