The instinct to protect IP from competitors runs deep, and it often extends into an automatic refusal to ever license proprietary technology to a direct rival, even when that competitor is willing to pay well for it. I've had to talk myself out of that instinct more than once, because it's emotional, not strategic.
The Question Isn't Whether They're a Competitor, It's What the Deal Actually Costs You
If a competitor wants to license patented technology, the real question is whether licensing to them costs you more in lost competitive advantage than the royalty revenue is worth, not whether they happen to compete with you in some part of the market. In categories or geographies where I'm not actively competing head-to-head with that specific competitor, or where the licensed technology represents a small piece of a much larger competitive picture, licensing revenue can be close to free money with limited real strategic cost.
I evaluate these deals by mapping exactly where the competitive overlap actually exists. Licensing a manufacturing process patent to a competitor who sells into a different customer segment or geography than I do captures revenue without meaningfully strengthening their position against me in the markets I actually care about.
Structure the Deal to Limit the Downside
When I do license to a competitor, I build in field-of-use restrictions that limit exactly where and how they can deploy the licensed technology, keeping it away from the specific product lines or markets where we compete most directly. I also price these deals to account for the strategic risk, not just the standalone value of the technology, because the royalty needs to compensate for any edge I'm giving up, not just reflect market rate for the IP in isolation.
Refusing every competitor licensing conversation on principle is leaving a real revenue stream on the table. Evaluating each one honestly on where the actual competitive risk lies is a better use of the asset.