Setting your IP strategy - Part II: Monetisation of IP

Monetising patents

Extracting value from patents comes in many forms, most notably, preventing competitors from using key features of a product to maintain a competitive edge. This may be furthered by enforcing patents if a competitor were to infringe. However, there are other ways to monetise a patent. Similarly to that described above with regards to trade secrets, when an innovation protected by a patent is either difficult to detect in a product or has only a limited time window in which it is likely to provide a competitive advantage, the patent may provide more value through licensing. In the first case, the lack of detectability can make bringing infringement claims against a competitor more difficult, limiting the extent to which competitors are prevented from using the key features protected by the patent. In the second case, where the patented innovation may provide a market-leading product for only a limited time, licensing the patent can maximise the profit generated in the limited time window and the associated payment structure may even be designed such that further profits are made after the time by which the licensor forecasts the profit window to have closed.

In either case, patents may be entered into a patent pool joining patents belonging to other patentees and making a single license available including a number of patents owned by different members of the pool. This can be particularly effective when several patents owned by separate entities protect features which may be used together in one product. Moreover, in many cases, R&D can be geared towards the development of patentable inventions which are intended solely for licensing to third parties. Building a large portfolio of licensed patents can generate considerable, consistent revenue. Alternatively, patents can be used as a security for loans and credit. Additionally, in the UK, patents can also be used to reduce the tax burden on a business through the Patent Box scheme.

 

Monetisation of data

 

In addition to trade secrets and patents, profit can be generated from bespoke datasets. There are a number of options when monetising datasets, most notably, through licensing the raw data or training a ML model using the data, to then provide as a product. When deciding to make use of one or both of these two options, training and providing a model may feel safer because the raw data is not being shared. However, it is generally understood that ML models often leak a portion of the data when responding to user queries. More specifically, competitors may submit specific queries intended to extract information about specific elements of a training dataset, often referred to as data mining. Such mining may be hindered by designing a payment structure which prevents the high query volumes associated therewith. For example, the cost to a user placing 50 queries may be considerably cheaper, per query, than for a user placing 1,000.

Moreover, it is important to consider which parts of a dataset are the most valuable. Generally, less common data points at the edge of a dataset are the most valuable parts of a dataset. Therefore, licensing agreements for the raw data or payment schemes for a trained ML model may be structured such that accessing the edge cases of your data is more expensive.

 

Monetisation of IP

 

It is clear from the above that, to optimise the profitability of an IP portfolio, the IP right used to protect each innovation should be carefully selected and utilised strategically, taking a number of key factors into consideration. For additional details on this, please refer to our recent webinar entitled Setting your IP Strategy for 2025 - Strategic Patent and trade secret Portfolio Development presented by Colin Paterson and Kimberly Bayliss.