Licensing is the granting of the right to use, and/or make, and/or market your invention by another individual or a company. Most licenses are exclusive, that is, they are granted to only one individual or company. In exchange for this grant the inventor is paid a certain amount of money -- usually a small percentage of the net amount that the licensee receives from each sale, not the retail price. In almost all cases the invention is covered by a patent. Only in a rare case, such as an un-discoverable secret process or secret ingredient, will a company license an unpatented invention. Or, in the case of toys, inventors who have an "in" with the toy manufacturer often work on a handshake basis. This is because the life cycle of many toys is over before the patent issues. Those few lucky inventors who work this way usually come out of the toy industry, and have the right contacts on the inside.

Nearly all companies, especially large corporations, have a philosophy about inventions that reads like this: "All inventions are in the public domain unless an inventor proves otherwise by getting a patent." Ideas are abundant -- like flies at a garbage dump. Only ideas that are developed and patented (or ideas for which patent plans are definitely in the works) are rightfully called inventions in my opinion.

Companies avoid inventors who come to them with "a great idea" because the company may have had the same idea in the past and abandoned it; or it may have the same idea on a back burner; or it may be working on the same idea presently. In any case if the company eventually moves forward with its own idea, and an inventor who has submitted the same idea sues because he or she believes his idea was stolen, the company is at risk.

The ideal scenario most inventors dream of is developing an invention that will be licensed to a company and obtain royalties as a result. Licensing is the contractual agreement that provides a marketing company the opportunity to produce and sell the inventors invention for either a one time fee or ongoing payments (also known as a royalties) The company that manufacturers, markets, and sells the invention agrees to pay the inventor a small percent on sales they achieve in achieve for usage rights.To seriously consider licensing it is important to go through the traditional steps that one would take in building a business.

1.    Making a prototype of your invention. When manufacturing and/or marketing companies are approached with a new product idea by an inventor, they prefer to have a working model or sample design of a new invention submitted to them. We have had several inventors express that they have been developing their idea for many years but not have any prototype (working model) in place to test the theory of their idea. There are many phases to developing a prototype and various options but without a prototype it becomes challenging for any company to consider licensing the invention. Simply because the company would want to make sure the theory is tested out before moving forward with a contract.

2.    Develop a marketing plan geared at manufacturing companies.
Often inventors assume that a prototype that has been developed over the course of several years or serveral models is a clear 'win' to royalties. That is rarely the case without a thorough review of the market and its probability of its success. While some inventions clearly make be the next big thing in the industry, others require a due diligence in its review of the industry, customers, comparable products, trends, and scalability. Preparing a plan shows a potential 'licensee' (the manufacturing or marketing company) that the 'licensor' (inventor) has put some serious thought in the future success of the invention.

3.    Product testing the invention with consumers
Bringing the invention to a product testing consumer phase allows you to really determine the validity of your market by allowing consumers to experience and provide feedback on the invention. This critical component can be utilized to position the invention for a specific industry with realized data as opposed to theorized data. 

4.   Branding the invention for licensing opportunities
All manufactures prefer to see the invention in action to allow for full understanding of the concept. At MIPO we have to agree and we work with each inventor to help brand their invention. Branding is putting the marketing materials behind the invention so manufacturers and companies can see the sales potential of the invention. This may include trademark on the name, brochures, sales video or a website. Bringing a visual compelling effect to the invention strengthen the licensing understanding of the invention.

5.  Locating the Manufacturing or Marketing Companies                            

Finding manufacturers that are open to listening or reviewing a potential      licensing deal by an independent inventor is just as difficult as finding the right manufacturer. At MIPO we realize that being an independent inventor may have its downside when you are trying to pitch your invention to a buyer that is used to working with big companies and multiple products. So we work with the inventor to increase the odds of getting through the door with some of the buyers

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6.  Negotiating an Equitable Licensing Deal.                                                

Being at the end of a licensing deal is one of the most rewarding events for an inventor but it does require a through understanding of licensing contracts, licensing options, and negotiation tactics. This is an area that MIPO supports through our licensing experts including attorneys that specialize in providing guidance through licensing deals.

Licensing could very well be the most lucrative way to make a living today.  At its basics, licensing is the selling of intellectual property to a person or business that wishes to produce it for a profit.  The intellectual property could be a patent, copyright, or an idea. Picking the right company to license your invention is crucial in the first stages.  Without knowing where to go you are destined to endlessly search in the wrong places.  It is important to research the specific industry and markets to understand where your invention would sell and which company has a strong brand and the distribution channels to fully exploit your invention.

Licensing Plan Project

Benefits:
    * Analysis of licensing potential for product
    * Consulting meeting with successful licensee
    * Preparation of licensing list customized to product
    * Preparation of one press release
    * Preparation of a cover letter introduction of product
    * Consulting meeting with a licensing attorney