Leveraging IP: Licensing For Development Money

An often overlooked way to use licensing is for intellectual property development. This is an ideal strategy if you don't have the money or manpower to fully develop your IP and get it to market. You also get the benefit of the licensee's manufacturing and distribution facilities, and/or sales and marketing efforts without having to spend the time and money to develop them on your own.

 

An IP development agreement can be part of a longer term licensing agreement. Basically, you license the rights to commercialize the IP in return for royalties on sales or some other form of compensation. As part of the agreement, the licensee agrees to complete the development of the IP. For example, you may have a new software technology that is only partially completed. Rather than try to raise money to complete the development, you could find a "development partner" who would finish it for you. In return, they would get the rights to market and sell the software under a licensing agreement.

 

One of the most important issues to clarify is who owns the rights to the current and future IP development, and what can you do with those rights. The licensee will typically want rights to future IP improvements so they can maximize their profits. However, there are situations where the licensee will not automatically get these rights. For example, the development licensee may specialize in the B-to-B market, but the IP also has applications to the consumer market. In this situation, it must be clear that the IP (including future developments) can be licensed to licensees in the consumer market.

 

The development licensee will also typically want exclusivity. It gives them the best opportunity to recoup their investment and make a profit with the IP. In return for investing in the development of the IP, the licensee may want a long-term, exclusive, unlimited license (including sub licensing) for specific products, applications or markets.

 

Here are a couple of other key points to keep in mind when negotiating these types of licensing agreements.

 

• Specify what the licensee will do, the time line to finish and what performance standards must be met.
• Detail what is being developed, and if testing is required, when will it be done.
• If your know-how or expertise is required, be sure to detail what you will do.

 

One final note: Beware of joint ownership of rights to current and future IP development. These can create conflicts when licensing the rights for other markets or products.

Strategy Session: 4 Key Questions for Licensor Due Diligence

Due diligence is a necessary and important step when considering a licensing partner. This applies both to licensing in and licensing out. The process of due diligence is basically to get as much information as possible about the potential partner. This month, we'll review due diligence for the IP owner.

 

Every licensing deal should begin with researching a potential licensee. The first step in considering a licensee's proposal is having them complete a licensing application. It will provide some good background information and help identify any potential issues.

 

When considering a potential licensing partner, here are four key areas to research before entering a licensing agreement:

 

      1. Quality and Reputation of the Licensee. Does the licensee produce and deliver the quality of products or services that reflect your quality standards? Does the licensee have a good reputation with its distribution channels, retail partners and customers?

     2. Experience of the Licensee. Does the licensee have experience with your type of IP? Does it fit within their product or service line and sales channels? Verify a licensees strength in key distribution channels, whether they use direct sales, distributors or brokers, or some combination of both. The use of third party manufacturers is common in licensing, and it's important to make sure they have the necessary manufacturing capabilities in place.

     3. Financial Condition of the Licensee. Does the licensee have the financial resources needed to successfully commercialize your IP? Is the licensee credit worthy? References such suppliers and vendors, running a D&B report and researching SEC filings can confirm if the potential partner will be able to perform financially.

    4. Competing Products. Does the licensee handle other products or services that might compete? If so, will the licensee devote sufficient resources and attention to your IP?

 

The better you research a licensee in advance of the licensing deal, the more  headaches you'll avoid down the road.

Video Licensing Lesson

How to Identify a Good IP

When preparing or reviewing a licensing agreement, it's always best to seek qualified legal advice before you sign anything. 

Click here to listen to IP Money Talk replay

 

If you missed the IP Money Talk, you can hear the replay of this exciting 25-minute discussion on the secrets of how to move past the top 3 IP Money Making Blocks and join the top 5% of IP Money Makers.

 

During this audio chat, you'll hear about the 3 IP money Blocks - Mindset, Method and Motivation - and what you need to do to overcome these to succeed in making money with your IP. 

 

Intellectual property is the wealth creator in this new economy. It is very fluid and can be offered in many forms.  The key to making money with IP is limited only by how you think about what you can do with it.

 

http://www.iplicensingacademy.com/audio-replay-top-3-ip-money-making-blocks-and-how-to-move-past-them 

 

Join the IP Licensing Academy

www.iplicensingacademy.com/join  

 

The IP Licensing Academy is an online coaching and training platform designed for inventors, entrepreneurs, and business owners - whether you are new to the licensing game, looking for the next big licensing opportunity or ready to do a licensing deal. The IP Licensing Academy enables you to advance your licensing activities to the next level faster while avoiding the mistakes that cost time, money and resources.  

This Month in IP History

Licensing is a marketing strategy that all inventors, entrepreneurs, established businesses and emerging start-ups should consider in today's challenging economy.  This webinar will discuss 7 key benefits of licensing and how you can use those benefits to create new money making opportunities in today's marketplace.

Click here to view this webinar.
http://licensingconsultinggroup.com/webinars/the-7-money-making-benefits-of-licensing/

Licensing4Profits Store

 
From IP to Income - Whether you are an inventor who wants to license out the rights, or an entrepreneur seeking to acquire the rights to an intellectual property, this introduction to the licensing process will show you inside tips, options and strategies to successfully license an intellectual property.  Click here to get more information.

IP Business Builder - The strategic use of intellectual property can substantially enhance the business development and competitiveness of your business:from product development to product design,from service delivery to marketing, and from raising financial resources to expanding your business internationally. Click here for more details.

Expertise IP - If you are a Consultant, Coach, Speaker, Author, Trainer or other service based business professional, you can license your Professional Expertise, generate more money, and take your expertise to a far wider audience than you can ever achieve on your own. Click here for more details.

IP Money Magic - IP is an intangible asset that can be transformed into many forms to generate income.  The key to success is using the right process and system to create and control the IP cash flow rights.Whether you have a patent, trademark, copyright or trade secret, IP Money Magic will teach you the entire licensing process - from making your IP licenseable to finding licensing partners to structuring the right kind of licensing agreements. Click here for more details.

Ask Rand Brenner