Licensing at

Himont
Abhilasha Acharya (0076/55)
Abhishek Kadivar (0078/55)
Kamakshi Gupta (0098/55)
S Radhika (0124/55)
Shimpi Aniruddha Rajendra (0130/55)
Somani Kirtishree Radhey(0135/55)
Suryawanshi Bageshree (0138/55)
Vallari Srivastava (0144/55)
 Who is himont
● Himont: A manufacturing company selling PP and PE was started off as a joint
venture between the Italian Montedison and the American chemical group Hercules,
both with a share of 50%. The venture then had 2.5 billion lb of annual capacity and
$750 million in sales.
● Montedison had developed an innovative technology aimed at the polymerisation of
polypropylene
● In addition to the geographical complementarity, the strength of Hercules was in
downstream markets, where it had a large market share in the production of PP
fibres and films.
The Technology market for the
chemical process industry
Commoditization of process
technology
● The increase in the scale and complexity of chemical
plants led to the rise of a new market for engineering
and process design services.
● As a result, Chemical engineering emerged as an
academic discipline.
○ Could separate process design from products.
○ Transfer of this General & Abstract knowledge
for use in different purposes by organisations
The Technology market for the
chemical process industry
Self reinforcing Mechanism
● Sell process technologies to appropriate rents from innovations (~60% of
tech market)
● Encouraged other chemical and oil firms to license their technologies;
market for technology in chemicals to persist over time.
● Specialised technology licensors that lack the downstream complementary
assets in production and commercialisation sell more licenses – in this case,
the rent dissipation effect is zero.
When DOES A FIRM LICENSE?

Revenue Effect: Rent Dissipation

Revenues generated by
virtue of licensing Effect:
Erosion of profits due to
payments on the sale of competition in the
technologies downstream Market
FACTORS TO CONSIDER FOR
Distinctive
LICENSING
Nature and
THE TECHNOLOGY
complementary
assets in production
1

importance of the and marketing wrt

transaction costs in other competing
the exchange of firms
2
complementary
assets vs costs in
licensing the 3
Extent of
technology
competition in
the final product
market
increase
financial Dow Chemicals - To offset R&D investments
return
from
Strateg as licensing revenues are less cyclical than
commodity businesses.
R&D y of Formed licensing group, to ensure licensing
other revenues for account for loss of monopoly
technology position.
such creating
DuPont - Formed a group to make available
large value for
existing tech for licensing
firms processes by
persuading Eastman - Technology licensing unit to sell
more firms
under-utilised IP.
to license.
HIMONT AND SPHERIPOL
PROCESS of making
PP was capable of adapting PPworking conditions
under varied

Process Advantages:

1. Greater performance of the production plant and a greater control

over the physical structure of the polymer.
2. Compactness of the catalyst as fluid requires less storage space
than a gas.
3. This leads to lower investments and plant development costs
Himont was not a monopoly in the production of PP per se
but was enroute to become a major player in the market for PP production process
technology.
Why HIMONT LICENSED?
● Gain returns from R&D investments.
○ Royalties and Licensing fees
○ Licensees chose Himont for the catalyst supply and as engineering
firm (Technimont)
○ The presence of PP suppliers using the same technology of Himont
creating stricter and longer relationships with the final customers
○ Final customer of PP preferred to buy PP from Himont and from
Himont’s licensees to maintain compatibility between sources of PP.
● Lack of downstream complementary assets in production.
● Increase in PP (polypropylene) demand leading to
○ Increase in PP production and PP production technologies
● The presence of a potential licensor/competition (Shell, BASF, Carbide, etc.)
created incentives to license.
● The desire of Himont of setting-up a global standard in PP materials
Identify how Himont overcame licensee resistance and
protected its own interests through clauses/provisions in its
licensing contract?
Licensing contract consisted of - the definition of price, payment methods, knowledge
disclosure, and prospective further development
Problems of information Standard licensing contract - fixed
asymmetry in knowledge
amount(down payment) + variable
(Arrow’s information
paradox) amount(running royalties)

Licensee received right to develop

the technology by paying license fee.
But, the characteristics of
The risk of patent
technology & catalyst were easily
infringement
understood only by Himonts

Cross-licensing agreement

To avoid risk of creating Licensing contract partly included a

new technological reciprocal continuous know-how, co-
competitors development agreement (grant back)
HIMONT ANTI-Trust
● Himont protected its licenses with patents.
● In case of patent infringement
○ Suing them
○ Partial patent disclosure and cross-licensing
● Technipol to manage licensing as Himont-shell merge

Licenses and Licenses

Catalysts and
Catalysts
Montell Technipol Customers

Fee Money