3 Critical Questions You Must Ask Before Licensing an IP

Licensing in the right type of intellectual property can be a fast track to the commercial marketplace. But if you fail to ask the right questions, you can wind up with an IP that costs you more than just a licensing fee.

When you’re looking to license in an IP, the first thing you must do is verify the IP owners do in fact own the IP. Do your homework. If it’s a patent, do a patent search to confirm its ownership, that all the maintenance fees are current, and there are no infringement actions. Before licensing a brand, make sure the trademark is registered for the products or services you’re seeking to license, and the IP owner isn’t in a dispute with a licensee or someone else.

Second is to understand exactly what rights are included in the license. If it’s a patent, what is the technology and does it need know-how? For example, a new patent product requires the manufacturing know-how to produce it. If this know-how isn’t part of the rights, you’ll be unable to make and sell it. If it’s a movie or a TV show, what rights are included, such as use of character or celebrity images. If you don’t find out exactly what components or pieces of the IP are included, you can wind up missing the most critical parts for commercial success.

Third is what is expected from you as a licensee. Are you going to be on your own or will the IP owner offer support? You must really understand what you’re getting into. For example, if you do a licensing deal with a major studio, entertainment company or big brand, sometimes they’ll give you support, and sometimes they won’t. You must take this into consideration. Is this a brand or an IP that you can commercialize on your own, or do you need some support?

One of my client who faced this issue when we licensed one of the big auto brands. The agent representing it told us “The company offers no support. You’re on your own. Here’s the license. There’s no advertising, no promotion, no nothing.” We were surprised the licensor didn’t offer any retail support, such as buyer introductions, or a coordinated retail program for cross promotions with the brand. But their position was the brand was so big and well-known they didn’t have to offer anything beyond the license rights.

That’s a good example of what can occur. When you do find out something like that, it’s a critical issue you must consider before going forward with the licensing agreement. Especially if you’ve got limited financial resources to market and promote the IP.

Licensing in rights to an IP is a great strategy to build your business. But its critical to ask the right questions to understand what you’re getting into. Before signing the agreement, make sure your verify the IP ownership, confirm which rights are included, and what type of support the IP owner will offer. Otherwise you can wind up with an IP  that costs you more in time, money and resources than it returns in new revenue opportunities.

Rand Brenner Administrator
Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies.

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