Keurig may be licensing IP technology to Mr. Coffee

I was out shopping the other day and I noticed a product that warmed the heart of any IP attorney. It was a Mr. Coffee coffee maker, with the Kuerig K-cup sticker on the box. That doesn’t seem so surprising since many small appliance manufacturers have jumped in on the single serve coffee bandwagon. What makes this different is that it appears that Jarden, the makers of Mr. Coffee brand appliances licensed the IP technology from a competitor, Keurig Green Mountain.

So why would a company license its proprietary technology to a competitor? It may seem especially confusing since both products are available in the same marketplace. Why would Keurig offer its proprietary tech to a company that it competes with for market share? There are a couple of very smart reasons that my change the way you think about licensing IP technology to a competitor. Read on!

Keurig may be licensing IP technology to Mr. Coffee Zach Hiller Law Houston, TX

When Licensing IP Technology Is A Smart Plan

Creating an Industry Standard
Keurig K-Cups have been on the market for many years, and while they are fairly commonplace, they are not the only option for single serve coffee. Over the past few years knock off products have been introduced that purport to work just  well. The legitimacy of these claims notwithstanding, licensing of a proprietary technology can help to create an industry standard under-which all similar products operate. In the case of Keurig, selling coffee makers is only a portion of their revenue stream. Much of their profits come from the repeat sales of K-cups. Creating an industry standard can help to introduce more consumers to the use of this product, negating any disadvantage that may come from adding competition to the market.

Preventing Innovation

This may sound like a negative, but licensing technology can help stifle innovation amongst your competitors. Leaders in the industry must always worry about others nipping at their heels to try to create the next big thing. Keurig offers a great example of this concept in action, from coffee makers to coffee pods, competitors were quick to try to cash in on the single serve coffee craze. Allowing competitors to buy into their technology, Keurig removed some of the incentive to try to design around your technology with products that may render your product obsolete.

Taxing The Competition

Allowing the competition to license their technology also places their competition at a slight disadvantage. Sure, they are able to compete in a crowded market with better tech, but the have to pay a premium on this advantage.   Not only does this create a revenue stream for the licensing company, all things being equal, it also makes it more expensive for your competitor to create a similar product.

Human Capital Insurance

Companies invest a great deal in hiring and keeping the best people. This is especially true in the areas of research and development, where the top minds are in high demand. Meanwhile, creating a new product can be a costly venture. One of the easiest ways to reduce the cost of creating a new product is to raid the competition for their top and most experienced talent. When written correctly, Entering into a licensing agreement with a competitor can put a quick stop to this type of brain drain from your company.

Creating Room For New Innovation

In addition to putting the kibosh on your competition, added revenue from licensing and the security of being the industry standard can leave room for your R&D team to create ancillary technologies to improve on your product and create the next big tech that leaves your competitor in the dust. Again, Keurig offers the perfect example to this concept. The Mr. Coffee/Keurig license seems to only extend to the initial Keurig tech, a market that Keurig has already dominated. Keurig 2.0 is the newest offering from the brand, which includes new technology that the company is keeping proprietary.

Of course, this type of strategy only works in two situations; when a company is at the absolute top of its game, with the bulk of the industry market share.  Allowing the smaller players a bite of the apple only increases the companies potential value. The other instance is when a company has the ability to partner with several smaller companies to enjoy economies of scale to take on a larger competitor together. Are you curious about how your business can utilize licensing to improve your bottom line? Call the offices of Zachary Hiller to discuss your potential.

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