Here’s a question for all of you business owners out there: Do you know the worth of your intellectual property?
Is it worth hundreds, thousands, or more?
If you don’t, you should.
All of the industry leaders, like Apple, Microsoft, Sony, and RIM sure do. Otherwise, they wouldn’t have bought over 6,000 patents worth $4.5 billion from Nortel Networks!
Understanding the value of your intellectual property is crucial for leveraging it as a revenue stream, and in this article, we'll explore how you can do just that.
Let’s dive right in.
1. Can Intellectual Property Be a Revenue Stream for Businesses?
If you're here, you've probably heard some talk about how patents, trademarks, copyrights, and trade secrets can boost your business.
You might not be an expert on all the nitty-gritty, but that's alright – that's why intellectual property lawyers exist.
Still, you don't need to be an expert to recognize that IP can be a major revenue stream for your business. Intellectual property offices worldwide can attest to this.
According to their reports, companies that own at least one patent, registered design, or trademark tend to generate about 21% more revenue per employee than those without these intellectual property rights.
If you do the maths, you’ll see that this difference isn't insignificant.
We've also discovered that companies that own intellectual property rights tend to pay higher wages to the employees who create this intellectual property. This further proves the valuable contribution of IP to a firm's overall worth.
Now, reading this, you’d probably think how it seems obvious that every company should use intellectual property as a revenue stream.
However, there's still so much untapped potential.
Studies report that fewer than 9% of small and medium-sized enterprises (SMEs) in the U.S. own some IP rights. Larger companies, on the other hand, have a much better percentage of ownership.
This underlines a huge opportunity for SMEs to use intellectual property for growth and talent acquisition.
2. 6 Ways Businesses Can Use Intellectual Property as Revenue Stream
There are many ways businesses can use IP as a revenue stream. Today, we’ve decided to highlight the top six for you.
At number one, we’ve got licensing for you.
1. Licensing
Licensing is like renting out your intellectual property to someone else.
Let's say you have a cool invention, a catchy brand name, or a logo. You can let other companies use those in exchange for a fee or a royalty.
In fact, that’s exactly what Disney does.
See, Disney licenses their characters like Mickey Mouse or Elsa to toy companies, clothing brands, and even theme parks. Every time you buy a Mickey Mouse toy or a Frozen backpack, part of that money goes back to Disney as a royalty payment.
Smart way to generate income, right?
2. Cross-Licensing
Think of cross-licensing as a bit like a trade agreement between two companies that own different intellectual properties.
Essentially, they give each other permission to use their IP in exchange for the other company's IP rights.
In 2011, Microsoft and Samsung signed a cross-licensing agreement, allowing Samsung to use Microsoft's patents in its Android smartphones and tablets.
In return, Samsung agreed to pay royalties to Microsoft.
This agreement was seen as mutually beneficial, as it gave Samsung access to valuable technology while providing Microsoft with a revenue stream from Android devices.
3. Intellectual Property Rights Sales
Selling IP rights to another party is another way for your business to generate or increase revenue from its innovations.
This stands particularly true if you’re a startup founder considering selling a patent to a larger corporation.
In that case, the larger corporation can get the rights to use the technology covered by that patent, if they see the potential in it. You, on the other hand, can receive a lump sum payment or ongoing royalties from the larger company.
This solution can be a beneficial arrangement for everyone involved. The startup receives a significant financial boost and the larger company gains access to valuable technology that can give it a competitive edge in the market.
4. Intellectual Property as Collateral
Some businesses even use IP to secure loans or finances.
For instance, the State Bank of India advanced a hefty loan to Kingfisher Airlines, using the airline’s brand as collateral.
In the event that Kingfisher Airlines failed to repay the loan, the bank would have the right to take ownership of the brand or its associated IP assets.
5. Merchandising
While providing you with an example of licensing, we actually gave you an example of merchandising as well.
But to explain it once again, merchandising is when a company uses its intellectual property to create and sell products. Even if they are not directly involved in the manufacturing or sales of those products.
For example, the NFL licenses its logos, team names, and player likenesses to companies that create and sell clothing, accessories, toys, and home decor.
These products are then sold to fans, generating revenue for both the NFL and the companies producing the merchandise.
6. Franchising
Franchising is when your business allows someone else to operate under your brand’s name and business model.
Let’s take McDonald's franchises as an example.
These franchises allow individuals to own and operate their own McDonald's restaurants by paying an initial fee and ongoing royalties to McDonald's in exchange for the right to:
- use the McDonald's brand
- sell its products
- benefit from its business model and support.
In doing so, McDonald's gets to expand its brand presence and reach more customers without directly operating all of its restaurants. The franchisees, on the other hand, benefit from using the established brand recognition and proven business model to increase their chances of success.
Win-win!
3. Countries with the Highest Share of Intellectual Property in GDP
Unsurprisingly, the United States is a global leader when it comes to the IP contribution to its GDP.
