Just because you invented a new product or got a patent, doesn’t mean it’s “licensable”. To make it licensable, you must take certain actions with your IP. Not just any actions, but the right actions.
In this article, you’ll learn about the 5 most important actions that are the inside secrets to making your IP licensable.
Secret 1- It’s Market Ready (or very close)
The closer your IP is to market ready, the more interested a company will be in licensing it. Be sure to confirm your technology in the market before trying to license it. Most companies aren’t interested in an unproven technology.
A product or technology that’s market ready saves a company time and money developing and launching a new product. The price (royalty rate) a licensee will pay depends on how quickly they can get it to market. For example, the royalty rate for an unproven technology may run 1%-2%. On the other hand, a consumer product that’s in the market may get a 7%-10% royalty. A good rule of thumb is the closer to market ready your IP is the higher the price a licensee is willing to pay.
Secret 2 – It Will Generate Profits
The Number 1 rule of licensing – Licensees don’t license IP…they license MONEY. Understand that “licensees buy ‘MONEY’ – NOT patents, trademarks and copyrights”. To successfully license your IP, a potential licensee must feel your IP is worth the risk they take to commercialize it.
For example, if you show the licensee your IP will generate $20 million in sales over the next 5 years, and at a 15% profit, you’re offering the licensee $3,000,000 in profit. Now you’ve got a basis for a big licensing deal (and to show a value of your IP).
Secret 3 – It Offers a Big Competitive Advantage
Your IP is licensable if it solves a specific problem, fills a big need, or creates a new marketplace. A big part of what makes your IP licensable is what it offers in terms of a competitive advantage.
Is it a solution that truly fills an unmet need in the marketplace? What sets your IP apart from the competition must be identified (competitive advantage).
A competitive advantage is having something that others don’t have. It’s like creating a moat around your IP. If you have a patented new cooking technology, or consumer gadget, or new software program – something that others don’t have – you’ve got an advantage. That’s what licensees are looking for.
The bigger the competitive advantage, the more licensable it is.
Secret 4 – It’s Packaged for Licensing
Potential licensing partners will be more interested in licensing your IP if they understand what it does, and how and why it’s important. Packaging your intellectual property in a way potential partners will find attractive makes your IP easier to license.
Providing information about why the IP is better, demonstrating a working prototype and clear explanations of marketing information are all things that can help to interest the licensee.
Information on test markets, product sales, customer feedback, sourcing production materials, operating manuals, or other supporting proprietary information will enhance your licensing opportunity “package”.
A well documented licensing package also helps to speed the process of reaching an agreement and shorten the time it takes a licensee to complete their own evaluation of the IP.
Secret 5 – It’s Protected
Identify all of your IP parts and then decide which ones are the most commercially viable. Focus on protecting the most valuable parts first. Those are the ones you’ll want to develop and use for licensing.
Protecting your IP often relies on a “bundle” of IP rights. For instance, software is protected with multiple types of IP. The program information is a copyright, the software brand is a trademark, its packaging is trade dress, the source code is a trade secret, the box shape is a design patent, and use of the software is protected by an end user licensing agreement (EULA).
Remember, the number 1 key question for a potential licensing partner is can they make money with your IP. The real value of your IP is the way a licensing partner can use it to increase revenues, cut costs, or gain a competitive advantage. The more of these actions you complete, the more licensable your IP becomes, and the greater the likelihood a company will license it.
If you’re still not sure whether you’ve got a licensable IP, then contact me today. We’ll have a short discussion about your IP and what needs to be done to make it licensable.
Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies. His decades of experience run the gamut from medical devices to food technology to consumer products. He’s licensed some of the biggest Hollywood entertainment blockbusters including the Batman Movies (1 and 2), and the number one kid’s action TV show, the Mighty Morphin Power Rangers. Rand speaks about licensing and is a featured speaker at investment conferences, trade shows, colleges and startup events. He’s a published writer with articles appearing in several prestigious trade magazine including The Licensing Journal, Intellectual Property Magazine, and License India. Rand also mentors at the Cal State Fullerton School of Business and Economics and is a judge for their startup business plan competitions.