Revenue Licensing Intellectual Property

This is because a license provides a customer either the right to use the ip as it exists at the start of the licensing period or the right to access the ip over the license period these two uses represent different types of licenses of ip.

Revenue licensing intellectual property. Among other provisions the proposed asu intends to improve the new standard s implementation guidance on determining whether a license to intellectual property ip is either a right to access ip or a right. Financial markets now recognize these royalty revenues as financial resources. For example it is well known that ibm generates over 1 billion in annual licensing revenues from its intellectual property assets. On the other hand when the license is distinct an entity needs to determine whether the intellectual property underlying the license is functional or symbolic.

This is an important distinction because the nature of the intellectual property will impact the timing of revenue recognition related to the license. Licensing revenue is income earned by a company for allowing its copyrighted or patented material to be used by another. License that is not distinct. Nevertheless many companies often overlook their ip as a source of revenue.

As noted above the nature of a license affects the timing of revenue recognition. The nature of the license. On may 12 2015 the fasb issued an exposure draft for public comment a proposed accounting standard update asu to amend asc topic 606 revenue from contracts with customers asc 606. If a license is not distinct entities should determine whether the license is a primary or dominant component in the performance obligation ifrs 15 bc407.

Intellectual property ip assets are those incredibly useful and strategic vehicles patents trademarks copyrights trade secrets internet domain names companies rely on to protect their products brands processes and to create competitive advantages. Depending on each party s bargaining positions and strength of the intellectual property asset tremendous revenue may be generated from licensing operations. Revenue generation licensing can broaden the reach of ip into different markets. Licensing is the best and easiest approach to turn intellectual property such as trademarks copyrights and patents into revenues.

Maximizing the protection and value of intellectual property assets is often the cornerstone of a business s success and even survival. Checklist pdf 98 6kb 5 pages skeleton licence pdf 141kb 4 pages. Although royalty financing or licensing is in its early stages it still commands a multi billion dollar market.