How to Avoid Getting Stuck with a Big Company Who Sits on Your IP

What happens if a larger company licenses your intellectual property and then sits on in it? Is it a deliberate strategy to keep it off the market, or they just slow-moving and haven’t decided what to do with the IP?

Sometimes it’s a combination of both, and in other situations it’s a deliberate strategy. While at worked at the studios I encountered this situation. In one case, a major toy company licensed a girl’s property, paid a million dollars, did minimal work on it, and let it die out. They did that for competitive reasons, to protect one of their core brands.

Some large companies will license intellectual property and sit on it specifically because it’s a competitive move. It keeps that technology off the marketplace.

One way to avoid this problem is by understanding who you’re doing business with. If you have a new technology, product or service, before you approach a company, you must do some homework. Think about “am I going to be a big fish in a small pond? Or is this new technology (or product) that I’ve created going to take sales away from their core business or products they already have on the market?” Obviously, if your IP is competitive to their products or services, take that into account.

To prevent your partner from sitting on your IP, within your licensing agreement, you must include what’s known as performance clauses. These types of clauses make sure your licensing partner does what they are supposed to do. If they don’t take action or bring the product to market within a certain time, it triggers termination actions inside these performance clauses that say, “If you don’t market it by such and such date, then you’re going to lose the rights to this technology.”

Performance clauses are tools inside the licensing agreement to help you enforce a lack of action. But the most important way of making sure a bigger company does something with your IP is with due diligence and a good understanding of whether this larger company makes sense as a licensing partner for your intellectual property.

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