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Licensing a patent can be a viable source of company revenue

On Behalf of | Mar 15, 2023 | Patent Law

Prosecuting patent infringement is often about protecting an idea, invention or manufacturing process. A patent extends the sole right to use a process, invention or concept for years. Innovative businesses can often produce better products than their competitors or offer products at a substantially lower cost because of their unique and patented processes, inventions and designs.

In theory, having an advantage over competitors will let one business corner the market in their industry. However, competitors may quickly start to push back an organization’s competitive advantages by trying to reverse engineer the same concept or product. Any advancement will push other companies to find better solutions as well.

Rather than waiting for competitors to undermine the usefulness of a patent, it may be a better option for an organization to license its patents to other businesses in the same industry.

Licensing is a source of ongoing revenue

When an organization licenses a patent to another business, that organization will have full access to the process or concept. That may mean that the business that licenses the patent will be able to produce higher-quality products or drop the prices of the products they sell.

Although that could eventually diminish the market share of the company that holds the patent, the licensing fees are effectively a guarantee, while sales can fluctuate at any time. There’s never any way of knowing when another advancement in the same field might drive prices lower or push customers to buy from a competitor instead.

Many businesses will find that a combination of enforcing their patents to protect against infringement by competitors and licensing certain patents are the best ways to capitalize off of innovations.