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The Money Making Power of Intellectual Property
May 2013 Issue
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Greetings!
Welcome to the May issue of
Licensing4Profits.
Join us on Friday, May 3rd at 10AM Pacific/1PM Eastern for a special encore webcast presentation of the IP Licensing Academy World IP Day Webinar - IP and Innovation: Playing the New Game of IP.
After an intellectual property is developed, it needs to be commercialized to create revenue. In this month's Leveraging IP article, we look at the 3 ways you can generate money with your IP.
In our next article, Strategy Session: Working with Licensing Agents, we discuss why licensing agents are a good option if you are an IP owner who is not familiar with the licensing process or you don't want to manage your own licensing program.
Learn about the licensing process - what it is and how it works - in this month's Video Licensing Lesson.
A clear definition of "sales" in a licensing agreement is critical. An ambiguous definition is frequently the reason for disputes between the licensor and licensee. In our next article, Key Terms & Conditions, we review how the term "sales" should be defined and what should and should not be included in this definition.
Find out what the transmission of electricity, the song "Stars and Stripes Forever", and the brand name "Velcro" have in common in This Month in IP History.
We conclude this month's newsletter with the licensing question "In this challenging economy, what are the types of products to consider for licensing? "
Enjoy!
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Leveraging IP: What are Your
Commercialization Options?
 After an intellectual property is developed, it needs to be commercialized to make money. Commercializing IP is the process of transforming it from an intangible asset into a tangible product or service. There are 3 ways you can generate money with your IP: Sell, Make or License. Sell the IP Selling your intellectual property means that you have permanently transferred ownership of and the right to use your IP to another person or company for an agreed upon fee. The difficulty with selling IP is figuring out how much its worth. If your intellectual property has not yet been used in a significant way, it has no "track record", and is therefore difficult to put a value on it. Make the IP The second option is to develop your IP into a market-ready format. It requires investing the money, manpower and time as well as taking the associated risk to reap the benefits if you are successful. After all expenses and operating costs are paid, the balance is profit. Keep in mind, once production is set up and begun, it may be costly to stop production and switch to an alternative. Examine all the financial and legal aspects of your IP and weigh this choice versus the third option, which is licensing. Licensing the IP For most intellectual property owners, it will be far easier and less risky to license their intellectual property, than to produce and market it directly. While licensing your IP requires no upfront cost and minimizes your downside risk, your upside is limited by the royalty rate. The advantage of licensing is that it allows both licensor and licensee to test out the commercial potential of the IP. Licensing is an ideal option if you lack resources or are not interested in starting and running a business. Licensing to a well-established company that already manufactures and markets products similar to yours can also increase your chances for success in the market. |
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Strategy Session - Working with Licensing Agents
 If you are an IP owner who is not familiar with the licensing process or you don't want to manage your own licensing program, then you may want to consider using a licensing agent.
Although it will add to the cost of a licensing program, an agent also can bring much to the table and serve many roles for the licensor including: identifying new business opportunities, conducting due diligence on potential licensees, ensuring compliance with approval processes, and collecting amounts due. Licensing agents can also help you develop and position your IP so it's attractive to potential licensees.
Most agents will want to be exclusive, meaning they are the only one that can represent your IP. Commissions for licensing agents generally average between 30% to 40% of gross licensing revenue, and may run as high as 50%. In addition, most agents require the IP owner to pay certain expenses such as trade shows, creating promotional packages, display and solicitation materials, travel and legal fees. A minimum initial term of two or three years is typical, since it often takes that long to develop a property, find licensees and begin to receive royalties. In addition, an agent will want a option to renew the agreement for one or more additional terms.
Licensing agents (and most licensees) rarely get involved with raw idea concepts that are un-researched, unprotected, and untested. An IP still in the idea stage is the wrong time to seek out a licensing agent. These idea concepts have little or no value. The right time to approach the licensing agent is with a ready-to-go IP, that is tested and has the necessary research to back up its true value.
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Feel free to pass this newsletter along to friends and associates. You can visit www.licensingcg.com to view other free reports and presentations. If you are interested in learning about our consulting services, please contact us at (646) 395-9572 or email
info@licensingcg.com.
Best Regards,
Rand Brenner
President & CEO
Licensing Consulting Group
About Rand Brenner
Rand has licensed some of the biggest Hollywood blockbusters, including "Batman" and the "Mighty Morphin Power Rangers", both of which generated billions of dollars in worldwide merchandise sales. His career included executive positions at Saban Entertainment and Warner Bros Consumer Products where he developed numerous licensing and promotional deals with Fortune 1000 companies.
