Written by Brandon Shalton
Date September 2, 2003

Mo Patents, Mo Money: Making money by licensing patents

As you can tell by reading the news and this website, there is a new way to make money. Forget about making a product that people will buy and use. Forget about inventing gadgets and devices that cause consumers to flock to you. Forget about starting a dot-com business and trying to be execute on a business plan.

The way to make money nowadays is to buy patents or to file patents for all kinds of ideas, and then later, license the patent to other companies.

For those that remember the Unisys/GIF issue of having to license the GIF patent, there is a small sigh of relief that the patent just expired! But as you recall, Unisys came out of dormancy by requiring software manufacturers to license the GIF image format. GIF images were so widely used by website and graphic programs that the whole computer industry was up in arms.

A company down in Austin, Texas is now coming back for the Unisys/GIF sequel and claiming the patent to JPEG! They are taking the right approach towards patent enforcement/licensing.. target businesses that MAKE PRODUCTS that utilize the patents.

If Forgent had followed Acacia's strategy, they would be suing every website that had JPEG images on them. This author believes that Acacia should have FIRST targeted companies like Real Networks and Microsoft for producing the technology that they felt violated their patents. If they really did own the patent to streaming/downloading audio, then let the big businesses (who are profitable) deal with the licensing issues. They in turn would end up passing down costs to the consumers.

Speaking of which..... Do you know how much money a DVD manufacturer has to pay for MPEG, Dolby, and DVD licensing to make a DVD player? The answer is about $20 per machine. This article details the licensing fees and how China is producing DVD players WITHOUT paying for licenses (bad Chinese manufacturers, bad).

The cost of licensing a patent gets passed onto the consumers eventually. So with these kinds of licensing fees, and despite mass purchases by Walmart, we'll probably never see a $20 DVD player.

Patents that don't have any prior art to invalidate them, are good patents. So while it does mean that products cost more due to paying for a patent license, it is the patent holder's right to profit from their inventions.

So if you are up late at night and watching TV, and you see those ads for patenting your invention/idea, maybe you might pay more attention to them now. Who knows, you may have some crazy idea today, that technologically speaking can't be created, but wait about 5-10 years and maybe it will. And by then, you'll be able to start suing companies and licensing patents.

You don't even need to have a good patent, just interpret a patent to mean more than it really represents.

You don't need a business plan or investors! Just come up with crazy ideas, file the patents, and wait for technology and people to start using your idea. This is the new, new, new, new, new, new economy.