One or more patents can be developed for a licensing strategy in conjunction with or separate from a company’s main product.
There are some technologies that are so large that one company may not have the resources to bring the technology to market or where the developing company does not have the interest in fully exploiting the technology.
In this strategy, the patent portfolio is developed with an intent to offer a licensing agreement to one or more other companies, presumably for royalty income.
An example of a very large technology is one that may be used across an entire industry, where the technology may be used like an industry standard by which many companies’ products may be interchangeable. For example, some of the MPEG standard is a licensed patent portfolio that is subscribed to by all manufacturers of hardware that uses MPEG. A key to bringing this technology to market is to get all of the big players on board so that the patent portfolio becomes an industry standard.
In another example, a company may develop a unique processing machine or method to manufacture its products. The processing machine or method may be useful outside the company’s industry by non-competing businesses. Patents on the processing machine and method may be licensed outside the patent owner’s industry. The patents may be a rich source of revenue without negatively affecting the company’s competitive position in its main market.
The company may elect to license its product or manufacturing methods to a competitor. In such a scenario, the company has two advantages: one is that they ensure an added royalty cost is added to every one of their competitor’s products, and two is that they make a profit even when a competitor sells a unit. Such alliances and royalty arrangements may give a business many opportunities it would not otherwise enjoy.