This is a transcript from a section of the course “Patents 340 – Invention Rating Checklist,” which is available here at IP.Education.
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Outbound Licensing Potential
Outbound licensing potential of an invention is the analysis of whether your invention could apply to other markets – markets that you might not pursue.
Outbound licensing is one of the most overlooked venues for generating money from your invention.
Many startup CEOs are so focused on their market, their value proposition, their minimum viable products, and so forth that they forget that their invention may be useful to many other players.
One of the ways I think of patent value is the time, money, and effort you spent to solve a problem in your space.
You have a grand vision or goal that drives the company: make the world a better place.
But you solve lots of little problems on your way there.
The problems that you solve often have tremendous value.
Once you cracked the nut on a hard problem, everything else seems to flow smoothly.
When you solve that hard problem, you have solved something that every competitor will have to solve.
Not only that, there are probably people in other industries who need that same solution.
This is there outbound licensing can add huge value.
One great example is this device from the mid 1990’s.
It is HP’s Scan Snap hand held scanner that was designed here in Colorado.
HP’s scanner division developed this device that you used by moving the scanner over a page.
As you moved back and forth, the scanner tracked your movements, then stitched together an image.
They had to solve a couple interesting problems.
One was an image processing problem of stitching together all the little images into a scanned image of your sheet.
The second one was tracking the movement of the device.
In order to solve that problem, HP had to invent a non-contact device that sensed very small movements across the page.
There are two of them on the device, one on either end.
In the mid 1990s, mice were much like this: mechanical tracking devices that had balls in them.
It turns out that those sensors – the ones developed for this hand held scanner – had another use.
HP was able to license their technology that turned into the optical mice that we have been using for almost two decades.
Their outbound licensing program for this technology yielded tens, if not hundreds of millions of dollars.
There are countless more stories of companies who have packaged up some of their internal solutions and made them stand alone products or even spinout companies.
A level 1 score is that there is no outbound licensing potential and that the invention is limited to our products and technology.
A level 2 score is that the invention could be licensed with several other technologies as a package.
This applies when the problem solved is not terribly significant, but that it has some commercial value.
A level 3 score is when the invention has good value in other markets. A level 4 score is when the invention as dramatic cost savings or improvements in other markets.
A level 5 score is when the invention could be a key element in a licensed product.