INTELLECTUAL PROPERTY LICENSING:

A CATALYST FOR INNOVATION AND

NEW VENTURE DEVELOPMENT

Abstract
A study of the role of commercialization of Intellectual Property in Innovation
and New Venture Development.

Oluwaseun Adesanya
Ota5063@psu.edu
Abstract

Intellectual property (IP) rights such as patents, trademarks, and trade secrets play an indispensable role in
protecting innovation and enabling the growth of new ventures. This paper provides an in-depth
examination of how the licensing of IP rights facilitates innovation and startup development. It begins by
outlining common provisions in IP licensing agreements, including specifying the parties, granted rights,
considerations, obligations, and dispute resolution. The paper then analyzes the multifaceted role that IP
plays in reducing risk, aiding research and development, and securing startup financing.

Effective IP protection preserves startups' competitive edge and signals value to investors, thereby
lowering capital costs. IP licensing also enables startups to access technologies and form strategic
partnerships with established firms. Additionally, the paper explores how corporate venturing funds
utilize IP-based deals to invest in high-tech startups. It also discusses how licensing supports open
innovation models between startups and incumbents. Overall, this analysis demonstrates that adept
management and licensing of IP rights are vital for commercializing innovation and ensuring the growth
and survival of technology startups. The paper concludes that IP is a crucial component of new ventures'
business strategy.

Keywords: intellectual property, licensing, innovation, new ventures, startups, patents, research and
development, venture capital, corporate venturing

1
Table of Contents
Abstract ............................................................................................................................................................... 1

1. Introduction ................................................................................................................... 3
2. Overview of Intellectual Property Licensing.................................................................... 4
2.1 Common Provisions of a Licensing Agreement. ............................................................... 4
3. Innovation and New Venture Development ..................................................................... 6
4. The Role of Intellectual Property in Innovation and New Venture Development. ............. 8
4.1 Reduce risk for the players involved. ............................................................................... 8
4.2 Role of IP in innovation: Ideation Stage ........................................................................... 9
4.3 Role of IP in innovation: Research and Development Stage ............................................10
5. Licensing of Intellectual property: A vital component of your startups business Strategy
11
5.1 Licensing of Intellectual Property: A safe haven for Start Up Financing ........................ 11
5.2 Licensing of Intellectual Property: A Catalyst for strategic collaboration ...................... 13
6. Conclusion................................................................................................................... 14
Bibliography ....................................................................................................................... 15

2
1. Introduction

As new ventures develop globally, and technology takes the center stage, start-up’s and established
corporations are pressured to stand out. New ventures are looking to implement strategies to aid their
growth, intellectual property protection an age long strategy for established businesses is being utilized by
start-up’s and new ventures.

Most start-up’s and new ventures recognize the need to foster meaningful partnerships and
collaboration to aid their growth, hereby gaining access to new technologies and advanced capabilities.
New Ventures are also leveraging on collaboration with existing growth companies and these
collaborations have proven to be beneficial, existing corporations gain access into new markets while new
ventures leverage on the resources of the established corporation thereby gaining an edge over
competition and launching into the global stage at a faster pace.

One of the major forms of enterprise collaboration and the crux of this research paper is Intellectual
Property licensing. Though there are different forms of IP collaboration, this work would focus on
intellectual property licensing and its role in innovation and new venture development.

Intellectual property licensing can be implemented for all form of IP rights such as Copyrights,
Trademarks, Trade secrets, Right of Publicity and Patent being the most utilized for on IP right licensing.
Typically, licenses are giving out by a right holder to the beneficiary of the license in exchange for the
payment of royalties. For emerging ventures, an intellectual property licensing agreement can present a
competitive advantage over rival companies, especially if a similar system is unavailable. The process of
Licensing Intellectual Property is a multidisciplinary process that should be accessed by trade experts,
legal practitioners and business executives, this helps to develop a truly commercial and beneficial
working agreement.1

The role of Intellectual Property is significant for a business to develop and retain is innovation-based
advantage over competitors. Economic surveys have shown that a good reflection of the innovation
intensity of an entity is the number of patents owned by the entity. This highlights the importance of the
link between Intellectual Property and the success of innovation in the marketplace.2

