Winning vs Losing: The Dilemma of Patent Royalties
Explore the complex decision of whether a licensee should invalidate a licensed patent to avoid royalty burdens, with real-world examples showcasing the impact on sales and profitability. Understand the strategic considerations of maintaining or killing a patent, and the potential consequences for your business.
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Presentation Transcript
Snapshot 3: When Winning is Losing Getting rid of a royalty burden can be Licensee s worst move! Title David B. Kagan Kagan Binder, PLLC Stillwater, Minnesota Presented to MNCLE January 31, 2020 Agreement Wisdom in a Flash! 1
Should Licensee invalidate the licensed patent to avoid its royalty burden? Licensed patent for caffeinated wine 3% royalty Stay Awake Vineyards Annual sales explode to $800 million Caffeinated Cabernet
Management smells blood $24 million annual royalty Freedom . . . From patent royalty!!! IPR attack is potent Kill the patent!
Do the math Patented with royalty Patent killed $800 million annual sales Competitors flood the market/price erosion 50% profit margin Annual sales drop to $90 million Less $24 million for royalty 10% profit margin $376 million net annual profit Annual profits drop to $9 million dollars
Do the math Patented with royalty Patent killed $800 million annual sales Competitors flood the market/price erosion 50% profit margin Annual sales drop to $90 million Take away $24 million for royalty 10% profit margin $376 million net annual profit Annual profits drop to $9 million dollars
Hints that winning is losing (licensed patent is working hard for you) Competitors stay away from your niche Proprietary profit margins Licensed patent protects the sizzle Your own patent portfolio is either complementary or perhaps non-existent The patent is keeping your business alive, and its absence would be deadly.
Hints that winning is winning (a.k.a. killing the patent makes sense) You ve got lots of competitors anyway Licensed patent not doing its job You re the only one paying royalty Your profit margins are ordinary Royalty stacking problems Alternatively, your own patent/know how portfolio protects Ongoing R&D Invention harvesting
Winning can win or lose depending on the facts Do the math Look for the hints Develop your own patent/know how portfolio Actively/effectively harvest and protect inventions
