Getting Paid for What You Know: Licensing and Secondary Sales
June 2, 2010 by Mary Adams
Yesterday, I talked about selling knowledge products. Another way of getting paid for knowledge is through licensing. This usually applies to situations where there is a very clear technology or knowledge product that has specific legal protection. I’ll discuss intellectual property in more detail in a later post. The important thing to understand at this point is that if your process, service, or product qualifies for legal protection, then you have a whole new way of monetizing your knowledge, through direct sale, licensing and royalty streams.
One of our recent guests on the monthly call for the Intangible Asset Finance Society, David Ruder, shared the story of Massimo, a brand that was licensed to Target and has become a huge source of licensing revenue to its owners. Massimo was a lackluster branded apparel company until they licensed their name to Target in 2000, which now generates $1 billion in annual revenues with the brand.
Trademarks do not have an expiration. As such, they can be a great investment. In contrast, patents do have a limited life. But they can give a technological advantage to their owner. Because so many companies have patents which they have not exploited themselves, there is a growing secondary market in them. Another guest on the IAFS calls, David Hetzel, estimated that these kind of sales yield $1 to 2 billion per year.
Licensing or outright sale of intellectual property can be powerful because it enables you to get paid in a new way for work you have already done. But, ultimately, you are still selling a “do it yourself” solution. The licensee/buyer, like the buyer of other kinds of knowledge products, has to contribute their own effort and expense to solving their problem; they must build a business around the IP.
This characteristic puts knowledge products on the low end of the value spectrum from your customer’s perspective. The knowledge product provides information, ideas and suggestions on how to apply them. But it does not solve your customer’s problem. For that, you need to sell them a service…more on this tomorrow.
From Intangible Capital: Putting Knowledge to Work in the 21st Century Organization
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[...] on the circumstances. This legal definition and protection can also create opportunities for licensing IP rights outside the corporation. This strategy is getting a lot more attention today from organizations, [...]
love the three capital system. but see a fourth called linkage capital. in that this is the glue or pressure that holds / binds the capital system together.
Funny you should say that…in our book, we call this strategic capital. Some people call it business recipe. But we all are saying the same thing–that how you pull and hold your knowledge factory together is itself a unique category of IC.