Licensing patents may be a pot o’ gold for a few, but it’s usually over the rainbow

General counsel may seek to drive some revenue as a result of their department’s patent licensing efforts, but the imagined returns are four leaf clovers. An article in MIT Sloan Mgt. Rev., Vol. 51, Fall 2009 at 72, states that for only a few companies does patent licensing pay off. True, Qualcomm, Philips Electronics, and Thompson generate from $500 million to $2 billion per year in patent licensing. They are exceptional leprechauns. “Indeed, 99% of patent-licensing revenue in the United States is generated by companies that own 40% of all U.S. patents; that is, the remaining 60% of patent holders receive just 1% of the revenue.”

Patent licensing only benefits a portion of companies (See my post of Dec. 31, 2007: intellectual property licensing with 12 references.). Apparently it is blarney to think it will be the pot o’ gold for general counsel who would like to move their department more toward a revenue generator. (See my post of April 27, 2008: profit center with 18 references.).

More generally, the article points out that “Siemens … and Proctor & Gamble Co., for example, recently reported that they use a mere 10% of their patents but nevertheless pay millions in annual renewal fees for the remaining 90%.” Patent activities remain problematic in terms of profit.