When you develop a new product or technology, often times the first thought is to create a company around it. But this isn’t always the best way to successfully get it into the market.
I often speak with inventors who start a company around their intellectual property. The spend most of their time trying to raise money to get it off the ground. It’s especially challenging when they are going up against big competitors. They wind up having to raise a lot more money anticipating having to spend more to get their product on the shelf and promote their brand. That’s the build and sell it model. Here are three advantages to licensing it instead.
If your product 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 much better strategy. These big competitors can be a great licensing partner. The can get your product into the market much faster and more cost-effectively.
Keep in mind if you patent your product, once that patent is issued, it’s public information. Just because you it’s patented doesn’t mean somebody won’t try to knock you off. Remember your patent is only as good as your ability to take legal action against an infringer, which will be very expensive and time-consuming if it happens.
That’s another advantage of licensing to a big partner. They have the deep pockets and the resources to litigate against any infringer. Plus if there is an infringement suit it’s not coming directly out of your pocket. Your licensing agreement can include terms giving your licensing partner the rights to take legal action against any infringer. They pay the cost of litigation and recoup their expenses from the royalty payments. And if your licensing partner is successful against the infringing company, they’ll most likely get their legal fees repaid, and it won’t cost you anything out of your pocket.
A third advantage of licensing is you can also commercialize your product directly. Depending on how big the market is, you can carve out a direct sales channel such as e-commerce or perhaps a different industry or territory.
If your new product, service or technology is in a highly competitive market or industry, don’t build it, license it. Why go head-to-head against very large and better financed competitors? Through licensing, you can create strategic partnerships, get access to new markets, industry experience, manufacturing capabilities and cut your litigation exposure while still maintaining your option to carve out a piece of the market for yourself.