CAN INTELLECTUAL PROPERTY BE SOLD?
May 9, 2022
If you or your business own intellectual property (IP) in the form of patents, trademarks, copyrights, or even trade secrets, there may come a point when you have to choose between using your IP yourself, licensing it to others, or simply selling it outright.
Sometimes it’s not an easy decision to make. Intellectual property often takes a lot of time and energy to create, and then safeguarding your creations through patents, copyrights, and trademarks can be expensive. Patents especially require continuing renewal fees, and if you’re not making money from the patent, you may decide it’s best to either license or sell it.
If you’re stuck between choices for your intellectual property, it’s probably best to consult with an attorney experienced in intellectual property rights and sales. The attorneys at CoffyLaw, LLC have a combined 80 years of experience in helping clients with issues pertaining to intellectual property, whether you’re looking to protect your IP, license it, or sell it.
With offices in New Jersey and New York, CoffyLaw, LLC represents clients across the nation.
Valuing Your Intellectual Property
Suppose you do reach the point that you're ready to sell your trademark, copyright, or patent. How do you value the sale of the IP you’ve created? If the IP is sitting idle and not in use yet, valuation can be more problematic than it would be if it is already part of your business. In either case, there are generally three methods for estimating the value of your IP, though each has its own limitations and complications.
Market-based estimates: Valuation is estimated in this model by comparing your IP with similar properties in the marketplace after you initially place your value on it. It can become an exercise in comparing apples and oranges, however. For instance, how do you compare the Nike and Adidas logos without looking at the underlying financials?
Cost-based estimates: Value is estimated here by determining the costs that went into the creation of the IP and how much it would cost to replicate the product, logo, or trademark. The costs include not only developmental expenses, but also registering and safeguarding the IP through the legal process, such as through the U.S. Patent and Trademark Office (USPTO).
Past and future economic estimates: This is perhaps the most reliable means for estimating value, but it requires that the IP in question be employed in some form or another, usually as part of your own business operations.
In short, there is no foolproof method of estimating value. If you come up with a value and then sell your IP only to see it grow exponentially in value in the future, you’re probably stuck with whatever you sold it for. One way to share in future value is to include an agreement in your sale that you receive bonus payments once certain sales goals are met.
Should You Sell or License?
This can be a tough choice. If your IP is part of your business and you decide to sell the business itself, then you will likely have to include the IP in the sale. No one is going to buy your business if you retain rights to the trademark or the trade secrets used in operating the business.
As mentioned above, an IP sale can be an open-and-shut deal and you can suffer seller’s remorse if your IP goes on to conquer the marketplace. Again, this can be ameliorated through a sales agreement that includes future bonus payments.
The major benefit of licensing is that it ensures you retain ownership of your IP. For instance, you can receive royalty payments for your patent while retaining ownership, and you can benefit from future sales of the product.
If you’re doing nothing with your IP and have no plans to, you may just want to unload it through a sale so you can avoid ongoing renewal payments for your IP’s registration.
Factors in Selling Your Intellectual Property
Depending on which type of IP you’re selling, the sales transaction can have different considerations and legal requirements.
Copyrights can be sold or transferred so long as the transaction is done in writing. You as the seller will need an attorney to help you complete a copyright assignment agreement. If you’ve never registered your copyrighted material, however, you may have a hard time convincing a buyer that you truly are the owner.
Trademarks can only be sold if they are actively being used in commerce. If you hold only an “intent to use” trademark application, you cannot sell the trademark. This is meant to prevent speculators from registering a slew of trademarks in hopes of selling them someday. Trademarks can be licensed as well, but the owner is responsible for ensuring the mark is used appropriately or the trademark can be considered abandoned.
Patents can be sold or licensed. The important point is that the patent by itself won’t generate income. It needs to be licensed or sold to produce income. Many patent holders choose the licensing route because it can result in a long-term income stream, whereas a sale might result in only a one-time payment.
How Skilled Legal Counsel Can Help
If you or your business own intellectual property, you have a choice of whether to use it for yourself, license it, or sell it. Often, the decision is not easy. At CoffyLaw, LLC, we have represented sole proprietors, mid-sized companies, and even Fortune 500 companies. We stand ready to offer you a comprehensive array of legal services for you and your intellectual property.
With offices in Maplewood and Freehold, New Jersey, and in Brooklyn, New York, our attorneys serve clients throughout Newark, New Jersey, Philadelphia, Pennsylvania, and across the nation.