1
David Michael; Developing Effective Intellectual Property Partnerships, 2015. Available at https://sloanreview.mit.edu/article/developing-
effective-intellectual-property-partnerships/
2 What role for Intellectual Property in Innovation? Available at http://innovation.questel.com/2018/11/27/what-role-for-intellectual-property-

in-innovation/

3
2. Overview of Intellectual Property Licensing
Intellectual property rights encompass patents, trademarks, trade secrets, copyrights, right of publicity
among various others. These rights are retained by the owner of the rights either for a stipulated period of
time or the through the lifetime of the right holder as the case may be. The rationale behind intellectual
property protection is to encourage development of new technologies, artistic expressions and inventions
while promoting economic growth. When individuals know that their developments would be protected
and incentivized, they are encouraged to be more creative and develop more innovative ideas.3

In fostering the economic gratification rationale behind intellectual property protection, right holders
may desire to transfer some its IPs rights for a limited time or outrightly. The outright sale of an
intellectual property is termed the assignment of the right, in this case the right owner transfers all his
right in the intellectual property inclusive of his good will in the right for an unlimited period of time.
Licensing of Intellectual property on the other hand is a limited transfer of the rights in the intellectual
property for a limited period of time in exchange for a payment of royalties.

Licensing intellectual property affords the right owner several advantages over assignment of
intellectual property. By retaining the ownership, the right owner (licensor) retains title and goodwill in
the rights and has a level of control and inspection over the use of the right. Licensing intellectual
property also afford the owner an easier method of reversing the transfer of rights if the licensee doesn’t
keep up their end of the bargain. Royalties are the most common form of payments in regards to
intellectual property licensing, typically the licensee does not have the financial wherewithal to pay the
licensor upfront, licensing therefore gives the licensor the opportunity to include in the licensing
agreement a termination clause to implemented in the event that the licensee fails to fulfill its financial
obligation.4

2.1 Common Provisions of a Licensing Agreement.

Traditionally, a licensing agreement would be divided into different sections such as the grants section,
term of the grant, consideration payment, representations and warranties, termination, liability amongst
others. This section would briefly explain the important sections of a licensing agreement.

(a) Parties: The agreement should state who the parties to the agreement are. Typically, the agreement
should be between the right owner and whoever would be exploiting the rights. Important points to

3Intellectual Property. Available at https://www.alllaw.com/topics/intellectual_property

4The ABCs of Licensing Intellectual Property. 2010. Available at https://www.nutter.com/ip-law-bulletin/the-abcs-of-licensing-intellectual-
property

4
 note include the addition of the address of the parties, in the case of a corporation the jurisdiction of
incorporation, in the case of natural persons the full legal names and the date of the agreement.
(b) Grant Clause: This clause sets forth the rights being conveyed. The nature of the grant, whether it is
exclusive or non-exclusive. An exclusive grant suggests that only licensee is entitled to exploit the
right while a non-exclusive grant suggests that the licensor is at liberty to license the right to another
licensee. The grant clause also states the limitation to the exploitation of the rights such as
geographical limitations and industry limitations.

(c) Considerations: This sets out the compensation the licensee is expected to pay the licensor in
exchange for the exploitation of the rights granted. This section should cover provisions such as the
amount of the payment, the timing and frequency of the payment, the payment method and liability
for taxes.

(d) Parties Obligations: this section sets fort the specific obligations and duties of the parties during the
term of the agreement and in some cases beyond the termination of the agreement. These obligations
may either be positive or negative, they must be clear and unambiguous and meticulously negotiated.

(e) Duration and Termination: This section of the agreement sets out the duration and time frame of the
agreement. It also provides specific details on what constitutes a termination of the agreement and
how the termination can be implemented.

(f) Conflict Resolution: The agreement should also set out the method for dispute resolution in an effort
to ensure that costs are minimalized. It is advisable that an option for alternative dispute resolution be
provided for as litigation can be time consuming and matters of intellectual property need immediate
resolution.

(g) Other clauses: Other common clauses include choice of law, indemnification, limitation of liability,
representation and warranties, transferability.5

5 Donald M. Cameron & Rowena Borenstein; KEY ASPECTS OF IP LICENSE AGREEMENTS; 2003.

5
3. Innovation and New Venture Development
Innovation is the development and implementation of a new idea. This is the process of providing a
valuable new product to the market starting from the ideation stage through to the launching stage. The
result of innovation is the provision of a market need to potential or current customers and markets.6 In
innovation there’s an emphasis on commercialization, hence, an innovation is more than just an idea or an
invention, it’s the result of marketing it to the end users.7 Marketing in this context means the
communicating of the new value and product to the current and potential customers.

