€1m worth of deals have been brokered so far by Irish firms licensing intellectual property overseas via the internet to create exportable products and services.
"The simple fact of the matter is that there are certain products that we can't develop on just our own research and development (R&D) budget and therefore we need to find other companies in the world that we can license technology from," explains Declan Gibbons, managing director of Dublin-based firm MDS Gateways.
Gibbons is just one of an emerging breed of Irish company owners who realise that if they want to accelerate growth and export overseas, licensing the manufacture of their product or licensing another company's intellectual property (IP) to make your product more compelling is a fact of life in business in the 21st century.
There is virtually no car, computer, mobile phone, television or appliance in the world today that is created by a sole manufacturer.
For small and medium-sized enterprises (SMEs) that need to export overseas to achieve scale, there is an onus to think outside the box and forge alliances.
MDS Gateways was established in 1985 and employs 50 people in the manufacture of business telephone systems for SMEs. The company sells locally in Ireland and exports products to Europe, South Africa and the Middle East. Gibbons is aware that in the business communications space wireless will be king and he is keen to establish an alliance with an overseas company that will help bring MDS to the next level.
"We're trying to develop a business phone system for the office that integrates seamlessly with wireless networks and switches automatically to your home or mobile phone. We already contract our manufacturing overseas and the global search is on for the wireless technology that will get our product to market quickly," says Gibbons.
Jim Cuddy, manager of innovation and technology transfer at Enterprise Ireland, explains that licensing technology between companies is a growing business. He added that firms use the process of licensing one another's IP in order to complement their existing R&D activities.
Last week at a special innovation event in Dublin Castle, Enterprise Ireland launched a new portal allowing Irish firms to both sell IP and license IP from overseas firms. The agency is targeting the site at sectors that include ICT, biopharma, medical devices, food and beverages, engineering, construction and timber and energy and environment.
The site includes an IP audit enabling Irish firms to test themselves to see how ready they are to partake in licensing agreements. The audit produces a detailed bespoke report that includes recommendations enabling a firm to optimise its position in terms of IP trading.
Another aspect to the site is a DIY search facility that allows Irish businesses to search for technologies worldwide. It links four key databases, each of which lists available technologies across a variety of sectors. The sites that the search facility links to include Yet2.com, the Innovation Relay site, the European Space Agency site and Pharmalicensing.com.
Cuddy highlights the licensing of technology in a variety of industries ranging from automotives licensing IP from computer firms to mobile phone manufacturers licensing music functionality into their products.
Cuddy says that the rationale behind licensing non-core technologies is to complement existing R&D strategies and in turn create a more meaningful and commercially viable end product. "We are seeing this activity particularly in the area of electronics manufacturing in Ireland. Much of the sub-contract activity has migrated to eastern Europe and the companies in Ireland are licensing technologies from abroad in order to add to their R&D and create their own-branded goods. This activity is also quite rampant in the biopharma sector."
Cuddy points to the example of Donegal-based manufacturer of cranes for the construction sector, Masol. "Masol acquired the technology they use in their cranes through an agreement with an Italian company. The company has since been very successful and this year was featured in the Ernst & Young Entrepreneur of the Year awards."
Cuddy also cites Dublin-based Vimio, which earlier this year signed an agreement with Microsoft to license the software giant's video-optimisation technology to strengthen its offerings in the world of mobile media distribution. The deal was signed under Microsoft's IP Ventures programme to facilitate product and business development for entrepreneurs and SMEs.
In January, Enterprise Ireland became the first development agency in Europe to enter into a formal agreement with Microsoft's IP Ventures programme to facilitate product and business development for entrepreneurs and SMEs. Under the programme, Microsoft opens up internally developed technologies to government agencies such as Enterprise Ireland, which in turn work with the local start-up and venture capital community to encourage business growth and deliver innovative technology to new markets.
There are significant tax advantages to Irish companies licensing overseas. For example, there is no stamp duty on the sale of IP assets. Revenue-based R&D costs in Irish companies are tax deductable as a business expense and this includes costs such as patenting and licensing in. Firms are also eligible for a tax credit of 20pc off R&D expenditure against the current year's corporation tax.
Cuddy maintains that while the licensing of IP is an area that Irish SMEs across a variety of industry have been slow to get into, it is nonetheless gaining pace. "Globally, the open innovation agenda is moving fast.
"Last year, we witnessed 26 licensing deals by Irish companies and we are likely to do 35 this year. The significant factor to watch is the actual size of the deals being struck. We will see more valuable licensing agreements taking place," Cuddy said.
Where on the web: IP licensing tools for business
Enterprise Ireland's new portal aimed at linking Irish companies with other businesses seeking to license IP for the manufacture of new goods and services
A research network linking the institutes of technology and Irish industry, promoting the commercialisation of third-level research
The website of consultant and author Kieran Comerford, an expert on managing IT and intellectual assets
Case study: Bringing home the bacon
Anyone familiar with the kiddies farmyard flick Babe may not realise the Cavan connection. Jimmy O'Donnell of Cavan-based O'Donnell Enterprises has built a worldwide business from developing heat pads for piglets and counts among his many worldwide sales the sale of a consignment of pads to the Australian producer of the movie.
Without being able to license the manufacture of the product his company developed, O'Donnell believes he never would have been able to bring a product to a market that today traverses the US, Europe, South America, south-east Asia and Australia.
O'Donnell was originally in the business of distributing farm products such as electric heat pads to farmers around Ireland. After a fire on a farm he realised that there were unresolved safety issues. He and his colleagues received a grant from Cavan Enterprise Board to develop a heat pad capable of keeping piglets warm for 24 hours at a cost of only 5p.
The ESB, which was on an energy efficiency drive at the time, gave it the thumbs up.
"I've been very fortunate and our product was purely an accident of design," O'Donnell explains. "We realised Ireland was a limited market and looked overseas. After getting a US farmer to reluctantly agree to test the product it was a success."
O'Donnell Enterprises is engaged in a joint venture with a US corporation in North Carolina to manufacture the devices under the trade name Jodel International.
"We receive a royalty for every pad produced and make the temperature-control devices in Ireland. Up to 3,000 kits are produced every month. Licensing is definitely the way to go. Because manufacturing is based in the US we can produce the products at a competitive cost. This is definitely the way to go if you want to sell outside of Europe," O'Donnell said.
Pictured — Jim Cuddy, manager of innovation and technology transfer at Enterprise Ireland with Declan Gibbons, managing director of MDS Gateways, pictured at the launch of www.techsearch.ie, a new technology licensing and partnering website available from Enterprise Ireland
By John Kennedy