Rand Brenner is the President & CEO of Licensing Consulting Group, a full service intellectual property management company. LCG provides IP management, strategy consulting, and property representation. For more information, please visit our website or send an email to info@licensingcg.com.
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Encore Webinar Event- IP and Innovation: Playing the New Game of IP Join us on Friday, May 3rd at 10AM Pacific/1PM Eastern for a special encore webcast presentation of the IP Licensing Academy World IP Day webinar - IP and Innovation: Playing the New Game of IP.
This webinar is riveting and you'll hear stories about how Mrs. Fields, Walt Disney, Bill Gates, Dale Carnegie, Google and others transformed intellectual property into fortunes. You'll also hear about new ways to transform your IP into valuable tangible assets and help others do the same. This webinar will change how you look at the most valuable real estate in the world...the 6 inches between your ears.  When you register to view the webinar, you'll also get a free white paper, IP: The Economic Currency of the 21st Century, and a free pass to the Licensing Essentials online clinic. The clinic provides an in depth look at why intellectual property has become the most important (and largest) asset class in the world, how IP creates wealth, and how to build your personal IP net worth.
This webinar will shift how you think about IP in profound ways.
Click here to register for this webinar. http://tli.tl/05GVM7 |
Video Licensing Lesson  | | The Licensing Process |
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Sign up for our newsletter and download a free copy of Introduction to Licensing Part 1: Making Money with Intellectual Property.
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Key Terms & Conditions - Defining "Sales"
A clear definition of "sales" in a licensing agreement is critical. An ambiguous definition is frequently the reason for disputes between the licensor and licensee. Licensing agreements vary on the term used - "sales", "net sales" or "adjusted gross sales" - are some of the variations.
In defining the selling price, it's critical to understand what items will be deducted from the sales before calculating royalties. These deductions can have a significant impact on the actual royalty payments, depending on what and how much is deducted. For example an 8% royalty could have an actual payout of only 5 - 6% of gross sales. Generally, as a licensor (IP owner), deductions would be limited to credits, returns, and quantity discounts. Typical items that would not be deducted include: - Advertising, promotions and markdowns
- Sales commissions and other selling expenses
- Production and distribution costs
- Bad debts and uncollectable accounts
Keep in mind it is a negotiation process, so there will be variations and modifications to these deduction items. The key point to focus on is that the negotiated royalty rate and actual royalty payout will be different, depending on what definition of "selling price" is agreed to by the licensee and licensor.
When preparing or reviewing a licensing agreement, it's always best to seek qualified legal advice before you sign anything.
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This Month in IP History - 1888 - Patent #382,280 was granted to Nikola Tesla for the "electrical transmission of power".
- 1897 - "Stars and Stripes Forever" by John Phillip Sousa was (copyright) registered.
- 1958- VELCRO was trademark registered. Mother Nature could not have done it better herself.
Source:About.com |
Ask Rand Brenner
Q: In this challenging economy, what kinds of products are best to get licenses for?
A: Intellectual property always does better in recessions and downturns because there's greater demand for innovation. When looking for products to license, focus on products that offer better value, better ways of doing things, or are complete game changers within a particular industry (think IPad). The questions to answer are what problems need solving or what challenges are people or businesses facing in today's marketplace? For people, it could be a time saving device, or a product that does something better. For businesses it could be a product that helps increase sales, or helps them operate more efficiently. There is a lot of great, innovative IP out there, and finding the right one can be a big money making opportunity.
Got a question about licensing? Send an email to askrandbrenner@licensing4profits.com. You'll get an answer to your question which will be included in a future issue of this newsletter.
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The information in this newsletter is presented by Licensing Consulting Group as a service to the subscribers. Although the author attempts to keep this information current and accurate, he makes no warranty or guarantee that it is correct, complete or up-to-date. This newsletter may contain links or be linked to other web sites not maintained by Licensing Consulting Group. The author makes no representations, express or implied, with respect to the materials and information provided on any third-party web site linked to this newsletter, including any representations as to the accuracy, timeliness, reliability or completeness of any material or information on such linked site. Inclusion of a link in this newsletter to another web site does not imply recommendation, approval or endorsement by the author of the linked site.
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