According to Walter Van Dyck, “The purpose of innovation is to continuously grow and renew an
enterprise with new or better products, more efficient processes, or enhanced business models,”.8
Entrepreneurship and innovation though linked and intertwined are different concepts, according to
Joseph Schumpeter, “necessity may be the mother of invention, but it does not automatically produce
innovation,” he opined that there exists a third element. “Schumpeter suggested the entrepreneur
represents the missing link between invention and innovation”, he explains. “Indeed, an entrepreneur is
someone who is willing and able to transform an invention into an innovation.” The ability to innovate
can be said to be an essential characteristic of entrepreneurship itself.9

Technological innovation is the process of an organization instrumentalizing technology as a source

of innovation for critical success in its established market. Technology is hereby employed as an
instrument employed as a critical success factor for increased market competitiveness.10 "Technological
innovation" better reflects the business consideration of improving business value by working on
technological aspects of the product or services. This is the combination, the integration and interaction of
different technologies that make the product or service successful. Technological innovation is classified
in the following ways: product vs. process, radical vs. incremental and disruptive vs. sustaining. As a
result of the rise of competition in the business environment, one of the major determinants of successful
organizational performance is the adaptation of technological innovation to the organizations business.

According to Lipsey et al:

“People living in the first decade of the twentieth century did not know modern dental and medical
equipment, penicillin, bypass operations, safe births, control of genetically transmitted diseases, personal
computers, compact discs, television sets, automobiles, opportunities for fast and cheap worldwide travel,

6
See Cantwell, J. “Innovation, Profits and Growth: Schumpeter and Penrose”
7 Fredrik Hacklin & Walter Van Dyck. “Innovation in entrepreneurship defined”. Available at
https://onlinemba.vlerick.com/resources/innovation-entrepreneurship
8 Ibid.
9 Ibid.
10 Innovation Questions and Answers". Retrieved 2018-11-08.

6
affordable universities, central heating, air conditioning….. technological change has transformed the
quality of our lives”11
Innovation should be a top priority for policy makers, as it is instrumental in driving long term
economic growth and improvements in quality of life of the general populace. According to the U.S.
Department of Commerce as reported in 2010, technological innovation can be linked to three-quarters of
the U.S. growth rate since the end of World War II.12 While in the United Kingdom, the productivity
growth of the private sector between the years 2000 – 2007 is credited to innovation.13 The present
business environment is one that is powered by knowledge-driven and competitive and a firms success is
hinged on innovation. A survey conducted by PWC on top 1000 innovators shows that: “Faster growth
companies have tighter alignment between their innovation and business strategies and between their
culture and their innovation strategy”.14
A business that wants to thrive in the present economy needs to manage innovation better than its
competitors. The management of Intellectual Property through the process of developing a new
venture/product is a critical factor in the successful commercialization of the venture/product. This paper
highlights how commercialization of Intellectual Property aids innovation in today’s economy. 15

11 Lipsey, R.G., Carlaw, K.I. and Bekar, C.T. (2005). Economic Transformations: General Purpose
Technologies and Long-Term Economic Growth. Oxford: Oxford University Press
12 .Arti Rai et al., “Patent Reform: Unleashing Innovation, Promoting Economic Growth and Producing High-Paying Jobs” (Washington, D.C.: U.S.

Department of Commerce, April 13, 2010), 2, http://www.esa.doc.gov/sites/default/files/patentreform_0.pdf

13 .National Endowment for Science, Technology, and the Arts, “The Innovation Index: Measuring the UK’s Investment in Innovation and Its

Effects” (NESTA, 2009), http://www.nesta.org.uk/library/documents/innovation-index.pdf.

