Sell, Make, or License: Which Option is Right for Your IP?

Commercializing (i.e. getting it into the market) an intellectual property (IP) transforms an intangible asset into a tangible product or service. For creators, entrepreneurs, and small business owners, this is an essential step toward maximizing the value of their innovations. However, choosing the right commercialization strategy can be daunting. You have three primary options: sell, make, or license your IP. This article will discuss key points to consider when deciding which option to use.

Selling Your Intellectual Property

Selling your intellectual property involves transferring ownership to another person or company for a set price. This option may seem straightforward, but it comes with its own set of challenges and risks.

Determining a Fair Price
One of the biggest challenges is setting a fair price for your IP. If you’re not currently using or generating revenue with your IP, it’s difficult to determine its true value. Market potential, prior use, and uniqueness must be considered.

Risks Involved
Once a sale is made, there’s no going back. There are no refunds in the world of intellectual property. This is risky for both you and the buyer. As the IP owner, you risk giving up an asset that might be highly valuable. On the other hand, the buyer risks acquiring an IP that’s less valuable than the purchase price.

When to Consider Selling
If your IP isn’t spectacular or generating significant revenue, selling can be a good option if it’s fairly valued or over-valued by the buyer. This allows you to cash in on your IP without the hassles of commercialization.

Producing Your IP Directly

The second option is to develop your intangible IP into a tangible product or service. This involves taking the risk and investing the money, manpower, and time to bring it to the marketplace.

The Process
Commercializing your IP involves multiple steps, including research and development, production, marketing, and sales. Each requires careful planning, financial investment, and specialized knowledge.

Outsourcing
Outsourcing may be an option if you cannot personally manufacture, market, or sell your product. This involves contracting one or more people or companies to undertake specific tasks. For example, you might contract a company to physically produce your product while you handle the promotion and sales.

Evaluating Financial and Legal Aspects
Before going this route, it is crucial to evaluate the financial and legal aspects of licensing. Commercializing your IP can be difficult and expensive. Ensure you understand the market, costs, and potential return on investment.

Licensing Your Intellectual Property

Your third option is to license your IP in return for a royalty. This is a far easier and less risky option for most IP owners than commercializing it directly.

Advantages
Licensing is ideal if you lack the resources to commercialize your IP or are not interested in starting and running a company. Licensing to a well-established company already making and selling products similar to your IP increases your chances of success in the market.

Flexibility and Control
Licensing lets you control your IP rights. You rent out (i.e., license out) the rights to make, use, and sell it to other companies. Licensing is flexible and lets you leverage your IP income opportunities. You can divide rights geographically or by distribution channel and retain some or all the rights for specific markets or product formats.

Minimal Risk
Licensing requires no upfront cost. It minimizes your downside risk while providing a steady income stream through royalties.

Testing the Market
When deciding which option to use, consider licensing to test the commercial potential of your IP. This approach helps you avoid the time and unknown risks of starting a new business or product development. Licensing also helps establish your IP value and a selling price if you decide to sell it later.

Choosing the Right Option

Choosing the right commercialization strategy for your intellectual property is a critical decision that can significantly impact your success. Whether you sell, make, or license your IP, each option has benefits and challenges.

Sell: Ideal for those looking for a quick exit and immediate financial gain, but comes with the risk of undervaluing your IP.

Make: Best for those willing to invest in developing and marketing their product, providing potentially higher returns but requiring substantial resources and expertise.

License: This option is suitable for those seeking a low-risk, consistent revenue stream while retaining control over their IP. It also offers the added benefit of market testing.

Before deciding, carefully consider your resources, market potential, and long-term goals. By doing so, you’ll be better positioned to maximize the value of your IP and achieve lasting success.

Interested in exploring how to best license your intellectual property? Contact us today for a free consultation and take the first step toward turning your IP into a profitable venture.

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