Successfully licensing your technology
Jun 19, 2014
So, you’ve developed a great technology. Perhaps you’ve even developed your own products based on that technology. If it’s really that good surely other people will want to use it for their own commercial gain?
In the field of research and diagnostic antibodies the ability to prepare high quality reagents conjugated to enzymes or fluorochromes was for a long time the bastion of those with in depth immunochemical knowledge. That was changed by the launch of Lightning-Link® kits by Innova Biosciences in 2004 – providing the opportunity to anyone who can use a pipette to prepare conjugates in less than 30 seconds hands-on time.
As I mentioned above, if you have such a great product others will want to use it commercially, and therefore a strategy to license Lightning-Link® for commercial use was required. Whilst it’s not possible in such a short article to consider all aspects of licensing, I’ve included a few key points below that should always be considered.
Field of Use
Understand what the licensee wants to do with your product, and offer them terms for exactly that. If they ask for a license to use products in research applications, don’t include rights for diagnostic applications – that might be a useful extension in the future. If they ask for rights within a veterinary assay field, why would you include human assays? Of course, they might ask for something very broad, in which case you really should find out what they really want to do…..and ensure the terms reflect that.
Products / technology
Obviously this will differ from company to company. For Innova Biosciences product sales are a key part of the value of the license, so we don’t license our core technologies to licensees to use themselves. For others the opposite will apply. Of course, if you do have a range of products like Lightning-Link® you need to consider if a licensee really needs access to all of your products – it’s unlikely to be the case, so you should license only what they need, and keep open the opportunity for extending the license in the future.
The licensee wants this, the licensor almost certainly doesn’t! If there is any form of exclusivity it has to be justified by the return – and a guaranteed return at that, avoiding the risk coming from empty promises. Of course, you could be creative here – is there an opportunity to offer exclusivity in such a narrow field of use that it is truly unlikely to reduce your income in the future?
Even with a great product like Lightning-Link® there is some competition. You have to understand the competition to understand the value of your product to a potential licensee. This is simply the same approach as you’ll use when selling the product to any other customer.
Range of Reasonableness
Perhaps the really key point of everything already mentioned. You need to propose terms for the license – if those terms will not allow the licensee to use your technology profitably they will simply walk away. Your valuation of the technology being licensed has to be generally aligned with that of your licensee – fitting into a so called “range of reasonableness”.
In summary, simply remember that an active licensing program can bring your products into long-term and regular use by a range of different companies. The value of a predictable income stream derived from such licenses cannot be underestimated to the long term success of your business.