14What role for Intellectual Property in Innovation? Available at http://innovation.questel.com/2018/11/27/what-role-for-intellectual-property-

in-innovation/
15 Micheal Zammit, PhD; The role of IP in innovation. Available at http://www.shelstonip.com/news/role-ip-innovation/

7
4. The Role of Intellectual Property in Innovation and New Venture
Development.
Intellectual property plays a vital role in driving innovation and consequentially advancing economic
growth.16 IP can be said to be all encompassing, copyrights encourage artistic expressions, patents protect
technical innovation, Industrial designs protect the appearance of products, trademarks indicate the source
of products. Intellectual property rights protection has advanced in the past years making it into a force
that influences an enormous amount of industries and sectors, hence IP goes beyond affecting just
innovation, IP also affects trade, competition, taxes and other business areas.17 In the present economy,
the generation and management of knowledge plays a vital role in wealth creation and economic
advancement and Intellectual Property affords the needed protection. This section would highlight the
role of Intellectual property in innovation.

4.1 Reduce risk for the players involved.

The effective use of IP rights protection plays an important role in reducing the risk for the players
involved in facilitating innovation and its eventual market success as there are typically many players
involved. The protection afforded to the players enables them to reap acceptable returns from the part
played by them in the process.18
IP protection also prevents the imitation and copy of an organizations products or services and this
preserves the organizations place in the market. IP protection also gives the right owner strength in
negotiation for licensing, franchising and other IP collaborations. These legal collaborations secure
transactions between companies and also encourages organizations to encourage open innovation.
Successful Innovation encompasses introducing a new product into the market and the acceptance
of that product by potential users. IP rights such as trademarks, patents and industrial design are
instrumental in the marketing stage of a new product/venture. IP rights particularly patent also plays a
major role in encouraging competition among technology-based enterprises. In technology-based
innovation, success is characterized by enhanced performance, the improved profitability of the enterprise
is hinged on the added value provided by the innovation which leads to a larger stream of revenue.

16 Stephen Haber, “Patents and the Wealth of Nations,” George Mason Law Review (2015), 23, 811.
17
Organization for Economic Cooperation and Development (OECD), Enquiry into Intellectual Property’s Economic Impact (Paris: OECD,
2015), http://www.oecd.org/sti/ieconomy/KBC2-IP.Final.pdf
18 Christopher M. Kalanje, “Role of Intellectual Property in Innovation and New Product Development”. Available at

https://www.wipo.int/sme/en/documents/ip_innovation_development_fulltext.html#P88_19601

8
 4.2 Role of IP in innovation: Ideation Stage

The decision to innovate by an enterprise is either influenced by a business strategy of growth

through innovation or the need to bridge an existing gap in the marketplace, irrespective of why an
enterprise has decided to innovate it is important that the innovative idea must be kept secret if the
enterprise intends to appropriate commercial benefits from the ides, hence the technical know-how of the
idea must be provided as a trade secret. To qualify as a trade secret the important knowledge behind the
idea must meet basic requirement, such as the information must be documented and access to the
document must be controlled, the information must be of value and sufficient effort must be out into
keeping the information secret.

At the ideation stage of innovation, confidentiality agreements between the enterprise and all parties
privy to the idea are very essential. In practice, at the ideation stage, trade secrets are the preferred form of
IP protection over patents because not all commercially viable ideas would be protected by patent laws
hence the use of trade secrets. Also patented developments are only protected for a period of time after
which they go into the public domain whereas trade secrets are protected for as long as the subject of
protection is kept a secret which can go as long as a lifetime.19 Small and Medium scale enterprises also
tend to lean towards trade secrets in protecting their innovations rather than patents, the major reason
behind this is the cost implication and complexity of acquiring patent protection.20 However, there exists
some disadvantages to trade secrets such as the lack of protection against reverse engineering or
independent creation of a trade secret by a third party. Also, public disclosure can lead to the loss of
patent rights as a third party may patent an idea before the owner of the idea.

While trade secrets may seem to be a more practical IP protection during the ideation stage and patent
may seem to hamper innovation, it is also evident that patent if used strategically could be a better option,
it can become a dependable source of new and higher revenue. The decision of what choice of IP
protection to employ in the protection of a patentable invention should be a strategic business decision to
be taken when all the prerequisites of patentability are complied with. The choice would be dependent on
factors such as the nature of the invention, its business potential, the competition nature, and possibility of
reverse engineering or independent creation by competitors. Ultimately, irrespective of the decision made,
the initial innovative idea should be protected as a trade secret and may subsequently patented while the
technical knowhow still remains a trade secret.

