Creative licence

To license or not to license? You might like to believe this is a simple question. You have developed a new product or technology and want to decide how to maximise your return on investment. Do you exploit the idea directly yourself or do you licence it to other parties? There isn't a simple answer, although the business model should be thought through during the development process because it may well affect how you invest in the idea.

The critical first question is: 'Do you have the attributes, resources and capabilities to exploit the idea completely?' These could include development resources, market channels and manufacturing and support capabilities.

In the general product area, I would say successful companies built on licensing are rare. The attributes I would look for are: a platform technology with a broad range of applications; a technology that can go into products whose principal differentiation in the market place arises from technology and features outside the licensed technology; protection of the intellectual property (IP).

Also, for a sustainable business as opposed to a one-off deal, the technology must be amenable to non-exclusive licensing; for firms with strong market channels in particular territories, licensing might be an appropriate means of addressing international markets.

For example, ARM's microprocessor is the heart of a vast number of silicon chips each year. In marketing the technology as a core, rather than developing a discrete number of devices, they have made it much easier for their customers to design the technology into diverse products. ARM's technology has the attributes of the first four points above. Many of those integrated circuits (ICs) incorporating ARM cores require capabilities outside the microprocessor field and by licensing the microprocessor to design teams everywhere, ARM has succeeded in maximising the commercial potential of their development.