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Patent licensing can be a very lucrative revenue stream

On Behalf of | Aug 29, 2022 | Patent Law

Discussions about patents often focus on the protective benefits of prosecuting a patent. You can take someone to court if they violate your rights after you secure a patent on your original chemical formula or manufacturing process.

Being able to produce a product that no one else can duplicate or to cut your manufacturing costs to a fraction of what the same products cost your competitors can certainly give you an edge. However, the biggest benefits from patent prosecution may come not from their enforcement but from licensing after you secure them.

Patent enforcement can be an expensive and lengthy process, but licensing the right to use your patented concept can be an immediate source of revenue. Even big, well-established companies turn to patent licensing as a source of revenue.

Two major tech players just reached a licensing agreement

In some ways, LG Electronics and Apple are direct competitors. Both develop smart devices for public consumption. Both have managed to create a positive perception of their brands both in the United States and abroad.

You might imagine that such large companies in similar industries would be unlikely to cooperate, but sometimes that is exactly what they do. Recently, LG and Apple announced a $600 million patent licensing agreement. Apple made a massive payment to LG to license the right to use some of LG’s patents.

Regardless of how many products Apple sells, a nine-figure licensing deal will almost certainly benefit LG as much as it benefits Apple.

Smaller businesses can also benefit from licensing agreements

Especially when your brand is not a household name, simply having a patent may not do enough to generate revenue for your business. Your concept may reach more customers if you agree to license the idea to a bigger business or even some of your direct competitors.

As with initial patent prosecution, licensing patent rights is a complex process that requires careful planning to protect your business. Identifying the various ways in which obtaining new patents can benefit your company may help you see the value in ongoing research and development, as well as the value in the lengthy and often expensive process of patent prosecution.