19
Mark Rogers, 1998, The Definition and Measurement of Innovation, pg. 14
20
See example of Australian camera man Jim Frazier who signed a confidentiality agreement with Panavision, regarded as the best lens
manufacturer in the world, before he showed them his invention at https://www.wipo.int/sme/en/case_studies/frazier.htm

9
 4.3 Role of IP in innovation: Research and Development Stage

The next stage in the innovation process is the research and development stage. As mentioned in the
foregoing section, trade secrets protection is equally relevant in this stage.21 Trade secret protection is
important during the R&D stage, as a means of protecting vital information and technical know-how from
potential competitors. Indicators such as expenditure on research and developments (R&D), information
on innovation, total sales, firm size, innovation strategies, have been employed in measuring the efforts of
an enterprise in undergoing the research and development of innovative ideas.22 These indicators are
linked and sometimes influenced by Intellectual Property.

During the R&D stage, researchers are in a quest of knowledge and typically consult several sources
of information that guidance for the success of their innovative project, existing patent documents are a
good source of knowledge and relevant information that are inaccessible anywhere else.23 Patent
documents help minimize wastage during the R&D stage as they provide information on the status quo of
a lot of innovations related concepts such as money and time. Patent information also provide useful
information which lead to product development and design improvement and this may help reduce the
production and development time required to introduce a new product into the market.

Once an innovator decides to take on patent protection during the R&D stage, all relevant information
and technical Know-how should be protected by filing a patent application, while also considering other
forms of protections. Patent protection is afforded to new ideas and developments that solves an existing
specific technical problem that relates to the functionality of a system, process, article of manufacture or a
composition of matter. Most patentable innovations would result in both functional and aesthetic
improvement, hence it is imperative to also employ industrial design protection in protecting innovations
that result in a new or improved design. The filing of a patent application triggers the patent time
requirements, in essence, once a patent application has been filled a progression of deadlines must be met
in order to sustain the patent application. The filling date would determine the priority rights assigned to
the patented innovation. A potential innovator has to take proactive steps during the R&D stage to avoid
the risk of infringing an existing patent. During this stage, it is important to carry out database searches to
assess the risk of infringement of third-party rights. The outcome of the database searches would lead the
innovator to take strategic business decisions such as the possibility of avoiding a third-party patent
infringement or whether to acquire a license or assignment of the third-party rights. 24

21 See example of Australian camera man Jim Frazier who signed a confidentiality agreement with Panavision, regarded as the best lens
manufacturer in the world, before he showed them his invention at https://www.wipo.int/sme/en/case_studies/frazier.htm
22 Kemp, R.G.M et al call this stage as innovation intensity, p.7
23 The EPO Guide on Patent Information on the Internet, p.7 http://epart.epo.org/dwl/espacenet_manual.pdf (August 13,2003)
24 Micheal Zammit, PhD; The role of IP in innovation. Available at http://www.shelstonip.com/news/role-ip-innovation/

10
5. Licensing of Intellectual property: A vital component of your startups
business Strategy
A major business goal for innovators is the ability to expand an existing business, spring up a new
business or improve the quality of existing products and services, one very efficient tool in achieving this
business goal is the licensing of intellectual property. Licensing agreements often form one single
contract since typically all associated rights are involved in the licensing procedure as opposed to one
type of intellectual property right. Intellectual property licensing could also be part of a larger transaction
such as mergers and acquisitions or joint venture negotiations.
An intellectual property owner or licensors has a wide variety of possibilities and ability to
expand their business and ensure an additional and steady source of income. Alternatively, as an
intellectual property licensor, the business can also make additional income by the ability to manufacture,
sell, import, export and distribute various goods and services that they ordinarily would not be prohibited
from doing.25

5.1 Licensing of Intellectual Property: A safe haven for Start Up Financing

75% of startups fail while only 25% of startups are successful a study by Harvard senior lecturer
Shikhar Ghosh reveals.26 One of the major differentiating factors between a startup that goes into
extinction and one that expands is the ability to raise additional capital. It is quite common for technology
startups to have little or no revenue and very few tangible assets, hence for tech start-up particularly high-
tech start-ups, their most valuable assets are their ideas and the associated IP protection afforded rights.

