Read the Complete Article at: http://onestopinventionshop.net/blog/2019/07/how-to-approach-invention-licensing/
This post is excerpted for the book How to Turn Your Invention Into Cash by Don Debelak. https://www.amazon.com/Turn-Your-Invention-into-Cash-ebook/dp/B07N8JSQJW
Licensing
Licensing
is when a company takes over your new product idea and pays you a royalty on the sales from your idea. The licensee can be a
manufacturer, marketer or a product development company. Since licensees take
on all the risk of a product, they are cautious about what products they will
license. Most companies will only license an idea if they are fairly certain it
will be successful so it is up to you to convince them it will succed.
While
the earning potential is lower than both the outsource entrepreneurial approach
and starting your own company, many inventors choose this strategy because once
you license the idea you have no more responsibility to the project.
Finding Licensing Targets
Key Characteristics of a Licensing Target
They are a
company with less than 15 % market share. Companies with large market shares
don’t want to cannibalize their own products with a licensed product, and they
typically won’t take on a licensed product where they need to pay a royalty.Companies
who lag the industry in new product development, often because they lack
product development departments. The companies are looking for new ideas.Companies
that have licensed products before.Companies
where the marketing and sales departments have major management influence. You
almost never license
a product by convincing the product
development group you have a good product, after all you are their competitor.
You license a
product by having a good response
from marketing and salesIf your
product is inexpensive to introduce, often a company with limited resources
will want to introduce it. Be sure you license to a company with the resources
to promote your product.
Key Contacts
You
need two types of contacts. The first are people who will convince a potential
licensee that your product is ideal for the market. These would be key users,
key people in the distribution channel, or key retailers. The second type of
contact is someone who can push your product inside the company toward a
license agreement. This could be a company executive, a regional or national sales
manager, a marketing person, or sometimes the R&D director.
Of
the two, your most important contact is someone inside the company. This person
can help you fine-tune your proposal, tell you whom you have to convince, and
then after your presentation, offer you insights into what you need to do to
get the deal done. To meet these contacts, you need to get out and attend trade
shows, industry events, and association meetings.
Making
these contacts improves your chances of licensing a product at least 100
percent. Without a helpful contact, you may never make it past the company’s product submission policy to make a
presentation.
Often
the first person to help you license a product is the local sales person or
rep. They have a lot to gain by helping you as they will look like real
go-getters to their company. You can often find them just by choosing
potential target companies, calling them up for literature and asking who the
local salesperson is. Then meet with them for coffee or lunch and see if
they like your idea.
Preparing a Licensing Presentation
When
you find interested companies, you will be asked to come to the company’s
office for a presentation. This presentation should not last more than 15
minutes and you should allow for questions after the presentation. If at all
possible, you should include a demonstration. This is the most effective way of
selling your idea. If you cannot provide a demonstration, try to incorporate a
five-minute video showing people using your product. During the remainder of
your presentation, you need to show the company why the product will be
successful and that your product matches the company’s goals and current market
strategies. Key points in the presentation should be:
A little
introduction by your company inside contact on why they like the productYour
experience in the market, or in the technology of making the product.A brief
history. Provide a short summary of why came up with the idea, what made you
take your particular product design, and why you think it will sell. Include a
list of any industry related people you’ve worked with, such as sales
representatives, retail store owners, distribution people, inventors who have
succeeded in the market, or key end-users.A
competitive products chart. Analyze the products that are already on the
market, what they costs and what their strong and weak points are. Include your
product in the chart. Also try to get some of the more popular products either
the actual product or brochure, printed web pages or ads for the competitive
products.Market
research you’ve done comparing your product to the competitive products.Current
sales efforts. If you have done anything to sell you product successfully, list those efforts here.Why you
chose this company to present your product. Talk about synergy of existing
products and the fact the company is capable of launching a major campaign to
promote the new product.
The
best way to launch a presentation is have a great prototype package and show
both your product and competitive products. If the cost isn’t too great have
the major products on hand.
Approach Your Candidates and Sign the Deal
You should propose your own licensing deal as that is the
way you will get an agreement that protects you best. You can look up licensing agreements on a search engine
and find many licensing agreements to review and find one you like. As an intermediate step, to get a final commitment
from the company you might want to sign a Memorandum of Understanding or MOU.
This non-binding agreement shows serious intent on the part of the potential
licensee and also the agreement typically has mutual confidentiality clauses
which offer you protection. MOU agreements are also available on the Internet.
This site has template for an MOU that you might find helpful http://templates.openoffice.org/en/template/sample-memorandum-understanding-between.
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