IP licensing adds value to businesses

This article in The McKinsey Quarterly argues that too many companies treat the licensing of
IP as a one-way street by relying solely on their own research and
hoping to profit by licensing it to others.

"But companies that derive a
significant share of their revenues from licensing intellectual
property understand that in-licensing—the purchase of IP from outside
sources—can boost their performance no less than internal research.
Instead of viewing new ideas and technology from other companies as
competition, they use external IP to spur innovation and to improve
their own products. The most successful companies go further still by
taking externally developed knowledge, incorporating it into their own
new products, and then licensing those products to others, thereby
gaining even more revenues from licensing…

Counterintuitive though it may seem, in-licensing can drive innovation,
for successful in-licensors better understand the gaps— ideas or
technologies they need to improve processes, create new products, or
complement current ones—in their own IP portfolios. These companies
also know how to find partners to close the gaps. In addition,
in-licensors are more likely than other companies to meet their
financial and strategic expectations for IP and to rate IP management
as a source of competitive advantage.
"

McKinsey research shows that companies could earn 5
to 10 percent of their operating income from the sale or licensing of
intellectual property.

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