How to Sell Your Startup’s Intellectual Property

The intellectual property of your startup can be bought and sold, licensed, exchanged, or donated just like other types of property. A sound strategy for the management of your company’s intellectual property rights will prove to be very profitable if you have experienced legal counsel and understand how these different techniques of conveyance are used.

Think of conveying your IP rights as the inverse of protecting your start-up’s intellectual property rights. You want to prevent the unauthorized use of your patents, trademarks, and copyrights—but that use may signal an opportunity to assign or license the rights to an interested party to generate revenue.

There are two ways in which to convey or sell the use of your IP rights—this is by either an assignment or a license. If you compare it to real property, an assignment is akin to a sale, and a license is like a lease.

Assignment of Your Startup’s IP Rights

Legally speaking, an assignment of a patent is a transfer of the rights to use the IP so that the recipient has title to it. Again, think of it as selling the patent to another individual or company. You sell it, and they own it. When your startup assigns the rights to a trademark and your goodwill, the assignee becomes the owner of that trademark… they have the same rights as the startup that owned it in the first place. When you discuss your IP strategy with your attorney, you may find that your startup doesn’t plan to ever use certain intellectual property rights—but you may want to leverage them with an assignment for profit.

Strategically License Your IP to Generate New Revenue

A license is a contract to use someone else’s intellectual property rights, usually for a fee. In contrast to an assignment, the startup that owns the IP maintains the ownership of those rights. This allows your startup to contract for an ongoing regular payment for the use of those IP rights, like being the landlord and receiving monthly rent from a tenant.

A license agreement requires the assistance of an experienced IP attorney because there are numerous details that must be addressed—or your startup may give away more than it intended. Your attorney will negotiate the rights to your intellectual property for a defined time, context, industry, or territory. The license can also be exclusive or non-exclusive.

Perhaps a licensing agreement allows you to tap into a market that your startup doesn’t have the resource to reach… or maybe the license is for a specific event that will give you exposure to a wide audience in a short period of time (like a concert or a basketball tournament). In addition, larger companies in non-competing markets may want to license your IP for their own products and services. These licensing deals can mean millions of dollars in new revenue for your startup.

Licensing also allows your company to recoup part of the development costs and to provide a steady revenue stream from future profits.

Determining whether your IP has licensing value and can generate income requires expert analysis into the legal and technical quality of your IP and of market conditions in your industry. You need to retain a legal expert with a corporate network to work with top-level contacts to get high-level licensing discussions going for potential licensing. Your IP attorney will prepare a business case as to why your IP has real value for a potential licensee and discuss how it fits into your startup’s overall IP strategy.

Summary

The value of IP — especially patents — is frequently underappreciated when compared to more tangible business assets. Work with an experienced IP attorney to uncover the opportunities your startup has for revenue from your IP rights.

Attorney Michael Ahmadshahi focuses on patents, intellectual property, copyright, and trade secrets in Irvine, California. The Michael Ahmadshahi, PhD, Law Offices are also located in Beverly Hills and Sherman Oaks. Call us toll free at (800) 747-6081 or direct at (949) 556-8800 or email info@mmaiplaw.com and let us help you with your IP questions and the strategy for your startup.

Michael Ahmadshahi

Mr. Ahmadshahi’s area of practice is Intellectual Property Laws including Patent Prosecution and Litigation, Trademarks, Copyrights, Unfair Business Practices, and Business Litigation. He is also an entrepreneur and an inventor.