Patent power: BluWave, other Ottawa firms eye IP licensing as new revenue stream

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After nearly a decade of developing cutting-edge software to make electricity providers, data centres and EV batteries more efficient, BluWave-ai is going a little off the grid in its latest effort to find more revenues. Earlier this month, the Kanata-based firm launched a new business unit to license its growing patent portfolio to other organizations such as utility companies, allowing them to piggyback off its intellectual property to develop their own bespoke products. BluWave hopes the IP licensing push will supplement the income it generates from its software, which uses artificial intelligence to track power usage, predict demand for electricity and help owners of electrical vehicle fleets manage the operation and charging of EVs in a bid to save energy. “The goal is to get a larger piece (of the potential market) than what we can get from our organic sales,” explains BluWave founder and chief executive Devashish Paul. Founded in 2017, BluWave has spent nearly $25 million developing its platform and has filed more than 60 patents – 14 of which have been granted or recently approved in the U.S. and other jurisdictions. Along the way, the company has become a trailblazer in its field. According to Ottawa-based consulting firm Stratford Managers, which recently did a global analysis of all the patent portfolios in BluWave’s market segment, its filings are surpassed only by global automotive giants such as Volvo and Honda. Paul – who has long touted his belief that his company can become a “made-in-Canada champion” in one of the hottest corners of the cleantech sandbox – and other BluWave executives think that expertise may be a key driver of new revenue. “This is kind of like a deal sweetener for most of our already existing clients,” says Muhammad Zaheed, the firm’s vice-president of finance. BluWave plans to offer its IP in a number of packages. Customers can gain access to all of the firm’s patents when they buy particular software products, or they can buy a licence to use specific applications in three main categories of patents: smart grid, renewables and energy storage, and electrified transport. “It’s as if you built our IP yourself,” Paul explains. Users will be charged an upfront fee and then make annual payments based on factors such as how much of the IP they use. BluWave, meanwhile, retains ownership of the patents. While BluWave is opening its patent portfolio to everyone, the company is also prepared to reserve some of its IP for specific users that are willing to shell out extra. As Paul explains, such a licence with “enforcement rights” would give the buyer exclusive access to specific BluWave technology, along with the right to take legal action against any competitors that try to poach or copy the IP. That type of deal would be a win for BluWave, says Paul, who knows full well his company doesn’t have the financial warchest to wage protracted patent infringement battles on its own. “We kind of want to be a Switzerland of IP for energy transition,” he says. “We don’t want to fight with the big players on who infringed on what. They just do that as a course of business. We don’t want to get caught in the middle of that. We want to stick to innovation. We want to stick to solving the use case.” Paul is hopeful the strategy will pay off. He says the firm’s “foundational” patent pool could be an attractive value proposition for an array of large energy utility companies, green-energy equipment manufacturers and governments, because rather than being focused on specific software codes and algorithms, it contains systems and methods that can be applied to a wide range of applications. “We’ve tried to formulate them like patenting new techniques of jogging versus patenting a running shoe,” he explains. “Regardless of what shoe you use, we’ve patented a new style of running. If you want to do that style of running, it doesn’t really matter what shoe you use.”

'More appetite' for IP licensing

While licensing intellectual property is not a groundbreaking concept, it’s never been a major source of revenue for most Ottawa software companies. But a local IP expert says that could change as startups look for ways to boost their cash flow amid a slowdown in VC funding and other sources of capital. “There’s definitely more appetite in licensing IP recently,” says Natalie Giroux, who runs Stratford Managers’ intellectual property practice and helped analyze BluWave’s patent portfolio. “It takes a little time to get going, but once you find your first or second licensee, then you have a stream of revenue that is ongoing that you can rely on to continue developing new IP.” Partnering with big-name clients also gives extra cachet to smaller firms like BluWave, she adds, raising their profile among other potential customers. “Being able to deploy your IP in more places faster is definitely a good way to go to market,” she says. Software-makers aren’t the only Ottawa tech enterprises sizing up the potential benefits of licensing their IP. Jean-Simon Diallo, founder and CEO of local life sciences startup Virica Biotech, says his company is pursuing agreements with larger pharmaceutical firms that want to integrate Virica’s technology into their products. “There are situations where it makes a lot of sense to do that,” says Diallo. Based at Carleton University, Virica manufactures state-of-the-art “cell enhancers” that optimize specially modified viruses called viral vectors. Viral vectors deliver new genes that are designed to repair the defective genes responsible for diseases such as cancer and muscular dystrophy, as well as conditions such as hereditary blindness. It’s complicated technology that has required millions of dollars to develop. Diallo says Virica, which was founded in 2018 and employs about two dozen people, is open to new ways of generating more cash flow, including partnerships that allow other companies to use its IP. “We’re actually exploring that kind of thing as we speak, but it’s not our bread-and-butter business,” he says. “We usually just sell our products. It’s a simpler business model for us.” Nonetheless, such deals are tempting. Extra revenue aside, Diallo says IP partnerships have other upsides, such as allowing startups to tap into the distribution networks of larger, well-established businesses. Under many agreements, the originators of the technology also get royalties from sales of products that contain their IP, providing yet another source of revenue. “If (your partners) sell a lot, you end up making way more than you would have otherwise made,” Diallo says. “If you’re a very small company and you have a small sales team, you can only go so far. But if you now have a global distribution network, you’re selling everywhere across the world. You’re taking a smaller percentage, but the number of sales goes up astronomically. It’s a net benefit.” Still, Giroux says IP licensing isn’t for everyone. It typically takes many years for tech firms to file enough patents to see any real financial benefit from such an arrangement, she explains. And any time IP is involved, the spectre of lawsuits and other legal action from competitors that might try to use the courts to invalidate patents is enough to deter many companies from pursuing the idea. “It’s a lengthy process that may potentially involve litigation, so it can be a bit overwhelming for some companies,” Giroux says. “Some may see it as a distraction.” But if BluWave’s IP strategy works, it could spark a domino effect as other software firms try to copy it, she adds. “We just need one company like BluWave to be successful, and that’s going to trigger other people to start thinking of doing that as well,” she says. “In the case of BluWave, they have a significant amount of patents, so that would cost a lot to try to invalidate all of them.”

Patent power: BluWave, other Ottawa firms eye IP licensing as new revenue stream

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'More appetite' for IP licensing

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