In the previous post – P – Principles of Licensing – I gave some general strategies and expectations regarding licensing of your invention. But, an obvious question is, “how do you find and engage with a potential licensee?”
From a high level, there are two approaches:
1. You negotiate directly with companies to license your product
2. You engage someone to negotiate an agreement on your behalf
As with most inventive topics, the better approach depends upon you, your circumstances, and your goals.
If you understand the key elements of licensing (see the previous post for good reference books) and you feel confident representing your product and negotiating directly with potential licensees, then 1 is probably the better approach for you. You must have a clear idea as to what you hope to achieve; for example, an exclusive license agreement with a royalty of approximately 5 percent.
If, on the other hand, you’d feel better served having an “expert” negotiate with companies and, hopefully, secure a licensing agreement for you, then 2 is your better approach. This approach makes sense if your time is very limited, you lack confidence or feel an experienced licensing rep can secure a better agreement than you might on your own. Just be aware that licensing reps generally will expect to receive a portion of any future royalties from the licensing agreement – typically between 25% and 50%. That could amount to a lot of money if the product sells well.
A cautionary approach to employing a rep: there are many companies that profess to offer licensing services, but only a few reputable ones. Lambert & Lambert and University of Wisconsin Innovation Center seem to be two reputable licensing companies. Reputable companies can list products they have licensed successfully for clients and they typically require little or no up front fees (they will make money from future royalties if they are successful).
Assuming you choose to negotiate directly yourself, how do you find companies to license to?
Short answer: do some research. Start with the Thomas Register – an excellent source listing of manufacturers of all sorts of product types. Cull your listing down to a small group of companies that look promising and make some phone calls. Simply ask them if they manufacture products like yours and, if not, who they might recommend you contact. From this short list of potential licensees, do further research by going to their websites, studying their product lines and determining how or if your product might be a good fit for them.
The final phase is to contact the companies directly and set up an appointment to meet with them and present your patent pending product to them. More about how to do this in the next post: R – Rep Your Product to Manufacturers.