Are You Putting All Your IP Eggs in One Basket?

Your intellectual property can be licensed in many ways, whether its generating revenues from different products, developing new applications, or building a bigger market opportunity. Each is a different strategy. The question is which one is right for your intellectual property?

This is part one of a three-part article in which I’ll discuss three of the most common licensing strategies – direct licensing, sub-licensing and strategic alliances/joint ventures. Keep in mind, in some situations you might start with one strategy and move to a different one, such as from direct licensing to sub-licensing. And you might even use two at the same time, such as a direct license and a strategic alliance.

Direct licensing is an ideal strategy if you lack the resources to commercialize your IP or you’re not interested in starting and running a company. Licensing a well-established company already making and selling products similar to your intellectual property also increases your chances for success in the market.

If your product or technology is competing in a market dominated by big players, it’s going to be harder and more costly to break into the market. In this situation licensing is a better strategy. These big competitors can be a great licensing partner. They will get your IP into the market faster and more cost-effectively.

The two most common ways of direct licensing are exclusive and non-exclusive. An exclusive license puts all your IP eggs in one basket, meaning you are relying on one licensee to make money with your IP. In most situations, it’s best to license your IP on a non-exclusive basis. That way, you can divide the IP rights and license it into other product categories, as broad as anywhere in the world, or narrowly defined down to the country, product category and even a specific niche market. And you’ll also have the option to continue using your IP to sell direct.

When I was licensing the big kids movie properties, most of the licenses were non-exclusive, except for very large deals, such as a multi-million dollar toy deal. Since these movie properties could be licensed into many product categories, the licenses were very specific on where the products could be sold (such as mass market or toy store distribution channels) as well as where they couldn’t sell (such as closeout stores). And in some cases, there were even exclusive deals for the same type of product – stuffed animals – but the exclusivity was limited to specific distribution channels (gift vs. Toy stores).

Direct licensing lets you control your IP rights. You rent out (license out) the rights to make, use, and sell it to other companies. You can divide rights geographically or by distribution channel. You can also keep some or all the rights for specific markets or product formats. How many ways you license your IP will depend on what it is. A new patented product will most likely be a single licensee, vs. a brand or entertainment property with applications in many product categories.

Direct licensing requires managing the licensing program yourself. If you don’t have the time or don’t want to do it yourself, you can retain the services of a licensing agent to manage it for you.

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