The Unexpected Path to Monetizing Accidental Intellectual Property
Accidental intellectual property (IP) can be a surprising asset, often emerging from bespoke products, employee innovations, or inheritances. Monetizing this IP requires strategic approaches, considering costs, risks, and potential returns through various pathways like launching a business, selling, or utilizing tax credits.
Many people find themselves with accidental intellectual property (IP). If you intentionally create IP, you've likely thought through a monetization strategy. However, it's common for people to unexpectedly end up with valuable IP. This phenomenon, while seemingly odd, happens more frequently than many realize.
Accidental IP Scenarios
Bespoke Products and Experiments: Companies often create custom products for clients, retaining ownership even if the client moves on. Additionally, experimentation can lead to the discovery of valuable IP. For instance, Rogaine was initially a heart drug, but its side effect of hair growth led to a lucrative new use.
Employee Innovations: Many companies encourage employees to pursue side projects, fostering innovation and occasionally yielding unexpected IP. However, this IP might not align with the company's strategic plans.
Inherited IP: Both companies and individuals can inherit IP. Acquisitions might reveal unknown IP assets, and individuals may inherit valuable creations, like J.R.R. Tolkien's manuscripts, which his descendants compiled into "The Silmarillion."
Unintended Commercialization Opportunities: Sometimes, companies trying to sell their business discover there's more interest in their IP assets than the business itself. This scenario requires a pivot from selling a company to monetizing individual IP assets.
The Challenges of Monetizing Accidental IP
Monetizing IP isn't as simple as having a garage sale. It requires intentional strategies, especially for unexpected IP. The process is relevant for various types of IP, including patents, trade secrets, trademarks, copyrighted material, and more.
The Six Laws of IP Commercialization
IP Commercialization Costs Money: Whether for legal protection, market research, or development, monetizing IP often requires significant investment.
IP Commercialization Carries Risk: There’s no guarantee of success. The high potential return is often balanced by a high risk of failure.
IP Commercialization Takes Time: Achieving commercialization can take months or even years. Quick successes are rare.
IP Rarely Has Value in Isolation: IP often needs to work in concert with other assets to be truly valuable. A single patent, for example, is more vulnerable than a portfolio of patents.
Even a Little Commercialization Goes a Long Way: Demonstrating some market traction, even if minor, can significantly enhance IP value.
Valuable IP Attracts Attacks: Success attracts competition and challenges, ranging from legal disputes to outright infringement.
Strategies for Monetizing IP
Launch a Business: This provides the most control and potential return but requires significant time, effort, and resources.
Sell the IP: Selling transfers the risk but finding a buyer can be challenging. Structured payments or earn-outs often complicate control over the outcome.
Create a Joint Venture: Sharing risk and leveraging resources with a partner can accelerate monetization but might result in loss of control.
Litigate: Pursuing legal action against infringers can be profitable but is expensive and time-consuming.
Utilize Tax Credits: Research and development tax credits can provide financial relief, even if the IP isn't generating revenue yet.
Make Charitable Donations: Donating IP can offer tax benefits, making it a viable last-resort option for monetizing otherwise uncommercializable assets.
Practical Considerations
When considering IP commercialization, assess the costs, risks, and potential returns. Ensure you have the bandwidth and resources to defend and market the IP effectively. Use available tools and strategies to research potential partners and buyers, and always be prepared for legal and market challenges.
Conclusion
Accidental IP can be a surprising yet valuable asset. By understanding the landscape and utilizing strategic approaches, you can navigate the complexities of IP commercialization. Whether through launching a business, selling, joint ventures, litigation, tax credits, or donations, there are numerous pathways to turn unexpected IP into a profitable venture.
For more information check out our webinar replay, "How to Sell Intellectual Property".