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R&D spend, patent licensing revenue and the law department as profit center

The Harvard Bus. Rev., Vol. 87, Dec. 2009 at 72, mentions Royal Philips Electronics and that it is “capitalizing on the more than 60,000 patents in its portfolio to earn hundreds of millions of euros annually from licensing.” I have mentioned patent licensing fees in several contexts (See my post of April 27, 2008: patent licensing by American Express; Sept. 21, 2008 #4: Director of IP licensing at 3Com; Oct. 7, 2008: three strategic objectives of an IP group; Feb. 24, 2009: intangible assets of a company drive lawyers per billion; and Sept. 21, 2009: Qualcomm, Philips Electronics and Thompson flourish, but few others with patent licensing.). The HBR author claims that “Many businesses recover from 10% to 20% of their annual R&D spending in this way.

If R&D spending is six or seven times legal spend (See my post of Dec. 3, 2009: benchmark data on R&D intensity.), that means licensing patents for “many businesses” almost covers the entire legal budget! With that benchmark in mind, general counsel might devote more attention to generating revenue. The effort, however, increases workload and requires much coordination with R&D, marketing, and business units.

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One response to “R&D spend, patent licensing revenue and the law department as profit center”

  1. Music to my ears!! We have done IC (intellectual capital) audits that come to this same conclusion but we find tremendous resistance (sometimes in paying for an audit in the first place) to the “licensing burden.” Part of the problem is that there are few people on the business (i.e., non-law) side who want to own this market (seeking licensees) because they are perceived to be graveyard workers. Management would much rather work on the hot and sexy current technology.
    I say outsource it (we do it in a New York minute).