What is Commercialization of IP

1. What is Commercialization of IP Josiah Hernandez

2. Direct sales • Direct sales. In the direct sales scenario, the intellectual property owner handles all aspects of the business. While the product may be manufactured by the owner itself or by a contract manufacturer, the owner will be responsible for the marketing and sales of the product. After the owner has paid its employees and expenses, the balance is profit. A newer venture may find it difficult to hire people with the knowledge and ability to market and sell the product. However, the benefit of this option is that the owner has not made a commitment to another party, so it may change its direction at any time and pursue another commercialization strategy.

3. Sales representative • Sales representative. The next scenario involves outsourcing sales to outside sales representatives. Typically, under this arrangement, a sales representative will take orders, which may be accepted or rejected by the company. If accepted, the sales representative will then obtain a commission of 5, 10 or 15% of sales. While 10% is common, the commission rate will depend on the industry and the person involved. For the company, the benefit is that it typically pays commissions out of money already received, so there's no advance investment. The company is often also getting someone with knowledge of the area. However, this type of arrangement also carries drawbacks. Since the sales representative is not an employee, that person may not be committed to the product. Furthermore, the representative may be carrying multiple products such that if another product is selling better or is more established

4. Franchising • Franchising. Franchising is a heavily regulated area. If a company tries to impose a lot of marketing obligations on its franchisee, it must look into many of the obligations under Federal Trade Commission (FTC) or US law. One indication that a company is operating a franchise business is if it charges the distributor for the right to use a trademark that extends above and beyond the basic price of the product.

5. Distribution • Distribution. In distribution-type arrangement, a manufacturer sells its product to a third-party distributor, who resells it to other people. The distributor will assume some of the risk after it has taken title to the product. For the manufacturer, it will be surrendering more responsibility and profit than in the strategies above. In the sales representative option, the manufacturer may be offering a 5-15% commission. With a distribution agreement, the manufacturer may be selling at a 30-70% discount to the retail price, with the typical discount being 50%.

6. Joint Venture • Joint venture. In a joint venture arrangement, the intellectual property owner licenses its intellectual property to some party in which it holds an ownership interest. A joint venture is a separate entity where an owner may receive money both from owning the entity and from royalties. The risk is that a joint venture may have a different corporate culture and goal than the intellectual property owner. The benefit is that such an arrangement may potentially shield the intellectual property owner from some liability. Michael Diener recommended that owners negotiate the intellectual property license fees at a reasonable arms-length and that they consider dividends from their ownership interest as an additional benefit. Owners who rely on dividends as their compensation may sometimes be disappointed by the results.

7. Licensing • Licensing. Typically, the licensee will manufacture and sell the product, and pay some kind of royalty of 3-6%. In the case of a patent license, the licensor may be relying on the licensee to develop and manufacture the product. If the margins are 20%, the licensor may receive 5% out of that. The ballpark figure is that 25% of margins goes to the licensor; however, that may depend on whether the licensor is just transferring the patent and prototype, or whether it is also contributing some significant know-how or other technical information, as well as the amount of mark-up that is typical for that type of product. Licenses may be exclusive or non-exclusive. If an intellectual property owner was contemplating selling its intellectual property under an agreement that provided for downstream payments, Michael Diener recommended that the owner consider an exclusive license instead so that it would have a better ability to recover intellectual property.

8. Sale of Technology • Sale of technology. The sale of intellectual property is not seen very often, except for the sale of a product line or the transfer of a business. If the intellectual property owner will be receiving an ongoing payment for the sale, Michael Diener recommended that the owner offer an exclusive license instead so that it will have a better chance of reclaiming the intellectual property if it don't get paid along the way.

9. Spin-off and divestigure • A corporate spin-off, also known as a spin-out or a starburst, refers to a type of corporate action where a company "splits off" sections of itself as a separate business. • The common definition of a spin-off is when a division of a company or organization becomes an independent business. The "spun off" company takes assets, employees,intellectual property, technology, or existing products from the parent organization. Shareholders of the parent company receive equivalent shares in the new company in order to compensate for the loss of equity in the original stocks; thus, at the moment of spinning off, the ownership of the original and spun off companies are identical. However, shareholders may then buy and sell stocks from either company independently; this potentially makes investment in the companies more attractive, as potential share purchasers can invest in only the portion of the business they think will have the most growth.

10. Spin-off and Divestigure • A research spin-off is a company that falls into at least one of the four following categories:[1] • Companies that have an Equity investment from a national library or university • Companies that license technology from a public research institute or university • Companies that consider a university or public sectoremployee to have been a founder • Companies that have been established directly by a public research institution