Canadian Plastics

Licensing: Instant Technology, Not Instant Riches

By Nate Hendley   



"Getting licensed" -- i.e. purchasing the right to use a proprietary process -- can be highly advantageous for plastics companies interested in achieving technical breakthroughs and higher profits. On...

“Getting licensed” — i.e. purchasing the right to use a proprietary process — can be highly advantageous for plastics companies interested in achieving technical breakthroughs and higher profits. On the other hand, becoming a licensee entails certain risks, particularly on the financial front.

Risk factors aside, licensers and licensees insist that the overall benefits of buying a license outweigh the negative aspects.

Most obviously, licensing offers companies instant access to products and services that have been years in the making — thus giving them an edge in the marketplace.

The Trexel company of Woburn, MA, for example, has been issuing licenses for the MuCell process since the late 1990s. Originally developed at the Massachusetts Institute of Technology (MIT), MuCell is a proprietary process for producing foamed injection molded parts in areas where traditional foam processes have not been utilized.

Advertisement

“We have invested $30 million in the development of this technology,” says David Bernstein, president and CEO of Trexel. Companies that purchase a MuCell license can leverage decades of research and development without having to spend millions of dollars on their own R&D.

Trexel has issued about 200 licenses for the MuCell process around the world. Roughly 50 of these licenses went to North American companies.

BOTTOM-LINE BENEFITS

Licenses can provide other bottom-line benefits as well, says Dan Szczurko, vice-president of business development at Trexel. By taking advantage of proprietary technologies, companies can produce better quality products “at lower cost,” says Szczurko.

Getting licensed also gives firms entry into new markets.

Pierre Pinet, product manager of thixosystems at Husky Injection Molding Systems in Bolton, ON, says his company purchased a thixomolding license for just this reason.

“We saw the benefits from two perspectives — one being an exciting new market that had a lot of potential for growth,” says Pinet. “Also, [the license] provided us with an interesting project to push ourselves and perhaps come up with new and innovative ways of doing injection molding.”

Thixomat has licensed two companies, Japan Steel Works (JSW) and Husky, to make thixomolding injection machines.

Companies that buy licenses can usually rely on solid technical support from their licensers. Engel Canada in Guelph ON, for example, is licensed by Trexel to build MuCell injection molding equipment.

“We have a close relationship,” states Joachim Kragl, manager of processing technology for Engel. “If we have any problems with equipment or processing, [Trexel] is more or less a phone call away. Guys from Trexel come to Engel a couple times a year. We go there. There’s an ongoing exchange going on.”

Drew Knox, vice-president of business development at Toronto-based Composatron Composite Technology says much the same. Composatron has a license from the Strandex Corporation of Madison, WI, for a process that’s also called Strandex.

The Strandex process is a proprietary technology for creating wood-fibre plastic composite products. Composatron is using this process to develop deck and railing systems.

“They provide you with manuals, specs, staff and technical assistance,” says Knox, of Strandex. “They come to your plant and help you with formulations.”

Licensing isn’t without its drawbacks, however. For a start, there’s the cost issue to consider. Licensing might be cheaper than trying to develop your own technology, but that doesn’t mean it’s free.

License fees are a touchy subject; almost no one interviewed for this article would go on record about what their licenses are worth.

“People don’t like to pay for intellectual property. It’s an emotional issue,” explains Bernstein.

Licensing isn’t for everyone; companies have to know why they want to get a license and how they plan on using it.

“[Licensees] have floundered when they didn’t have a clear vision of what they intended to use the technology for,” states Szczurko.

Dr. Stephen LeBeau, vice-president of sales and marketing at Thixomat, agrees.

“We once sold a machine to a company in Japan whose main business was women’s lingerie,” says LeBeau, with a laugh. “I’m not sure why they wanted it. I guess they wanted to diversify.”

While licensers are happy to provide technical support, they are not responsible for ensuring the profitability of their clients.

Despite the cost and effort involved, LeBeau think licensing offers plastics companies a valuable leg-up.

“Going from a blank sheet of paper, to developing new technologies and businesses is not an easy thing to do,” he states.

LeBeau says companies interested in getting licensed should “do their homework” and be aware that buying a license does not guarantee instant riches.

“Check out the company you want to work with,” he advises. “Find a licenser you feel comfortable with. When you take out a license [remember that success] is not going to happen without working hard, putting in extra effort, and being committed.”

Advertisement

Stories continue below

Print this page

Related Stories