Many people file applications to protect their intellectual property without properly considering why they are seeking protection.

Before any protection is sought, it is necessary to first consider how value will be extracted from the technology, product or process. Value may be extracted through the ability of the IP to generate income and/or its ability to deliver strategic advantages. Only once due consideration has been given to the value extraction method for the innovation can good decisions be made about how and where to protect it. Once the protection has been obtained, then the issue of value extraction must be revisited.

Commercialisation is one value extraction method, or perhaps more accurately, once group of methods relating to income generation. Licensing is one method within that group. Which method of commercialisation is appropriate will depend upon the corporate and business strategies of the organisation.

Introduction

Each business will have its own views and processes relating to commercialisation of innovation. Generally speaking though, the process should include the steps of market research, creation of the innovation, protection of the intellectual property relating to the innovation, and extracting value from the innovation. Funding and other resources are usually required to execute each step.

Market research

Before serious money is spent on developing an innovation a fundamental question must be asked. Is there a need in the market for this product or service? Based on the competitive situation and market characteristics, what return could be expected from the innovation and does this make development viable?

Patent searching should be conducted to determine not only freedom to operate, but also to determine competitor technology trends and to identify any possible R&D savings.

Creation

The essential question in this phase of the process is whether to create the innovation from scratch in-house, to acquire it from a third party (by way of sale or licence), or to partner with a collaborator to develop the innovation jointly.

This decision will depend upon:

• The core competencies of the business in the relevant field;
• The amount of money and other resource available to the business;
• Whether competitors are active in the field and/or have competing technology or prior intellectual property rights; and
• How quickly the innovation is required.

For example, a business lacking a significant in-house R&D facility may lack the science competencies required to develop the innovation in-house, and accordingly will contract out development, enter into a collaborative joint venture, or buy or licence the innovation from someone else. If the innovation is required very quickly to capitalise on a first to market opportunity, then licensing the technology from offshore may be a suitable option.

Value extraction

The options for extracting value from intellectual property pertaining to an innovation, apart from strategically holding the intellectual property (and not actively commercialising it), can be summarised as:

• Direct investment to manufacture and market independently;
• Selling outright to a third party;
• Licensing a third party to commercialise;
• Partnering in a joint venture; or
• A combination of the above.

Exactly how value will be derived from innovation will depend on the strategies of the business, its core competencies, its attitude towards risk, its desired rate of return on investment for the innovation, its available resources, the strength and nature of the protection obtained for the innovation and the competitive landscape in the relevant market.