So you have been tasked to market some very valuable IP. For larger technology firms, this licensing initiative might be the result of a mandate from execu­tive management: “We’ve invested heavily in R&D and I want a return on some of our underutilized technology. I read an article which showed current US royalties approaching $ 100 billion annually. It noted the sig­nificant impact of royalties on earnings at IBM, TI and other technology firms. You have a personal commitment to help the firm hit its quarterly num­bers by generating a significant royalty stream.” You say to yourself, “Okay, what do I do now?”

For smaller technology firms, IP is the key differen­tiating asset — it is the foundation of the technolo­gy. A successful Road Show, or IPO, requires that the IP be powerfully communicated in a business context. If done successfully, the result is new capital under favor-able terms.

Similarly, effective IP market­ing is often pivotal to a “make­or-break” license between a biotech NewCo and “Big Pharma”. Infusion of significant royalties under advantaged terms results if the IP is market­ed effectively.

 

In these examples, the need to effectively communicate the strength of the technology and underlying IP in a business con-text is critical. A compelling business story about a compli­cated technical subject, and the supporting IP, must be told to time-constrained technical and non-technical investors and business professionals. The eco­nomic case has to be made to users who may, or may not, be conversant in the technology.

Effective technology market­ing requires that core technical drivers, and attendant benefits, not features, be explained in a concise and comprehensible fashion. The investment thesis has to logically map to benefits.A clear, compelling value propo­sition has to be delivered quick­ly to an overburdened audience.

To do this, you must explain the technology in near-lay terms.

Background:

The consensus estimate for 2003 US licensing royalties is roughly $100 billion segmented into four areas. There is limited hard data.

There are basically 4 types of licenses (Push, Assertion, Brand and “Donation”). Push licens­ing, also known as carrot licens­ing, refers to an offer to license intellectual property on a non-coercive basis. Assertion licens­ing, also known as stick licens­ing, defines a license offered on a coercive basis where a prospective licensee is accused of infringing IP rights and is

threatened with litigation. Brand licensing refers to the license of trademarks and trade names. IP “Donation” is not, strictly speaking, a license. The tax benefit from donating unen­cumbered IP to qualified organi­zations (i.e. universities), how-ever, can be viewed as the equivalent of a license royalty. A donation can be thought of as a higher return option to a royalty bearing license.

Push licensing is tough to implement in a weak economy. New start-ups that are prospec­tive Push licensees have little cash. Established high-tech firms can’t tap the IPO market.With limited liquidity, they are reluctant to invest in building their IP portfolios by investing in Push licenses.

With the exception of the pharmaceutical and biotechnolo­gy industries, anecdotal evi­dence suggests that current cor­porate initiatives directed at leveraging IP into new products and applications are down. Corporate appetite for risk is low and the need to conserve cash and shore-up current earn­ings is high. Industries such as telcom, semiconductors and chemicals are not too receptive to Push license proposals.

Successful Push licensing in a weak economy requires careful targeting of markets, compelling business arguments and a will­ingness to share risk by taking a higher proportion of considera­tion on a contingent basis.

This article focuses on IP Marketing as it relates to corpo­rate out-licensing. It is assumed that the decision to license fundamental IP is based on sound analysis. The key “teachings”, with few exceptions, are appli­cable also to the marketing of IP by small technology firms.

It is not the objective here to discuss advanced approaches and tools available to prioritizeand select IP for licensing from a broad portfolio.

What are the issues associated with the marketing and sale of IP? They are the need to:

1)  Develop an efficient, results-oriented licensing process. This requires a project manager with decision making authority and access to key com­pany functions (i.e. business unit managers, legal, account­ing, tax). It also requiresupfront agreement on approvals – less is more.

Leveraging best practices in M&A is recommended: Who are the prospective qualified strate­gic buyers / licensees? (A quali­fied licensee has the financial and technical resources to implement the deal. As important, the target has a track record for being able to close quickly, is ethical, imple­ments commitments and may be a partner for future transactions. Talk to others who have licensed the target and act on their input.) Are there non-obvious buyers who value the IP at a premium? How will we approach the tar-gets? Can we make the process competitive?

2)  Establish the IP transac­tion team. This should include the Business Development or IP Licensing manager, who is typi­cally also the team leader and negotiator; the technical subject­matter-expert; IP attorney andfinancial analyst. A track record of selling and closing complex technology deals is the most critical skill for the team leader.

3)  Create a prospectus and compelling marketing collat­eral that makes the business case for the technology and IP from the licensee’s viewpoint. You want to help the prospec­tive licensee sell his manage­ment on the licensing. This is an investment; it’s about the money, not the technology.

So what are the unique com­munications and marketing challenges represented by IP licensing? How does one go about designing and implement­ing?

