Commercialization of IP
Commercialization in terms of intellectual property rights refer to the process of converting an intellectual property into money-making strategy, i.e. business model. The success rate of intellectual property commercialization is dependent on the choice of commercialization tools. The hybridization of intellectual property rights with business strategies lead companies to a solution where everyone benefits.
Intellectual Property Rights commercialization usually takes place through knowledge transfer via licensing, franchising, joint venture and spin-off, and material transfer agreements. The other ways include (a) Internal product development and (b) Assignment or sale. The scheme for internal product development is as follows:
The Intellectual Property Rights commercialization is an on-going process, and in most successful cases it has been found that money is gambled on the idea at the hypothesis level or beginning of the research. Studies done by researchers suggest that a mere 5% of all patented innovations are demonstrated victorious in business commercialization. Thus, it becomes a trend for big companies to route their business through IPRs as they can spend money and have sufficed the research and development section. Moreover, studies even suggest that for successful IPR commercialization, the IPR should be commercialized at each stage of research.
The stages of commercialization of IPR are listed as follows, though the individual components have been discussed elsewhere.
- Inception Stage
- R&D Stage
- Application for IP
- Financing
- Partnership
- Further R&D
- Integrating IP tools
- IPR enforcement
For e. g.: Coco-Cola is one big name and is enjoying perks of using intellectual property rights in terms of copyright of design of bottles, registered trademark, the patent for barrier coated plastic containers, and patent for manufacturing secrets. Further, Coke Zero or Diet Coke a subsidiary of Coca Cola, inc., is achieving milestones in low sugar drinks due to the exclusivity of the brand name – ‘Coca Cola’.
An example of the impact of Intellectual Property Rights commercialization can also be quoted from the telecommunication industry. This is of Microsoft acquiring mobile handsets business of Nokia wherein, Microsoft paid $5 bn to Nokia for business take over and an additional $2 bn for patent licensing for over a decade. This implies almost 30% of the total deal was specifically for carry forwarding the Intellectual Property Rights owned by Nokia.
Some important statistical data related to IP commercialization for India are tabulated below.
University Startups and Spin-off Models
The university start-up programs are designed to promote commercialization of intellectual property either via internal university programs and/ or external programs; and the modes through which resources are being shared and attracted. The models are developed in such a way that they facilitate R&D and aid business services, management, and financing. These programs can be one or more of the following:
- Commercialization Programs
- Technology Development
- Accelerator Models
Commercialization Programs
The major components of commercialization program models include:
a) Proof
of Concept – It refers to a situation where an intangible component (an idea or
thought or hypothesis) is realized into tangible or feasible components.
(Product, service, methodology).
b) Networking
– These are events that foster a relationship between budding minds and startup companies. Usually, such networking
models provide contacts with collaborators, service providers, management, and
mentors.
c) Partnering
– These programs build bridges between startup companies and other companies.
In terms of research and development collaborators, strategic investors,
end-users, or providers of sales, marketing, and distribution.
d) Team
Building – This usually promotes inter-disciplinary work and help in overcoming
the loopholes both primary (ideation, technology transfer, scale-up and
troubleshooting) and secondary (patenting, legal matters, marketing, finance,
etc.).
e) Education
and Training – Several courses are available globally that provides education
and training on the commercialization of
intellectual property and the creation of a startup company.
Technology
Development
There are two ways in which universities promote the ideation to realization practice. The first one is the Sponsored Research Programs. In this case, the university provides resources either by directly funding the projects or by providing funds through government organizations, non – government organizations, or companies or promoters. The second mode of providing help includes allowing access to resources available within the campus or providing access to resources available with other institutions or organizations; this is known as Shared Research Resources.
Accelerator Models
They can be either startup accelerators or business incubators. Their duty is to support the budding companies by providing resources and services; this even includes accessibility to funds. These incubators are situated in the vicinity of university premises and are readily available to guide the students.
One such incubation center in India is “SINE” (Society for Innovation and Entrepreneurship) a fostering incubator at IIT Bombay. And as of the latest numbers, they have supported more than 160 startups, with 550 + entrepreneurs and who provide employment to over 4000 individuals.
There’s a basic difference between startup accelerators or business incubators which can be understood from the following table:
Angel Investors: These are rich individuals who are interested in investing money in startups and entrepreneurs, in return having ownership equity in the business. The Angel investors can be even friends or relatives or some high-end business tycoons looking for exploring new business ideas. Nowadays, there are several online platforms who bring investors and entrepreneurs together.
Ericsson – Micromax (2013) (Case Study)
In the year 2013, Ericsson (Swedish multinational) took legal action against Micromax for patent infringement for eight of its standard-essential patents (SEPs), related to 2G, 3G, and EDGE devices that were heard by the learned counsel of Hon’ble Delhi High Court. The SEPs owners like Ericsson are required to reveal some of their patents as necessary to the determined standard and, offer these patents to license on Fair, Reasonable and Non-Discriminatory (FRAND) terms, to any probable licensee. However, there are several legal issues related to this process:
- The SEPs are potent to create a monopoly for the owner (industry)
- There would arise question on legal implementation of FRAND commitments.
- It may lead to none or improper revelation by patent holder
- And there could also arise a situation wherein licensees refuse to settle FRAND terms in good faith.
Hon’ble Delhi HC directed the companies to enter a predetermined FRAND arrangement for a fleeting period of one month and appointed a mediator to supervise and settle the dispute. However, aggrieved by the dominance of Ericsson in the royalty terms for its GSM technology-related patents, Micromax filed a complaint u/s 26(1) of the Competition Act, 2002, with the Competition Commission of India (CCI). CCI pointed out that Ericsson owns 33000 patents out of which four hundred were granted to India and that the respondent was the largest holder of SEPs for the aforementioned mobile technologies. The commission further noted that there was no alternate technology available in the market and Ericsson was the kingpin of the technology. CCI further highlighted those royalties charged should be on the patents associated with the chipset technology and should not be randomly calculated as a percentage of the sales price of the licensed downstream product.
CCI ordered the Director General to interfere in and investigate the matter. Ericsson discontented with the order, challenged the same again in the High Court, Delhi. According to the judgment pronounced by the Hon’ble Court, in case of misuse of dominance by a company, CCI has complete jurisdiction to order an investigation in such matters. The court further ordered that the base of calculating royalties to be charged for the license can be the net sales price of the final product which was already determined in an interim order dated Nov 12, 2015
This is an important case as not only Micromax but several other mobile handsets manufacturing companies like Intex, Lava, Gionee, Xia and iBall was sued by Ericsson on similar grounds. Further, Intex also retaliates just as Micromax. Last but not the least, Vringo also sued ZTE and Asus in the same fashion.
Conclusion
The report here is on Intellectual Property – Concept to Commercialization. The report contains gist on need and ways of IP commercialization; it also mentions the way in which universities promote the IP Commercialization, this includes – Commercialization Programs, Technology Transfer, and Accelerator models. Various examples have been included to understand the concept, these include – Coco Cola’s IP strategies, Microsoft’s acquisition of Nokia and a detailed case study on Ericsson versus Micromax.
