Undercapitalization is one of the biggest killers of small medical device companies – but this does not have to happen to your business. Your company has valuable resources at its disposal, and it is just a matter of figuring out how to extract additional value from your assets. One of the most valuable business assets that a medical device company can have is intellectual property rights. Not only do IP rights generate value as a barrier to entry for competitors trying to launch a similar product in the relevant field, but IP assets can also be used as a tool to secure funding and financing in a number of different ways.
Medical device companies with a strong IP portfolio are in a position to leverage their IP assets to attract capital. All it takes is a little creativity, determination, and entrepreneurial spirit to extract untapped value from your medical device company’s intellectual property.
Examples Of How To Monetize Medical Device IP Rights
Some medical device companies are surprised to learn that intellectual property assets can be used to obtain funding for further development projects. There are several different ways that IP rights can be monetized.
- IP portfolios attract investors. A common source of funding for startups and early stage medical device companies is funding from angel and venture capital investors. Angel and VC investors are often attracted to investment opportunities in small to mid-sized medical device companies where the company seeking funding has a comprehensive IP portfolio behind their innovative products. A well-planned IP portfolio demonstrates to investors how serious the company is about growing the business and succeeding, which makes investors view the company as a good investment opportunity.
- Using IP as collateral for a loan. IP assets can be be treated just like physical assets of the company, and they can be put up as collateral for a loan. Certain banks and funding groups will negotiate loans or convertible notes if the company seeking funding can back the debt vehicle with IP assets, such as patents and registered trademarks. The company’s IP assets will need to be valuated by a professional valuation assessment firm so that you can gauge how much leverage the IP assets are worth.
- IP assets can be licensed in exchange for royalty payments. Another way that medical device IP can be monetized is through licensing agreements, where the licensee pays royalties in exchange for use of the IP rights. Medical device companies that want to monetize their IP through licensing agreements need to ensure that the licensing agreement allows them to continue to use the IP rights themselves. Also, a medical device company looking to monetize IP rights through licensing needs to carefully consider whether entering into an exclusive licensing agreement is a good idea. An exclusive license means that the licensee has the exclusive right to use the IP, and no one else can be authorized to use it. For the right price, an exclusive license might be worthwhile to the company/licensor, but oftentimes the company/licensor may be able to make more money from its IP licensing if the IP can be licensed to multiple parties through non-exclusive licensing agreements.
While not every medical device company will be able to take advantage of every IP monetization opportunity, it is important to be creative when identifying ways to extract additional monetary value for your company’s IP assets.
If you need assistance obtaining comprehensive intellectual property rights for your medical device innovations, please reach out to The Rapacke Law Group. We can schedule a free initial consultation with you to discuss your IP needs.