Saturday, January 11, 2020

Commercialization of Intellectual Property Rights and its Key Business Concerns



Topic:Commercialization of Intellectual Property Rights and its Key Business Concerns

INTRODUCTION:-


As you all know Copyrights Trademarks Patents etc are buzzing words of this decade.To elaborate IPR in India are broadly classified in five categories that is Copyright, Trademark, Patent, Designs, Geographical indication


The biggest opportunity/advantage as well as the threat in IPR is that it is an intangible asset.
 For example if I want to own a flat in Mumbai it is quite easy to search for the same, value the property and purchase it. 





Almost all of us know the legalities involved in buying and selling a flat but frankly how many of us really do know all of the above mentioned procedures for say Patents? 
So today is the need of an hour to throw the light on the various processes in making IPR marketable . 

What is Commercialisation of IPR? 

In its Layman sense commercialization of IPR refers to making your IPR marketable and earning profits through it. In India if we discuss commercialization of IPR it is like opening a Pandora's box – One thing leads to many complications. 
So I would like to pinpoint the major steps in simple language. 

Let's go back to our earlier example :- 

Imagine you have a piece of land and you want to do business from it so the options available to you is to sell the land as it is 



2)Another option is to construct a shop on land and give the shop on rent. 





Similarly if you own IPR you can either transfer it to someone else as it is or you can develop marketable product through joint venture or collaborations and commercially exploited to earn rewards. 


Having discussed this now let us enter into a bit technical zone regarding commercialization of IPR . 


WAYS IN WHICH IPR CAN BE COMMERCIALIZED

First of all let's discuss the ways in which IPR can be exploited commercially. It is certainly not easy to manage IP commercialization as success of whole process depends upon various endogenous and exogenous factors like:
-business objectives, 
-Type of IPR
-capital resources etc. 

Three Major Ways for IP Commercialization:-
Broadly IPR commercialization can be achieved through three ways.

1. Commercialization directly by owner of IP  
2. By Assignment 
3. By building a business partnerships . 

All these ways have their own pros and cons let's discuss them in a bit detail. 

Commercialization directly by owner of IP:




As mentioned IPR can be commercially exploited by owner himself . This approach comes with best returns as well as it is most risky because being the individual owner of IP and converting them into marketable product or service is altogether a different game . 

The factors to be considered before undertaking this are how an IPR you own can be developed to a desired product in market ,then time included ,the funding required and how to get it . 

Moreover the owner has to keep focus of all the process from view of market. Once you find the product in the market and it is desired by customers then your returns are going to be enormous. 
  
The major setback in this type of commercialization is availability of necessary financial and technical capabilities to take your product to market by yourself 

For example in biotechnology and nanotechnology the major market is international market. Thus in many situations and organisation owning IPR will need commercial partners to develop a product 

Also the time gap between production and generation of sales revenue is quite long. Thus it puts pressure on financial position of IP owner. 

so it is clear from above discussion that on one hand this way of marketing IPR can give best returns but if not successful at can lead to enormous financial losses to IP owner. 

2) Assignment:




Second way to commercialize IPR is by assignment. In this process IPR owner transfers all or any part of his rights.The owner of IPR assigns the right to use IPR to certain organisation who will develop , produce and market the product or services 

In this process the reward of owner is limited to the amount of royalty he gets from the organisation. 

The Owner is not concerned with the profits or losses owned by organisation. His amount of royalty is fixed. 

The major problem around this structure is to fix the amount of royalty .In India it is quite difficult to assess valuation of IPR ,we will have deep insight on valuation aspect in later part of a discussion now let us restrict our self to the point that valuation of IPR is crucial issue in assignment of IPR. 

Next issue to be considered while assigning IPR is to ensure integrity of counter Party

For example you are author of novel and have copyright on it, you have assigned the copyright to publisher @ 50 rupees per copy sold of book .

Now publisher may manipulate the data regarding number of copies sold and therefore financially hitting your royalty. 


Building a Business Collaborations :- 

Now let us take into consideration the last way to commercialize ip i.e building a business collaborations .  

In this strategy IPR owner enters into business agreement with third party who play role of an investor and helps in converting IP into marketable product or services . 

This concept is quite new in India IP owner generally prefers to design product by himself or directly endorses it to other by way of assignment. 

But for long term sustainability partnering of IP owner and corporate houses would play an important role  

Other important aspect related to Commercialization of IPR.

Having discussed first part of our discussion on commercialisation of IPR let's pave our way to some other important aspect related to commercialization of IPR. 

Valuation: 


   
The paradox of valuation is that most corporates are aware of potential value of their IP but invariably neglect to determine its value with accuracy . As rightly said by Peter Drucker “if you cannot measure it you cannot manage it” 

Investors can optimise their IP portfolios and increase their returns with more realistic valuations. Various approaches to determine IP valuation replacement cost approach, market value approach, fair value approach and tax valuation approach. 

Under these approaches and IP valuation will assist in making informed decisions concerning IP development or acquisitions 


IP AUDIT:


Next point here is IP audit the first and foremost objective of IP audit is to ascertain the existence of IP.  An IP audit should identify all the IP generated by particular department of an organisation 

IP DUE DILIGENCE:

■IP due diligence generally seeks to: 

■Identify and locate IP assets, and then assess the nature and scope of the IP to evaluate their benefits and allocate risks associated with the ownership or use of the relevant IP assets; in particular, it seeks to determine whether the relevant IP is free of encumbrances for its intended business use(s). 

■Identify problems in and barriers to the transfer, hypothecation or securitization of the IP assets under consideration. 

■Identify and apportion between the two parties the expenses incident to the transfer of IP assets under consideration

 IPR ENFORCEMENT:

In this penultimate leg of discussion I would like to draw your attention to the most important aspect as well as the concern in IPR commercialization i.e IPR enforcement .

By entering into IP transaction one of the most important assessment to be made relates not only to validity and market relevance of asset but also capacity to protect and enforce IP .

Once new product is offered for sale in market and is successful in the market it is likely that competitors will attempt to make competing cheaper product with identical or similar features. 

This may lead to undue financial pressures. It is therefore important that parties have recourse to effective enforcement of IPR 
  
COMPETITION LAW V/S IPR LAW: 

            v/s

Relationship between competition law in India and intellectual property law : 

Often these laws are seen conflicting with one another. On one hand it is necessary to create monopolies under intellectual property law to encourage innovation and on the other hand competition law seeks to prevent Monopoly but in reality these laws of complementary rather than conflicting 

Because both laws have same fundamental goals of 
1) promoting fair competition and 
2) promoting innovation. 

For example of pharmaceutical company comes up with medicine for cancer so it is very obvious that other company will also come up with similar type of medicine accordingly there will be sustainable competition 


CONCLUSION: 

To conclude I would like to say that major lacunae in commercialization of IPR in India to the extent we want is lack of professionals in this field . 

Also one of the major setback we have in India is we have fragmented structure of IPR laws i.e we have Copyright Act, Trademark Act , Designs Act, Geographical Indication Act. 

If we have uniform IP laws just like how we have Insolvency and Bankruptcy code 2016 this fragmentation will not be there and it will be much clearer to understand as well as to implement it on a large scale. 

As a lawyer we are proficient to be able to guide our client write from registration of IPR , commercializing it , protecting it and providing necessary guidelines regarding infringement of IPR and other cases .A lawyer as a professional has a huge opportunity in IPR. 

In coming 5 to 10 years IPR will be huge demand in country as well as in the world 

Author: Richa Phale

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