Is Your Licensing Partner Biting Off More Than They Can Chew?

July 25, 20160 Comments

Your licensing partner is excited about your intellectual property, and you agree to give them global rights. After you’ve signed the licensing deal, you discover they’ve spread themselves too thin. They’re missing production deadlines, unable to deliver products and fail to enter all the markets in their agreement.

Making sure your partner has the right capabilities reduces the risk your partner won’t perform. Always do research on the potential licensee to verify they have the right capabilities, such as manufacturing and distribution already in place. Although a smaller company is very excited about your IP, if the market for your IP is national, it may overwhelm their production capabilities. It’s better to find a larger licensing partner or one that has access to the national marketplace.

When I was licensing the kids entertainment properties, many of the “early” licensees were small companies willing to take a risk. Nobody knew if the properties would be hit with the kids. Retail orders initially were small. Then suddenly, when the properties got hot, the retailers ordered big quantities to meet the surge in demand. It overwhelmed the production capabilities of many licensees, who tried to quickly ramp up production. Some were able to meet the demand, and a few didn’t have the resources to fill the orders.

Some key question to ask your licensing partner include:

  • Are they experienced with your type of IP?
  • Does the IP fit within their sales channels?
  • Do they have the production capabilities?

Verify a licensees strength in key distribution channels, whether they use direct sales, distributors or brokers, or some combination of both. Here’s a tip to keep in mind. The use of third-party manufacturers is common in licensing, and if your licensing partner subcontracts production, make sure they have the necessary manufacturing capabilities in place.

The best way to avoid a partner that bites off more than they can chew is verify their capabilities and match the terms of your licensing agreement with those capabilities. If your IP is a “mass market product”, the potential licensee needs national distribution capabilities. Otherwise, your IP rights can wind up languishing as income opportunities slip away because your licensing partner is unable to perform as agreed.


Your Licensing Partner Will Make or Break Your Licensing Deal

The right partner makes you a lot of money. The wrong one costs you a fortune. The key is making sure you qualify your partner before negotiating your licensing deal. But if you don't ask the right questions, you can wind up with a partner who lacks the right resources and experience to successfully get your IP into the marketplace. That's why the Licensing Qualification Questionnaire is a core tool in The Licensing Toolkit. It includes the four critical areas of information you must know about them so you can decide if they would be the right type of licensing partner. Click here to get The Licensing Toolkit.

 

Filed in: MistakesPartners
Tagged with:

About the Author ()

Rand is President / CEO of Licensing Consulting Group, an intellectual property management and licensing company specializing in assisting clients in IP Management, Strategic Consulting, Acquisition of Licensing Rights, and Property Representation. 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. He has lead various international licensing programs as both licensee and licensor, and through consulting projects focused on licensing strategy, brand development, sponsorship sales and property representation.

Leave a Reply

Back to Top