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Early Patent Licensing: A Key Strategy for Startup Growth

Home / Blog / Freedom to Operate / Early Patent Licensing: A Key Strategy for Startup Growth

All businesses are averse to risks but startups in particular have more to lose given their nascent stage in the market. As a startup founder one needs to be cautious when launching their tech or product in the market to avoid unforeseen challenges. Since a novel innovation is at the core of most startups, securing their IP is the foremost step that must be taken. While obtaining a patent is great, it may not ensure coverage for all aspects of the product. This is where early patent licensing steps in.  

Table of Contents

Types of Licensing

Licensing may be exclusive or non-exclusive depending on the signed contract. Exclusive licensing gives a business monopolistic right over an invention to the exclusion of others, whereas non-exclusive means that it may simultaneously be available to others as well. There are 2 types of licensing channels that can be utilized depending on the business’s requirements.  

  1. Collaborative Licensing – This type of licensing is fairly recent but gaining pace due to the advantages it offers. In the arena of tech, often multiple companies are working towards the same goal. If there is another company working on similar lines as yours, collaborative licensing can help by enriching the research and promoting growth. It is a win-win for all! 
  2. Cross Licensing – Cross Licensing involves an agreement between companies to share technologies. By mutually sharing technology companies are able to lower product development costs as well as avoid expensive litigation.  

Who Should Seek An Early Patent License? 

Early patent licensing is a cost-effective way of enhancing patent protection and avoiding potential infringement cases. Startups planning the following must seek an early patent license for smooth sailing: 

  • Initial Public Offering
    Acquiring an early license before you foray into a public offering is a smart move. There have been plenty of precedents where a company received an infringement lawsuit during its IPO period. The most famous example is that of Facebook which was sued by Yahoo before its IPO. As a result, Facebook had to buy 1400+ patents from IBM and Microsoft to counter the 1000+ in Yahoo’s portfolio. But startups do not have the financial luxury of making such hefty spending. Hence, it is always better to take precautions than regret later. It helps you negotiate a better deal and avoid paying hefty royalty fees later.  
  • Entering A New Jurisdiction
    Unless you wish to be greeted by a lawsuit in a new country, it is best to conduct a Freedom to Operate (FTO) search. Since international expansion is the way forward for businesses to expand, you are likely to take your product abroad. Always perform a thorough FTO search and secure early licenses in the new jurisdiction to prevent infringement cases.   
    When conducting deals always avail the services of a trusted and professional team of lawyers as such deals hide many fine details that can prove cumbersome later. Invest in a good legal team to ensure your path is clear.   
  • Global Distribution
    Patent licensing can simplify the global distribution process as you can enter multiple markets if your patent has families that cover those jurisdictions. This makes it easier to explore and capitalize on new opportunities for your products.

What Are The Benefits Of Early Patent Licensing? 

Early patent licensing offers several benefits for startups, like: 

  1. They are more economical than seeking a license after being sued. The asking price for patent licenses increases significantly if they are sought in a critical situation like patent infringement. The same patent would cost much less as well as be available for negotiations if an early patent licensing approach is adopted. The same applies to tech as well. If you approach for a license in the development stage, you are likely to get a better price than once the tech is launched.  
  2. They are helpful in refining the product further. Licensing gives you access to the technologies that other companies are working on. This knowledge can be utilized to make changes and enhance your own product.  
  3. It helps you tap a new customer base and increase your market share.

How To Find Licensors?  

The four most feasible options for finding credible licensors are: 

  1. Patent Marketplaces 
    Shop for licenses on the patent licensing and selling platforms. They are simple to use and simplify the search process.  
  2. FTO Search 
    If you are launching a new product, chances are that you have already conducted an FTO search to rule out infringement. The same search will also come in handy when looking for licensors. It will reveal the technologies that are similar to yours in some aspects and can be reviewed for licensing opportunities  
  3. Competition Search 
    Find the top players as well as other burgeoning startups in the domain and approach them for licensing. Collaborative licensing would be a good fit in this scenario if agreed to by both companies.  
  4. Active Licensors 
    Some companies like IBM and Nokia are well known for actively licensing their patents. Many companies maintain patent portfolios for the sole purpose of licensing. These are the companies you can reach out to for your licensing needs.  

Conclusion

The world of innovation and IP is fraught with menaces that can jeopardize the most well-designed plans. Those caught unawares can end up losing all their hard work and investments in a moment. As a startup, securing yourself against these dangers should be considered a priority. Early patent licensing can be your shield from the time-consuming and financially draining litigation process that follows a case of infringement. If you are unsure about the licensing process or need assistance with strategizing your patent licensing, then hiring an expert firm is the dependable solution. They are your best bet when navigating the tricky waters of the patent landscape! 

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