During the financing cycle of a Start-up, quality IP assets demonstrates to potential investors that a
company is more likely to have a sustainable competitive edge for success over its competitors with less
IP assets. Typically, the higher the risk possibility of a startup the higher the capital collateral would be,
hence the cost of financing a start-up is reduced as the start-up matures and acquires more assets. A
convincing IP assets portfolio plays a vital role in acquiring start-up financing. For high-tech start-ups, IP
is the essential element in obtaining venture funding. A WIPO white paper, indicates that IP is the basis
for a significant portion of venture capital investments and that “without the strength of the intellectual
property and its protection, little if any investments would be made into new or growing enterprises.”27
Venture capitalists look to maximize their returns, hence they invest in start-ups that have a competitive

25
Licensing of Intellectual Property Rights; a Vital Component of the Business Strategy of Your SME. Available at
https://www.wipo.int/sme/en/ip_business/licensing/licensing.htm
26
Faisal Hoque; Why Most Venture-Backed Companies Fail.
Available at https://www.fastcompany.com/3003827/why-most-venture-backed-companies-fail
27 Bank, W. (2002). Chapter 5: Intellectual Property: Balancing Incentives with Competitive Access. Global Economic Prospects. Washington, DC,

World Bank.

11
edge over competitors through their proprietary inventions and innovations and the sustainability of the
advantage.

With regards to high-tech innovation, many large companies are utilizing licensing of IP to form
strategic partnerships with startups that own promising new technologies.28 An example of this is TD
Bank, TD bank created over $3 million investment fund to provide patent application funding to fintech
startups with the aim of helping startups protect their valuable IP. In return, TD bank gets a non-exclusive
license to the patent, and in the event that the innovation is successful, TD Bank offers a larger round of
financing. The advantage for the investor is the acquisition of the right to use the innovation to advance
their business, while the advantage for the startup is the acquisition of am established licensing partner to
launch their IP into the market once it is developed and ready.29

In search of financing, many startups today prefer to take the Corporate Venture fund route as its
investment is for a longer term. CVF’s are also afford the startup the opportunity to hold more control of
the startups business and IP development while offering several exit strategies such as licensing, OEM
partnerships or acquisition. A major reason for CVF investment is that it offers corporations a faster way
for finding complementary products and services thereby expanding their frontiers, acquiring disruptive
technologies and penetrating a new and foreign market. Most major and established companies such as
Google, Microsoft, Nokia and Dell all have CVF’s, these funds serve as investment capitals as well
funding for corporate labs, research & development personnel’s, marketing, sales and overall, they
accelerate the startup innovation process.

A notable example of the CVF funding style for startups is the General Electric (GE) Ventures. GE
invests in high-tech startups in its related industries and improves their internal productivity and
efficiency in exchange for licensing of the innovation. This helps the startups as rather than competing
with the established corporations, the startups partner with them to fund their startup in exchange for
licensing of the innovation, hence they still have control over their innovation while acquiring the
necessary funds they need to accelerate their market penetration.30

28
How to Avoid Desperation Licensing. Available at https://licensingconsultinggroup.com/category/licensing/
29 Rand Brenner; How Big Companies Use Licensing to Fund Startups. Available at https://licensingconsultinggroup.com/how-big-companies-
use-licensing-to-fund-startups/
30 Ibid

12
 Conclusively, as IP assets continue to play a larger role in startup funding and more type of investors
and financial instruments evolve in the market, the important of IP valuation becomes more important
than ever for successful investment by a corporation and the eventual growth of a startup.31

5.2 Licensing of Intellectual Property: A Catalyst for strategic collaboration

IP scholars have highlighted the importance of IP when it comes to successfully navigating
partnerships and strategic collaborations. In a radically growing society, most forward-thinking
companies recognize the importance of establishing partnerships and collaborations to expand their
business and penetrate, access new technologies and penetrate into emerging markets. These business
goals can be achieved through IP collaborations between established multinational companies and start-
ups/emerging companies, though this sort of collaborations can be challenging they also have proven to
be mutually beneficial. Established companies gain new market access and developing technologies while
emerging corporations can get ahead of their competitions by leveraging on the existing resources of the
established corporation.
Corporations form strategic collaborations through different means the most prominent one being
licensing of intellectual property. Beyond licensing of IP, strategic collaborations can also be formed
through licensing of technology, this sort of license transfers the design and instructions necessary to
implement or operationalize the innovation. The emerging corporation in this transaction leverages on the
establishes corporation’s technological expertise while the established company leverages on the growing
company’s local expertise. Technology licensing often requires the licensor dispatching engineers to
assist licensees with the usage and workings of the licensed technology.32
Another means of creating strategic partnership is through IP-based Component Business. In this
instance, the licensor transfers to the licensee products embedded with technology rights as opposed to
licensing the rights to them. The licensee only obtains the right to install, resell and use the product but
not the right to manufacture the product. The royalty paid on the product in this case is embedded in the
purchase price. The emerging corporation in this transaction is afforded a competitive advantage,
particularly if similar products are not available in the market, also the purchase of ready-made modules
rather than manufacturing comparable products helps reduce production time for developing a startups
final product. Established companies also profit from product sales and this serves as an additional stream
of income. It is important for established corporations to put in place safeguards against reverse
engineering.

