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Considerations when licensing IP as a startup

On Behalf of | Sep 21, 2021 | Business And Corporate Law

While some tech startups have a goal of developing their own innovative intellectual property (IP), the process can be expensive, complicated and lengthy. The successful use of IP is crucial to every startup; however, it is not vital that your company develops its own. You can also license a third party’s IP.

What makes licensing an attractive IP strategy?

If your tech startup doesn’t have the idea for a groundbreaking patent, you can still launch a successful business if you license intellectual property. Moreover, you can do so without going through the complex filing process for patents. The patent process includes constantly changing regulations and steep competition—both obstacles that you can avoid by licensing the property from a third party, especially if you do so with an exclusive contract.

4 things to consider before licensing third-party IP

It’s vital that you understand the patent you are licensing and its potential effect on your business goals. Will this technology be the right fit for your startup? Consider these factors:

  • Patent quality: No matter how cool the idea is, a patent must be commercially viable in real time. Does the patent you are considering have real monetary value in the present moment?
  • Patent documentation: Is the patent written clearly with specific terms? If it is too narrow or too broad, the patent will be easy for competitors to circumvent. How many inventors are on the patent? Too many or too few can be a red flag.
  • Location and market: Is the patent for a relevant area? Will the technology sell in that specific area? If not or if too many years out of the 20 years of viability have expired, the patent may not be worth the money.
  • IP infringement: Will you be able to prove when someone copies this patent? Is the document clear enough?

Intellectual property is a complex area of law. However, smart entrepreneurs will use IP to their advantage, commissioning it to further their business and profits.