This article will discuss licensing out of technology, but first let’s look at the basics with the help of a literary giant. Ernest Hemingway is not just a famous author anymore. Part of his legacy, as carefully managed by companies controlled by his heirs, is now growing into a significant branding enterprise that does much more than publish books.
While there are still existing copyrights in his literary works — the cornerstone intellectual property — there is also newer IP. For example, there are trademarks based on his name, which, since he is dead, can be registered and marked with ® as in, Ernest Hemingway®. Whether or not a famous author’s legacy should be commercialized in the manner discussed below is an issue that will be debated among fans, but if it is going to be commercialized, then protecting the IP rights is key.
In each case, an owner needs to identify, control, and secure its IP assets, register them where appropriate, decide whether to make the product or offer services itself, or license other companies to do so. Owners need to be proactive, not reactive.
While Hemingway’s life was chaotic at times, the newer branding endeavours in his name appear to be more orderly and very collaborative. Some products are commercialized under licence to a Hemingway-named company, such as clothes by Hemingway, Uomo, which we assume to be related to the estate. In other cases, a Hemingway company co-operatively licenses out the Ernest Hemingway® trademark rights to arm’s-length third parties. There is furniture by Thomasville, rum by Papa’s Pilar, seasonings by EH Gourmet, and a boat by Baha Marine. There is even a Hemingway app developed to help improve a user’s writing style to be more concise. If only it was so easy to write like Hemingway.
Licensing out can also be used to commercialize cutting-edge science.
BIOTech
In biotechnology, Cetus licensed a famous patented reaction called PCR, which was used to exponentially multiply the minuscule amounts of DNA in a sample so that it could be tested and characterized. It is very useful for basic research as well as diagnostics. The initial patents, US 4,683,202 and 4,683,195, later acquired by Roche, expired about 10 years ago, but improvements have been patented, creating a portfolio of IP to license out.
Now a new technology called CRISPR is being used to modify genes of mammalian cells. There are initial patents held by the Broad Institute, MIT, and others which focus on engineered components, compositions, and processes. These patent rights are available for license out. If the person that produces the initial innovation protects it properly, then it may be able to obtain broad rights that control use by others, and that are also broad enough to cover incremental improvements made by arm’s-length companies. This can be the basis of a good program by making the new IP widely available while generating revenue.
High Tech
In high technology, standards-essential patents are key for companies looking to generate revenue by licensing out IP. Thousands of standards have been set to create interoperability among electronics and communications systems.
The standard-essential patents cover technology essential to complying with a standard and are, therefore, commercially valuable and difficult for a competitor to design around. Some standards organizations require companies with standard-essential patents to license them on fair and non-discriminatory terms. There can be antitrust implications for companies that try to use standard-essential patents to block competitors.
Patent pools have often been used to streamline licensing out of high tech. Companies create a pool by mutual agreement, patents are added, and anyone wanting to take a licence can do so. Companies can cross-license their patents to each other. Third-party manufacturers can license in whatever IP they need.
The patent owners get paid readily. Patent pools can increase competition, and benefit consumers, by removing freedom-to-operate issues and facilitating technology integration. However, antitrust issues must be kept in mind in setting up a pool. DVD and MPEG patent pools were scrutinized and permitted by the U.S. Department of Justice under U.S. antitrust rules. The Canadian Competition Bureau can review pools under the Competition Act (s. 45).
Protecting IP early is critical, however, as the Hemingway example shows, it is never too late to try to build IP and license it out.
Noel Courage is a partner with Bereskin & Parr LLP.