There are three major hurdles to overcome in IP marketing.

1)Boring content. Let’s be honest, other than patent attor­neys and inventors, does anyone really want to read a patent portfolio? Ever hear anyone say, “Hey honey, I am going up to the bedroom to curl up with USP 6,792,339. I am half way through the claim section and can’t stand the suspense.”

2) Committing unnatural acts. Asking the licensing “team” to sell is difficult as they often are viscerally opposed to marketing. We are asking the team, composed of patent attor­neys, scientists and engineers to engage in an unnatural act. “The technology is so good it will sell itself.” Sure. Obviously, I am stretching to make a point here, but I am not stretching too far. I deal with technologists and attorneys on high-tech mar­keting collateral all the time. I know. Ever hear an attorney say

that you are not being aggres­sive enough in touting benefits; technologists argue economic merits? I have license to write this as I am a technologist and some of my best friends are attorneys.

3) Extracting the business story; “No, we don’t have any financial or marketing data, management was willing to back us with $10 million because it is cutting edge technol­ogy.” I can’t tell you how many times I have heard that “the project is strategic, financials aren’t important”. Economic data, albeit sometimes weak, always exist; you just have to be persistent. Then you have to get consensus from the marketing and technical guys on the technical and business merits of the story.

IP Marketing Methodology (IPMM)^™ for Push Licensing:

Quid Technologies, Inc. (Quid) has pioneered the development of marketing and com­munications methodologies for Push and Assertion licensing (covered in a follow-on article). The IPMM is a blueprint for communicating the key ele­ments of a Push license. The methodology was developed by a team of licensing executives with over 25 years of experience managing the IP portfolios of high-tech Fortune 500 companies.

The methodology is designed so that a licensing or business development executive, or tech­nologist, can quickly access the information needed to deter-mine the relevance of the licens­ing opportunity to the business strategy. The methodology begins with three sections designed to provide the potential licensee with a compelling overview of the licensing opportunity.

The Introduction introduces the technology being licensed, the company that is licensing the technology and the personnel responsible for managing the licensing process. The exec­utive summary provides the potential licensee with a brief overview of the licensing oppor­tunity from both a business and technological perspective. End Use Segmentation defines prospective end uses. If the gen­eral overview resonates, the potential licensee will proceed to the next two sections which focus specifically on the tech­nology being licensed.

Technology provides a synop­sis of the technology being licensed. Status highlights the com­mercial position of the technology. Now that the potential licens­ee understands the technology being licensed, the methodology focuses on the financial bene­fits. This section provides the basis for the potential licensee’s internal manage­ment presentation.

The Intellectual Property sec­tion then details the specific intellectual property being licensed while Other Assets lists other assets that are being offered. Finally, License Elements outlines the terms of the license. The methodology concludes by informing the poten­ tiallicensee how to respond to the licensing opportunity.

Development of the IPMM requires 8 to 10 weeks. The resulting prospectus-like module is distributable via the web, CD, broadcast or print. The wide avail-ability of broadband has made web-based distribution preferred.

There is heavy use of high-end animation and simulation. Voice-over is typically in English, but can easily be done

in multiple languages. Quid has developed modules inMandarin, Flemish, Bahasa, French, inter alia.

Quid builds modules in a mod­ular manner. This allows for easy repurposing (i.e. conver­sion of a CD to print or video) of content.

An IP Marketing module was recently developed for a Fortune 100 firm seeking to extend a commercial platform technology into new markets through licensing. The marketing of the IPwas initiated at a target industryconference. A few hundred CDsand print brochures were distrib­uted there. A short “looped” video was displayed at the exhibit table.

A short “teaser” was extracted from the module and used in a focused e-mail based marketing initiative directed at new licens­ing prospects. The teaser was emailed to a VP for a major German technology firm. He responded within the hour. “Neat technology and a great way to communicate it, but it is not for us. However, I have 4 customers who might be inter­ested. Can I forward the teaser to them?”

After a considered analysis lasting at least 30 milliseconds,the initial target was given per-mission to forward the teaser. One of the referrals responded the next morning asking formore information. Not bad, five new European contacts, one very interested, without leaving the east coast in less than 24 hours.

A case study, best viewed in broadband, is provided at:

www.quid.com in the IPMarketing section. The study covers a module developed for amajor west coast aerospace firm seeking to license MEMS fiber optic microaligner technology. This case study provides a basis to benchmark your marketing approach against, whether for an IP Marketing initiative, IPO or road show.

Harry Dounches, Ph.D. is VP and Sr. Partner for Quid Technologies,Inc. He is also the current Co-Chair of the NY chapter of the Licensing Executives Society.