In fact, reports indicate that IP-intensive industries account for approximately $8 trillion of its Gross Domestic Product.
It’s also worth noting that the U.S. consistently ranks high in the International Intellectual Property Index. This means that the country has strong intellectual property rights protection and enforcement mechanisms in place
Right after the U.S., we’ve got China in second place.
Statistics show that China has a significant number of patents in force, with many of its businesses continuously filing new patent applications.
The exact IP contribution to China’s GDP is unknown, but it is rather evident that it plays a substantial role in the country’s economic prosperity.
And lastly, there’s Japan.
With around 2 million patents in force, estimates are that IP-intensive industries account for over 30% of Japan’s GDP, which is roughly around $1.23 trillion.
4. Companies and Brands with the Highest Revenue Coming from IP
Moving on to companies & their brands that generate the highest revenue from IP, in the first place we’ve got *drumrolls please* –
Well, it’s three companies sharing the spot, to be exact: Nintendo, Game Freak, and Creatures.
What ties these brands together is none other than our beloved Pokémon franchise. A franchise that has earned approximately a whopping $88.089 trillion from Pokémon-themed products, games, movies, and designs!
Mindblowing, right?
Next up, we’ve got Disneyand their iconic Mickey Mouse franchise.
Totaling at around $52.2 billion, Disney has racked up some impressive revenue from their intellectual property.
This includes revenue from retail sales, box offices, and home entertainment sales (VHS & DVDs).
Last but not least, the company and a brand that takes third place on our list of highest revenue from IP businesses is Mattel and its Barbie.
Barbie has brought Mattel approximately $33.9 billion in revenue, making it one of the most successful and iconic toy brands of all time.
If your business is going to take away at least one lesson from these companies and brands, let it be this:
Your intellectual property can be a valuable asset. One that, when managed effectively and creatively, can lead to substantial revenue generation and long-term success.
5. 3 Key Strategies for Transforming Business Operations into Revenue Streams from IP
1. IP Portfolio Expansion
The first thing you can do to transform your business operations into revenue streams from IP is invest in R&D.
This involves creating new inventions, designs, or processes that can be patented or trademarked, which would add value to your company's IP assets.
By continuously innovating and expanding your IP portfolio, you can increase the potential for licensing, selling, or leveraging your IP for strategic partnerships, ultimately driving revenue growth.
Now, who is this for?
This is especially advisable for anyone running a software company.
For instance, if you’re developing a new software application, investing in R&D can help you create innovative features or functionalities that set your product apart from competitors.
By patenting these software features, you can protect your intellectual property rights and potentially license or sell them to other businesses.
And the best thing?
This way, you’re not only generating revenue but also establishing your company as a leader in the industry, attracting more customers and opportunities for growth.
2. Data Collection and Analysis
This is probably the most important strategy for any business to implement when it comes to generating revenue from IP.
Here’s what data collection and analysis entails:
For starters, take a look at any negative brand mentions or poor reviews. They're not fun to read, but they're gold when it comes to finding ways to make your products or services even better.
Fixing these issues can make your customers happier and more loyal to the brand, which means more repeat business and good word-of-mouth referrals - aka more money in the bank!
Another thing you can do is gather data on what your customers like, to figure out what's hot in the market right now.
You can use this data to spot gaps where new products or services could be a hit. And then, you can team up with a supplier or developer to create something that people really want or need.
Next, you can bundle up all the data you've collected and sell it to other companies.
Think of it like selling insider info: Market research firms and ad agencies love this stuff because it helps them figure out what makes people tick.
And lastly, keep an eye on online channels to spot any potential IP infringements.
If you come across, for example, a trademark infringement of your brand, you can use this data to protect your rights through legal action.
Looking for a way to gather data that can serve your business as a revenue stream? Book a demo with Reputeo and find out all the things it can do for you.
3. Intellectual Property Marketing
This one’s slightly out-of-the-box, but have you ever thought about using IP as your key differentiator in the market?
Biotech firms do this all the time by marketing their patents on groundbreaking drugs to pharmaceutical companies.
But they’re not the only ones.
Tech companies, in general, have a huge opportunity to leverage their intellectual property for market differentiation.
Take Apple, for example. They've built their brand around innovative technology and design, protected by a strong portfolio of patents and trademarks. This has allowed them to stand out from competitors and charge premium prices for their products.
You too can use your IP to create exclusive partnerships with other companies, license your technology to third parties, or even create new revenue streams by monetizing your patents through sales or royalties.
Conclusion
As you can see, there's obviously a treasure trove of opportunities when it comes to using intellectual property to boost your bottom line, and many businesses are barely scratching the surface.
If you take the time to understand the value of your intellectual property and find ways to make it work for you, you could see some serious revenue growth and set yourself up for long-term success.
Just like a true industry leader.
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