Licensing Basics: The Value of Invention

As discussed in Part I, once you have determined the commercial potential of your Intellectual Property (IP) decisions will need to be made on patenting, developing and licensing your IP or some combination thereof. In this article we briefly discuss some licensing basics so that you are familiar with the opportunity when it arises.

What does it mean to license your IP? A license is a legal contract between competent parties that details what is essentially to be traded between the parties, for how long, authorized uses of the IP and legal enforceable terms. A license grants permission from the Licensor (owner of the IP) to the Licensee to make use of the IP in a way that the Licensor could normally prohibit.

Although contracts can be boring, lengthy and tedious to an entrepreneur it is critical that the licensor and licensee review all the details. A poorly worded agreement may have disastrous effects. The Entrepreneur’s Advisor™ strongly suggests that contracts be written by a competent and licensed attorney. Contact us if you need help in finding an IP Attorney who can provide references.

Why you should consider Licensing: 

  • Royalties
  • Cross Licenses
  • Expansion into new market segments
  • Identification of new applications
  • Strengthens your market position – pervasive use may capture industry standard, making it difficult for competitive products to gain entrance. ***This is huge – the best science isn’t always the winner!!!!
  • Strengthens the legal position of your Patent
  • Possible product improvements may be developed
  • It creates value – # 1 reason to consider 

“The size of the deal is irrelevant if the deal creates value” – Stuart Smith 

“Just because something doesn’t do what you planned it to do doesn’t mean it’s useless. “ Thomas A Edison 

Top five reasons why people avoid licensing that result in missed opportunities:

  • Greed
  • Lack of Vision (cannot see the bigger picture)
  • It is too much work
  • Inability to trust others
  • Loss of Control 

How do you find someone to license your IP to or IP to license from someone?

  • Networking
  • Professional Associations
  • Publications
  • Channel Partners
  • Clients
  • Vendors
  • Market Research on who can benefit from the technology
  • Market research on who has the resources to develop 

I left where the last man left off – Thomas A Edison

What is in a License Agreement?

  • Identification of the Parties
  • Definitions of the IP being licensed
  • Defining what the “Grant” is? (Exclusive, non-exclusive, non-competing use, what IP can be used for)
  • Royalties
  • Milestones and Schedules
  • Warranties and Representations
  • Term Length
  • Causes for termination of the agreement
    • Examples (shelving of the IP, non-development, non-payment, reassignment, sale or change of entities)
  • Assignabililty and transfers (sub-licensing, who licensee can extend knowledge to etc…)
  • Other terms (example – who has the rights to improvements)
  • Signatures 

Note: Never, Never, undertake a licensing agreement or patent process without consulting with an IP Attorney. No, we are not making a pitch for attorneys – this is business and our number one goal is to help make your idea arrive at business fruition. The Entrepreneur’s Advisor ™ strongly recommends only using attorneys willing to provide good and not so good references. 

Good reference links

Licensing royalties rates – Royalty Rates

Licensing Agent Fees – Licensing Agent Fees

Finding Scammers – National Congress of Inventor Organizations Scambusters

The Entrepreneur’s Advisor™ is unique in their ability to assist new ventures. Our understanding of the emotional rollercoaster, the details of starting a business, the experiences of running a business, change management  and a passion for what we do separates us from others because “We have been there and done that”. Our innovative Pay-As-You-Go” program is designed to be a sounding board for start-ups. Talk to us – “We love getting our hands dirty.”

If you like this article you might also like
The Value of Invention
Licensing of Intellectual Property For Entrepreneur’s Seeking to Raise Capital
Finding Funding For Your Venture

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