31
Efrat Kasznik; Intellectual property in startup investments: A view from Silicon Valley. Available at https://www.ipeg.com/intellectual-
property-value-in-startup-investments-a-view-from-silicon-valley/
32 David Michael; Developing Effective Intellectual Property Partnerships, 2015. Available at https://sloanreview.mit.edu/article/developing-

effective-intellectual-property-partnerships

13
 Established and emerging companies can also create a partnership through research and
development contracting. Here, the contracting company provides a design work that is has some IP
rights embedded in it. The contracted corporation is to produce the design in exchange the contracting
party buys of the product and consequently owns the IP right embedded in it. This model is likened to a
professional service agreement and is paid as fee-for-service as opposed to royalty payments. In recent
times, there has been a rise in emerging corporations utilizing this model by offering outsourced
innovation services to established corporations.
In Sum, the creation of strategic collaborations in innovation cannot be overemphasized helps
emerging corporations leverage on the existing resources of established collaborations thereby launching
them into the market as a faster rate than competitors. Before deciding on a IP collaboration strategy, it is
important to think of the decision as a strategic business decision and not merely a legal decision. Also
access the business, financial and legal risks involved with each collaboration strategy.33

6. Conclusion.
The innovation process begins from the ideation stage to the launch stage and eventual market
penetration stage. Intellectual property if leveraged effectively can increase the success chances of an
innovation. Innovation with IP assets and prospects are more liable to succeed than innovation without IP
prospects. IP assets in high-tech are not only protectable by patent, the decision of what IP protection to
focus on is a strategic business decision that should be taken by a panel comprising of business experts,
legal practitioners and industry experts. A broad approach should be used in deciding on the IP right
protection form.
Commercialization of intellectual property plays a significant role in sourcing funding for innovation
as well as sourcing technical resources. IP also affords a stronger negotiation position to the right owner
in the event if business negotiations. Commercialization of intellectual Property also provides an
advantage over competition as it creates effective strategic partnership.

33 Ibid.

14
Bibliography
Articles

Bank, W (2002). Chapter 5: Intellectual Property: Balancing incentives with Competitive Access. Global
Economic Prospects. Washington, DC World Bank.

Cantwell, J. “Innovation, Profits and Growth: Schumpeter and Penrose.”

https://www.reading.ac.uk/Econ/Econ/workingpapers/emdp427.pdf

Efrat Kasznik (2016), Intellectual property in startup investments: A view from Silicon Valley. Available
at https://www.ipeg.com/intellectual-property-value-in-startup-investments-a-view-from-silicon-valley/

Hacklin, Fredrik, and Walter Van Dyck. “Innovation in Entrepreneurship Defined.” Vlerick Business
School accessed February 27, 2023. https://www.vlerick.com/en/programmes/mba-programmes/online-
mba/

Kalanje, Christopher M. “Role of Intellectual Property in Innovation and New Product Development.”
WIPO Magazine, April 2006.
https://www.wipo.int/sme/en/documents/ip_innovation_development_fulltext.html

Kasznik, Efrat. “Intellectual Property in Startup Investments: A View from Silicon Valley.” IPEG,
November 7, 2016. https://www.ipeg.com/intellectual-property-value-in-startup-investments-a-view-
from-silicon-valley/

Kemp, R.G.M., et al. “Measuring Eco-Innovation.” United Nations University Working Paper Series,
2004. https://collections.unu.edu/eserv/UNU:869/rb01_08_measuring_eco_innovation.pdf

