Intellectual properties owned by either research institutes or companies often fail to provide any return on investment on the money invested in the research and development for those assets.

Increasingly shareholders and investors are becoming aware of this and requesting that the organizations holding the IP monetize those IP assets that are not strategic or core to their operations.

One of the challenges that many organizations face is that patent monetization is beyond the scope of their normal job, so many of them are now reaching out to specialist companies to help with such monetization, says Jon Rortveit, vice president, acquisitions and licensing at Inventergy, a Silicon Valley, California-based patent investment and licensing company.

Rortveit recently presented an overview of various monetization approaches and how patents are valued at a meeting with business leaders and policy makers in Hong Kong.

Rortveit used his company to illustrate one of the possible business models to monetize IP assets: “Our business is basically to take an asset that is intangible on the balance sheet and make it tangible on the profit and loss statement,” he says. “If done appropriately, companies will experience improved margins and reduced costs via IP commercialization.”

Inventergy and companies like it work with the original patent holder to create portfolios that are believed to have good market potential. Those companies then create and manage licensing programmes on these assets, whose ownership is taken over through giving a combination of direct cash investment and a share in licensing revenues to the patent holder. The revenue brought in by licensing patent is significant and has high margins. In an example given by Rortveit, a company that has 5% net margin will need sales of US$400 million to achieve the same net effect as receiving US$20 million in licensing revenues.

Rortveit also discussed how venture capital investors consider patents and patent applications. In general, he says, there are two types of investors in this field. One type of investor requires a company to have at least some pending patents and a clear IP position before they invest. Investors in this group are often in “IP-rich industries” such as semiconductors or biotech and include corporate investors, such as Samsung Ventures. Generally, 88% of this type of investor’s holdings are in companies with at least pending patents. The other type of investor is those who deliberately do not want patent assets; most of these investors are in the new social media type of markets.