PATENT LICENSING

Cash Engineering Research gains its revenue solely from the sale of air compression technology to massive multinationals based in the US and Europe. Its products […]

Cash Engineering Research gains its revenue solely from the sale of air compression technology to massive multinationals based in the US and Europe. Its products are IP – patents and know-how.

The company started in 1938 in the Melbourne suburb of Richmond as a manufacturer of machine tools. In 1945 it began manufacturing air compressors. By the late 1970s it owned a dozen patents and knew air compressors inside and out.

The turning point was in 1981 when Tony Kitchener, grandson of one of the founders, convinced a large European manufacturer to license Cash Engineering technology. By 1985 the company was making its ‘living’ from licensing its IP.

Cash Engineering technology is tremendously valuable. In fact, two foreign takeovers have occurred out of the mistaken belief that the subsumed companies were the originators of the air compression technology, when it had actually been licensed from Cash.

THE STRATEGY: INVEST IN IP AS A COMMODITY

HOW LICENSING WORKS

According to Tony Kitchener: ‘Licensing intellectual property is basically about getting the fear and greed levels balanced between both parties.

‘The licensor fears they won’t be able to off-load their technology. The licensee fears that if they don’t buy the technology their competitor will buy it – and blow them out of the water. The licensor wants as much as possible for their intellectual property, and the licensee wants to give as little as possible.

‘Once you get this all sorted out – with lots of hair pulling and tears – you’ve got yourself a licence agreement.’

PATENTS WORTH INVESTING IN

Though licence agreements can be lucrative, many Australian businesses view the expense of IP protection such as patents, registered designs and trade marks, as unjustified. According to Tony Kitchener, they don’t realise that it’s crucial to being in the game:

‘We hold around 50 patents. They represent a significant financial investment, but this is the commodity we deal in.

‘Anyone can have an idea, but no one has ever made a cent from “an idea”. They have made money from being able to establish their idea as a reality. IP protection – a patent, for instance – is bricks and mortar.’

 

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