Beyond the direct competitive commercial advantage that intellectual property assets such as ideas, inventions, registered patents, registered designs and models, trademarks, and copyrights provide to their owners, they can also generate significant additional economic benefits through the sale or licensing of usage rights (patent acquisition), both as independent revenue components and through integration with other technologies.
Patent Buying and Selling – What Are the Benefits of IP Trading?
In recent years, intellectual property assets have become commodities in their own right, and IP trading is now one of the common ways to increase revenue. This can be achieved through:
– Profits from selling or licensing patents to third parties
– Purchasing patents that enhance company capabilities
– Creating technological collaborations based on patent rights sharing
Moreover, IP commercialization can generate high returns for owners during company sale and/or merger. Therefore, evaluating companies’ intellectual property commercial value is now an integral part of due diligence processes conducted before merger and acquisition proceedings.
Additionally, commercializing IP rights and selling patents can help companies release activities no longer core to their operations and redirect resources to develop core areas that advance their current objectives.
How Can Intellectual Property Assets Be Traded?
Entrepreneurs and companies can trade their intellectual property assets through sale or licensing of usage rights.
When purchasing patents or other IP assets, all usage rights transfer to the buyer, requiring a commercial agreement that secures the rights of sellers and buyers and the compensation for the sale. Patent sale compensation can be provided as:
– A single one-time payment
– Royalties paid over a limited or unlimited period based on sales volume
Alternatively, usage rights can be licensed. There are two types of licenses:
– Exclusive license (more expensive)
– Non-exclusive license (less expensive and granted to multiple companies operating in the same market)
How to Choose the Most Suitable Trading Model for Patent Buying and Selling?
The commercial model decision is always case-specific, as it depends on many factors including:
– Asset nature
– Quality
– Commercial maturity
– Market necessity
– Market structure
– Capabilities and needs of involved parties
Compensation amount and payment method for patent sales are determined through commercial negotiation between parties. Due to the complexity of compensation agreements, it’s highly recommended to consult an experienced IP attorney with deep commercial understanding. Before purchasing patents or other commercial assets, it’s highly recommended to obtain professional and objective opinion on the strength of protection they provide.
IP Due Diligence
Since intellectual property assets are an integral part of company assets, during due diligence for investments and M&A transactions, it’s crucial to thoroughly examine the value of the company’s IP assets.
The purpose of IP due diligence is to provide investors or buyers evaluating transaction viability with a complete and accurate picture of the legal and commercial status and value of the company’s IP assets. Additionally, examination results can indicate appropriate growth directions for the company.
Due diligence includes mapping all IP assets including:
– Patent list
– Trademarks
– Registered designs and models
– Copyright-protected works
– Trade secrets
– Validation of these assets
– Ownership verification
– In-depth professional examination of their commercial value and protection strength
It’s recommended to entrust IP due diligence to a specialized external body that can ensure objective and realistic valuations.
Note that arranging patent registration and additional IP assets before due diligence will increase company value and enhance attractiveness to investors.
Support and Representation in IP Commercialization
To maximize IP protection and profit potential in commercialization, including patent sales, it’s important to plan carefully from the patent registration stage with deep and forward-looking consideration, through negotiation and drafting various licensing agreements, to reliable IP valuation before M&A transactions.
As a leading IP firm, Dr. Mark Friedman’s law firm has high expertise and extensive experience of over 30 years representing more than 8,000 clients in planning and implementing IP protection strategies including patents, designs, copyrights and trademarks, as well as supporting investment transactions, partnerships, complex mergers and acquisitions, negotiations, agreement formation, due diligence, and IP asset valuation.
The firm’s team has extensive and diverse knowledge in all technological and scientific domains alongside deep familiarity with the business environment, tax and regulatory aspects, and current commercial practice of IP commercialization in each of these fields, both locally and globally.
For any questions regarding IP commercialization and transaction support, please contact us.
*The aforementioned in this article and on the website in general should not be considered as legal advice and the things written in it should not be considered as a substitute for individual legal advice, but a personal opinion and/or a general explanation only. Of course, you should not rely on and/or act in accordance with the above without individual legal advice from an attorney
For any questions on this topic, contact us
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