CENSIS white paper: Intellectual Property in Business

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Intellectual Property in Business: IP basics, IP management, IP strategy IP Management during Growth (continued) Limited exclusion This approach assumes that a company enables others to use its IP for certain purposes, through licensing that legitimises specific uses in specific territories for a specific time. In this way, it creates a business model which in turn generates revenue streams for the business. All IP rights are licensable. Therefore, it is important to create an attractive and diverse portfolio to monetise them. Technology can be also licensed directly to competitors. The latter is not a completely alien scenario, just like cross-licensing between competing enterprises. […], the goal is to create an ecosystem around your product or a system of value to multiple parties. There is an endless variety to the kinds of limited exclusion strategies that you might pursue, depending on the context. The underlying principle is simple: sometimes it makes sense to let others have limited access to your intellectual property in order to benefit in other ways over time. 42 Unlimited exclusion (open access) The open-access strategy contrasts with the ‘full exclusion’ strategy and is, to some degree, closely related to the limited exclusion strategy. This strategy assumes that a company allows other entities or individuals to use its IP portfolio – with no license fees. However, this does not mean that no revenuegenerating business models are feasible. Quite the opposite. Open-source software and the global community that grew around it are a great example of a thriving business force. The movement created some of the most famous software, like the Linux operating system, Mozilla Firefox browser and LibreOffice. It revolutionised our thinking about monetisation of software products and opened up a field of unique commercial ventures that contradicted the ‘traditional’ proprietary models. Importantly, open-source-based business models do not assume giving away the product or service for nothing – it is not like ‘free beer’. 43 There are two general types of licensing: 1. Technology licensing: this includes patents, secret know-how, source code, technical designs. 2. Brand-related licensing: this includes trade marks, registered designs, copyrighted material for merchandising. Licensing works in every industry sector and in principle without limitations on the final shape of a licensing deal (conditions, territory, royalty scheme, scope of exploitation rights). Even multiple exclusive licenses are feasible, given sufficient differentiation of licensing conditions (no overlaps). The only limitation is market demand for your licensing offer. 42 Palfrey (n 5) 98. 43 See Richard Stallman, ‘Why “open source” misses the Point of Free software’ (Communication of the ACM, June 2009) accessed 2 December 2022. 30
Intellectual Property in Business: IP basics, IP management, IP strategy IP Management during Growth (continued) Table 10 44 showcases the competitive advantages of open-source models in comparison with closedsource-based models. ‘Gen 1’ stands for the first generation of open-source business models where businesses were based on the model that only parts of the software were licensed for free: to use the other parts, customers had to acquire a commercial charge-based licence (open and proprietary software components, dual licensing business models). An obvious step for the competition in that case was to offer even bigger portions of the software without charge. With the advent of cloud-based services, the open-source businesses shifted towards Software-as-a- Service (SaaS) opportunities. Current Gen 3 businesses offer their products as a cloud service from early on (SaaS). This setting allows for diverse commercialisation models that smoothly merge open-source and proprietary software (in various proportions). SaaS also works to the advantage of the customers who are (finally) liberated from the need to purchase (and deal with) multiple licences. 45 Table 10: Competitive advantages of the open-source model Business Attribute Gen 3 Open Source (2019) Gen 1 Open Source (2009) Closed Source Market Size Large Small Large Innovation Velocity High High Low Customer Acquisition Costs Low Low High Average Selling Price (ASP) Low Very Low High Market Elasticity High High Low Customer Lock-in Low None High Cost of Development Low Very Low High Lifestyle Value High Low High Cloud First High Low Low Business Value High Mid Mid 44 Mike Volpi, ‘How open source software took over the world’ (TechCrunch, 12 January 2019) accessed 2 December 2022. 45 Ibid. 31
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CENSIS white paper: Intellectual Property in Business

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