Lipsey, R.G., K.I. Carlaw, and C.T. Bekar. Economic Transformations: General Purpose Technologies
and Long-Term Economic Growth. Oxford: Oxford University Press, 2005.
https://econpapers.repec.org/bookchap/oxpobooks/9780199290895.htm

Michael, David. “Developing Effective Intellectual Property Partnerships.” MIT Sloan Management
Review 57, no. 1 (Fall 2015). https://sloanreview.mit.edu/article/developing-effective-intellectual-
property-partnerships/. https://sloanreview.mit.edu/article/developing-effective-intellectual-property-
partnerships/

Rogers, Mark. “The Definition and Measurement of Innovation.” Melbourne Institute Working Paper No.
10/98, 1998. https://melbourneinstitute.unimelb.edu.au/publications/working-
papers/search/result?paper=2155929

15
Zammit, Michael. “The Role of IP in Innovation.” Shelston IP, November 27, 2018.
https://www.spruson.com/patents/the-role-of-ip-in-innovation/

Books/Reports

Cameron, Donald M., and Rowena Borenstein. Key Aspects of IP License Agreements. London: Sweet &
Maxwell, 2003. http://www.jurisdiction.com/lic101.pdf

Haber, Stephen. “Patents and the Wealth of Nations.” George Mason Law Review 23 (2015): 811.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2776773

National Endowment for Science, Technology and the Arts. The Innovation Index: Measuring the UK’s
Investment in Innovation and Its Effects. London: NESTA, 2009. https://www.slideshare.net/alsaraf1/the-
innovation-index-measuring-the-uks-investment-in-innovation-and-its-effects

Organization for Economic Cooperation and Development. Enquiry into Intellectual Property's Economic
Impact. Paris: OECD, 2015. https://www.oecd.org/sti/ieconomy/KBC2-IP.Final.pdf

World Bank. Global Economic Prospects and the Developing Countries 2002: Making Trade Work for
the World's Poor. Washington DC: World Bank, 2002.
https://documents.worldbank.org/en/publication/documents-
reports/documentdetail/285571468337817024/310436360_20050

Other Sources

“Innovation Questions and Answers.” Innovation Company. Accessed February 27, 2023.
https://innovationcompany.co.uk/innovation-questions

“Intellectual Property.” AllLaw. Accessed February 27, 2023.

https://www.alllaw.com/topics/intellectual_property

“Licensing of Intellectual Property Rights: A Vital Component of the Business Strategy of Your SME.”
WIPO Magazine, April 2006. https://www.wipo.int/sme/en/ip_business/licensing/licensing.htm

“The ABCs of Licensing Intellectual Property.” Nutter McClennen & Fish LLP, April 21, 2010.
https://www.nutter.com/ip-law-bulletin/the-abcs-of-licensing-intellectual-property

16
“What Role for Intellectual Property in Innovation?” Questel, November 27, 2018.
http://innovation.questel.com/2018/11/27/what-role-for-intellectual-property-in-innovation/

Brenner, Rand. “How Big Companies Use Licensing to Fund Startups.” Licensing Consulting Group,
June 5, 2017. https://licensingconsultinggroup.com/how-big-companies-use-licensing-to-fund-startups/

Brenner, Rand. “How to Avoid Desperation Licensing.” Licensing Consulting Group, January 15, 2019.
https://licensingconsultinggroup.com/how-to-avoid-desperation-licensing/

“EPO Guide on Patent Information on the Internet.” European Patent Office, August 13, 2003.
https://www.epo.org/searching-for-patents/helpful-resources/first-time-here/patent-information-
internet.html

Hoque, Faisal. “Why Most Venture-Backed Companies Fail.” Fast Company, November 15, 2012.
https://www.fastcompany.com/3003827/why-most-venture-backed-companies-fail

Rai, Arti, et al. “Patent Reform: Unleashing Innovation, Promoting Economic Growth and Producing
High-Paying Jobs.” U.S. Department of Commerce, April 13, 2010.
https://www.commerce.gov/files/patent-reform-unleashing-innovation-promoting-economic-growth-
producing-high-paying-jobs

Somers, Meredith. “Intrapreneurship Explained.” MIT Sloan School of Management, September 10,
2018. https://mitsloan.mit.edu/ideas-made-to-matter/intrapreneurship-explained

17