Why your intellectual property is worth more than you think

Some organisations have IP strategies in place, yet many businesses are still missing out on vital opportunities. This article by Michael Kolk, (Managing Partner, Arthur D. Little), Mario Aquino (FutureLabs Ventures) and Andrew Tingey (Symbiosis IP) explains how they can harness these new possibilities through either licensing or corporate venture building (CVB), spinning out IP into new businesses.

Understanding the untapped potential

Organisations of all sizes are increasingly knowledge- and capability-centric, generating an unprecedented volume of IP. Clearly, some of this is used to directly power businesses, particularly in innovation hotspots such as Cambridge.

However, much of this IP remains underutilised or could be applied in new markets. To monetise their IP effectively companies need to change their perspective.

Rather than thinking of themselves as businesses tied to a specific industry, they need to instead see themselves as dynamic collections of IP that can be applied in new markets. For example, a bank or fintech is not just a financial institution but also a holder of valuable data analytics, cybersecurity, and transaction technologies with broad applications beyond finance.

Monetising IP involves a spectrum of strategies, from cautious licensing to higher-stakes CVB, with strategic partnerships as a middle ground. This article will focus on licensing and CVB due to their direct, high-impact pathways for scaling IP monetisation amongst the majority of businesses.

Taking the licensing route for IP

Licensing is a versatile tool for monetising IP, allowing companies to gain royalties, expand market reach, and diversify revenue streams with minimal risk.

As sectors converge and technologies like AI become more ubiquitous, licensing outside an organisation’s core industry is increasingly viable. For example, “know your customer” technology from financial services has broader applications in sectors such as travel, healthcare, and logistics.

Agreements can be based on exclusive licenses, nonexclusive licenses which allow multiple companies to use the IP simultaneously, or joint development agreements around early-stage IP that has strategic importance. These are particularly useful for enabling companies to codevelop new products or solutions, especially in emerging markets such as Greentech.

Licensing success requires careful structuring, strong negotiation, and a deep understanding of market dynamics. Companies need to have specialist skills and evaluate licensing’s impact on their short- and long-term objectives.

CVB and achieving a multiplier effect

CVB offers a powerful way to unlock IP value by creating agile, high-growth businesses. Unlike licensing or partnerships, which typically generate incremental value, CVB enables the creation of entirely new businesses that can deliver significantly higher returns.

CVBs can either be spin-ins (internal ventures that evolve into fully owned lines of business) or spin-outs (new ventures that remain strategically aligned with the parent company but grow beyond its core industry.) Spin-outs typically gain external funding, enabling the parent company to monetise its initial IP investment while retaining a minority stake.

CVB can be used by companies of all sizes to multiply their valuation by unlocking IP in both existing and adjacent sectors. Although more complex than licensing, CVB shifts the focus from transactional deals to building scalable businesses with market valuations potentially reaching millions or even billions.

While CVB offers significant opportunities, it requires specialised capabilities and presents several challenges around balancing how involved the new business remains with its parent company, and attracting the right talent, skills, and funding.

Understanding best practices for IP monetisation

Whichever route is chosen, companies can achieve significant value from their IP. However, for many organisations this is uncharted territory, and they may lack the experience to know where to begin. To maximise opportunities while minimising risk, companies should follow these four best practices:

1. Plan a changed IP strategy
Shift from a solely reactive, defensive position of cataloguing and protecting IP to a proactive approach focused on its expansion and potential for partnering or monetisation. Ensure all IP is properly registered in the right jurisdictions.

2. Understand the opportunities
Perform a full market analysis to identify the most promising IP and determine the best strategy for monetisation, based on knowing its value and how it can be best offered to customers.

3. Create the right organisational structure
Given that IP exploitation is new for many businesses, it’s critical to ensure you have the right organisational structure and talent, with entrepreneurial, market and legal skills in place. External partnerships with consultancies can help to fill these gaps and build capabilities.

4. Understand that it is a continuous process
Maximising IP returns is an ongoing process as IP and business needs evolve over time. Therefore, continuously invest in and refresh your IP portfolio to maintain relevance and a competitive edge, monitoring competitor activities to help guide your strategy.

Taking a strategic approach to IP

In a world of low economic growth and increasing global uncertainty, companies must look for new ways to drive growth. Taking a strategic, proactive approach to IP can unlock transformative value, whether through low-risk licensing or potentially higher-impact corporate ventures. Properly planned and executed programs enable companies to not only safeguard their innovation but also turn it into a powerful engine for their future growth.