VANCOUVER, BC – Licensing executives increasingly view patents as the most important form of intellectual property for adding value to an organization, according to preliminary results of the LES Licensing Foundation’s fourth annual “State of Licensing” survey.
The foundation, a non-profit created in 2000 by the Licensing Executives Society to educate non-licensing professionals in the US and Canada, released the initial findings of the survey at the LES Annual Meeting, held here last week.
Richard Razgaitis, outgoing president of the Licensing Foundation, presented the results, which are drawn from a survey conducted earlier this year of LES members identified as either technology creators or users, or providers of legal or other professional services for the licensing sector.
The survey revealed a variety of information about licensing activity at US and Canadian for- and non-profit institutions over the last year and over the last three years. In addition to the increasing importance of patents relative to other forms of IP, the survey also found that IP-related lawsuits are not as common as publicly perceived, though most common in the information technology sector.
Furtehrmore, the survey revealed that it may be increasingly difficult for organizations to outlicense their available IP.
Razgaitis did not disclose the number of LES members surveyed this year or the response rate because the results are preliminary and awaiting formal publication.
Last year’s survey, conducted in February and March of 2006 and published in the December 2006 issue of the tech-transfer journal Les Nouvelles, was distributed to approximately 3,600 “technology creators or users” and approximately 2,700 “professional services providers.” The survey web site in 2006 received more than 1,200 hits with 588 respondents completing at least one question on the Technology Creator/User Survey and 344 on the Professional Services Survey.
Razgaitis said that the full results of the survey would be published in the December issue of Les Nouvelles.
One of the more interesting trends, according to Razgaitis, was the apparent growth of the importance of patenting compared with other forms of intellectual property.
Specifically, in response to the question, “How important are the following types of IP in creating a competitive advantage for your organization?” approximately 83 percent of those surveyed said that patents were “extremely important,” a nearly two-to-one advantage over the next category, “know how,” which about 46 percent of respondents deemed extremely important.
In comparison, the 2006 survey results revealed that only about 80 percent of those surveyed deemed patents as “extremely important;” while 50 percent said that know-how was extremely important. While Razgaitis said that the statistical significance of these numbers has yet to be calculated, they seem to indicate that the importance of patenting to creating a competitive advantage for companies was on the rise.
Other forms of intellectual property that respondents said were not as important included trade secrets, trademarks, and copyrights.
Another notable survey result revolved around the importance and/or frequency of litigation in the licensing arena. In response to the simple question, “Is licensing primarily about fighting litigation?” 90 percent of respondents said “no.”
Perhaps more telling were the responses to a question about how much time is consumed by the enforcement of IP; or, more specifically, “In the past 12 months, what percentage of your licensing activity resulted from enforcing your IP rights against another party?”
Overall, approximately 7 percent of respondents said that none of their licensing activity resulted from IP enforcement; 38 percent said 1 to 5 percent of their activity; 23 percent answered 5 to 25 percent of their activity; and 19 percent answered that more than 25 percent of their activity was related to enforcement.
Simply put, Razgaitis said, “most of the time litigation does not happen in this field,” contrary to what the general public might believe due to media coverage of IP-related litigation.
The survey also divided respondents to the litigation question into various industry segments including “digital information computing electronics,” or DICE, a catch-all for what is traditionally referred to as the IT industry; health; industrial; university and government labs; large corporations; and small corporations.
“Most of the time litigation does not happen in this field.”
Those in the “DICE” segment were by far the most litigious, with no respondents answering that none of their licensing activity resulted from IP enforcement; 26 percent answering 1 to 5 percent; 11 percent answering 5 to 25 percent; 18 percent answering in both the 25 to 50 percent and 50 to 75 percent categories; and 15 percent answering 75 to 100 percent of their activity was related to enforcement.
In contrast, in the health-related segment, 12 percent of respondents said that none of their licensing activity resulted from IP enforcement; 40 percent said 1 to 5 percent; 28 percent said 5 to 25 percent; 7 percent said 25 to 50 percent; 1 percent said 50 to 75 percent; and 1 percent said either 50 to 75 percent or 75 to 100 percent.
Meanwhile, in the government and university lab segment, 9 percent said that none of their licensing activity resulted from IP enforcement; 60 percent said 1 to 5 percent; 18 percent said 5 to 25 percent; 9 percent said 25 to 50 percent; and none said that one-half or more of their activity resulted from IP enforcement.
Because three previous licensing surveys had been completed prior to this year, the LES Licensing Foundation had an opportunity to ask survey participants their thoughts on licensing trends over the past three years.
In response to a question about licensing yield, or the amount of their available IP that is actually being licensed, although a majority of respondents believe that it has remained the same, almost three times as many respondents believed that licensing yields are getting worse than getting better.
Asked, “Has the percentage of IP you want to license but can’t, with at least one potential licensee, gone up or down over the past three years?” 63 percent of respondents answered that it has stayed the same. However, approximately 29 percent of respondents said that it increased, while 9 percent said that it didn’t. These percentages more or less held true for each of the segment categories.
Other three-year trends were revealed in questions about whether a respondent’s organization had “devoted significantly more resources to identifying potential licensees/licensors” (39 percent said ‘no,’ 59 percent ‘yes’); “seen a significant drop in the costs of searching for license opportunities” (77 percent said ‘no,’ 10 percent ‘yes’); used a web-based IP marketplace to generate leads or identify licensors” (48 percent said ‘no,’ 48 percent ‘yes’); or “had fewer licensing opportunities because of a reduction in R&D spending” (76 percent said ‘no,’ 14 percent ‘yes’).
Approximately 68 percent of university and government lab respondents answered that their organization had more often used a web-based IP marketplace to generate leads or identify licensors over the past three years, as opposed to the overall 48 percent response rate, underscoring the increasing importance of an online medium for identifying potential tech-transfer partners.
Another area in which university and government labs seem to differ from their industry colleagues is in the use of a formal valuation model for conducting licensing negotiations.
The survey revealed that overall, respondents said that they used a formal valuation model in their negotiations an average of 36 percent of the time. However, university and government respondents said that they used such a model an average of 18 percent of the time.
On the other end of the spectrum was the health-related segment, of which 47 percent on average used a valuation model, underscoring the influence that the long development time of drugs, medical devices, and other health-related technologies have on negotiating licensing deal terms.
Razgaitis said that in addition to the complete results of the survey being published in Les Nouvelles, the Licensing Foundation would likely release an article summarizing key aspects of the survey through the LES.
The 2008 “State of Licensing” survey will be conducted in January 2008, Razgaitis said.