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License to Profit

Could licensing your intellectual property provide the extra capital you've been looking for?

This story appears in the January 2004 issue of Entrepreneur. Subscribe »

Ambient Devices is not your typical high-tech company. The company's first product, the eerily glowing Ambient Orb, broke new ground in the consumer electronics space and landed squarely on the cover of the Hammacher Schlemmer catalog in May 2002. Building on technology first conceived at the MIT Media Lab, the company is not only turning out eye-popping products, but also turning heads with a business model that substitutes royalties for venture capital and helps launch new competitors.

Like many growing companies, Ambient has some key intellectual property-patents, trademarks and other "secret formulas." Most companies, however, would use such technology simply to tempt investors and then squirrel it away from the rest of the world. Ambient turns that model on its head by eschewing investors while spreading its technology far and wide through aggressive licensing. It's a strategy that squeezes huge economic value out of the Ambient patent portfolio and gives the company an important (and largely passive) source of funds.

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