Licensing

According to Stuart Elliott in The New York Times, citing The Licensing Letter published by EPM Communications, retail sales of licensed products in North America were $70.5 billion in 2004; based on the phrasing the number includes Canadian sales. But if all these sales had taken place in the U.S., they would have represented a mere 1.8 percent of total retail sales of $3,850 billion in 2004—thus a quite negligible portion of the total. Elliott also reports that such sales were down 1.3 percent from 2003. Amy Johannes, writing for Promo put worldwide retails sales at $175.3 billion in the same year, citing License! magazine. (Johannes' headline mistakenly shows $1.75 billion.) These two numbers indicate that image licensing affects a tiny proportion of sales at retail and therefore represents a sometimes-used marketing tactic.

KNOW-HOW OR TECHNOLOGY LICENSING

Many inventors and technology companies use patented methods and closely-held practices as the basis of licensing activity. Under a know-how or technology license, the licensee is enabled to deploy a design or use a patented process in his or her own manufacturing activities. The practice is as old as patent law and is present in all of the modern arts of production. Wherever the focus of invention is most intense, there new technologies spring up and are spread by licensing. In the mid-2000s these techniques were mushrooming in electronics, pharmaceuticals, genetic manipulation, alternative energy, and exotic materials technologies, while, at the same time, continuing in traditional fields like mechanics and chemical and petrochemical processing.

Whereas image licensing is likely to be extremely rare in small business, virtually every small business engages in licensing some know-how—although the vast majority would be surprised to learn this. So would the vast public engaged in the same activity: the use of computer software takes place under a license that comes with the software itself. The licensing agreement explicitly prohibits using a purchased package on more than one machine. Such practices are extremely common and also difficult to police. In the international field piracy is a constant refrain. Confusion appears to reign domestically. As Computer Trade Shopper reported, "SMEs are failing to recognize the implications of not meeting licensing requirements, with only 56 per cent having a formal licensing policy. According to research by PC World Business (PCWB), 58 percent did not keep records of the software they owned or file license certificates, but 87 percent believed they were compliant." (SMEs are "small to medium enterprises.") At the same time, as Ed Foster reported in InfoWorld, pressures are mounting to bring small business into compliance. "Under the name of the Business Software Alliance (BSA)," Foster wrote, "Microsoft and its allies continue to bombard small businesses with anti-piracy mailings demanding that customers audit their licensing compliance; it is becoming pretty obvious who the real buccaneers are in search of plunder." The message in these developments for the small business owner is that he or she is engaged in licensing, knowingly or not, and that it might require a closer look.

LICENSING IN, LICENSING OUT

Using software purchased from others—or operating a proprietary process under a license—is to be "licensing in." But the small business may also have an opportunity to "license out" if it has made a useful invention which may be of interest to others. In most cases the activity of licensing others is a new business in its own rights with unique activities and problems, of which the first may be patenting the invention itself to secure all rights to the new art. The activity is relatively easy if the company experiences positive demand for its invention and buyers are calling or visiting. When not, help from an experienced patent attorney may be the best first step in examining the feasibility of turning invention into profit.

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