Choosing Between Building a Company or Product Licensing

When you have a great idea for a product, you'll face a crucial decision: Should you establish a new company from the ground up to bring your product to market, or should you pursue a product licensing deal with an existing company that already has the resources?

• Building a company gives you complete control but requires substantial time and resources.
• Licensing allows you to tap into existing infrastructure, potentially generating royalties, but you'll have to share control.

The Challenges of Product Licensing

While licensing offers advantages, securing a product licensing agreement can be difficult. The rate of successful inventors who license their inventions is surprisingly low, less than 10 percent.

• It requires more than just a good invention; you must be an appealing inventor.
• Tenacity, preparation, and professionalism are essential for success.

Tips to Increase Your Chances of Success

To improve your chances of success in product licensing, consider these valuable tips:

• Become an expert in your field. Know your competitors, the market size, demand, and why your product is the best solution.
• Be realistic about the risks. Present a thorough analysis of potential challenges like product failure or slower-than-expected adoption.
• Present your idea professionally. Use written materials, PowerPoint presentations, and supporting data like market research, competitive analysis, patent status, and prototypes.
• Protect your intellectual property. Most companies require a patent before considering licensing opportunities. Be prepared to sign confidentiality agreements and seek legal counsel.
• Submit your idea strategically. Work closely with your patent attorney to ensure your idea is protected and follow established submission procedures.
• Research your target licensee. Choose companies with existing manufacturing and distribution capabilities, and be prepared to educate them about your product's potential.
• Find a champion within the company. Identify individuals who are passionate about your idea and can help champion it internally.
• Treat “no” as an opportunity to learn. Use rejection to understand the reasons behind it and improve your future pitches.
• Diversify your targets. Don't rely on a single licensee; approach multiple companies to increase your chances of success.

Understanding the Licensing Process

The product licensing process involves several steps that require careful planning and execution:

• Patent Protection: Securing a patent is often a prerequisite for licensing agreements, protecting your intellectual property.
• Target Selection: Identifying the right licensee is crucial, choosing companies with the resources and market presence to successfully launch your product.
• Presentation: Creating a compelling pitch with detailed information about your invention, market analysis, and competitive advantage is essential.
• Negotiation: Negotiating the terms of the licensing agreement, including royalties, exclusivity, and marketing responsibilities, requires strong negotiation skills.
• Contractual Agreement: Finalizing a legally binding contract that outlines the rights and responsibilities of both parties is essential.

The Importance of Professional Legal Counsel

Consulting with a patent attorney throughout the licensing process is crucial to protect your interests.

• They can help you navigate the patent process, draft confidentiality agreements, and review licensing agreements to ensure they are fair and favorable.
• Their expertise in intellectual property law can help you avoid costly mistakes and ensure your invention is properly protected.

The Value of Product Licensing

While product licensing can be challenging, it offers significant advantages for inventors and startups:

• Access to Resources: Leverage existing resources like manufacturing, distribution, and marketing channels without substantial upfront investment.
• Financial Gains: Earn royalties on product sales, generating passive income without direct involvement in the product's development and distribution.
• Faster Time to Market: Bring your product to market faster by leveraging the infrastructure of an established company.
• Market Validation: Get your product validated by a reputable company, increasing your chances of success and building credibility in the market.

Conclusion: Navigating the Path to Successful Product Licensing

Product licensing can be a rewarding journey, but it requires careful planning, persistence, and a strategic approach. By understanding the process, protecting your intellectual property, and finding the right licensee, inventors and startups can increase their chances of successfully licensing their inventions and reaping the benefits of their creativity and hard work.