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Licensing your intellectual property

Are you ready to mass-produce your invention? Do you lack the resources or time to do so? You could sell a license to a manufacturer or distributor who can bring the product to market.

In simplified terms, product licensing is like trading your intellectual property for a percentage of future profits. These profits are called royalties, and you need to research your options and shop around for the best deal. The rate of royalties is only one factor in the decision-making process. You may also want to look at things like whether the licensee actually plans to sell the product; if the manufacturer or distributor is a potential competitor, they might want the licence as a way to keep you from entering the market.

Why give rights to your invention?

Reasons for licensing the rights to your intellectual property include:

As a licensor, you have the potential to make a profit while taking on fewer financial risks.

Finding a licensee

Here are some ways you can try to find a potential licensee:

Shopping around for the best licensing deal may be worth your while. Even a small percentage in royalties can make a huge difference in the long term. The size of the licensee's market and the strength of their distribution channel can also influence returns.

The business meeting

The more prepared you are to present your product, the more appealing you will be to potential licensees. You can strengthen your position by showing:

Before revealing any sensitive information, get signatures from those in attendance on a non-disclosure agreement or a confidentiality agreement.

The licensing agreement

You will probably want to obtain legal advice prior to signing any agreements. Consider hiring an experienced lawyer or an intellectual property professional to negotiate on your behalf.

The agreement should cover:

Royalties generally range from 3–7%. The rate depends on things like product readiness and the importance of the patent.

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