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 a licensing fee.

Do your homework. When you’re looking to license an IP, the first thing you must do is verify the IP owners do own the IP. If it’s 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, ensure the trademark is registered for the products or services you’re seeking to license and the IP owner isn’t in dispute with a licensee or someone else.

The second is to understand exactly what rights are included in the license. If it’s 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 the use of character or celebrity images? If you don’t find out precisely what components or pieces of the IP are involved, you can miss the most critical parts for commercial success.

The third is what is expected of you as a licensee. Will you be alone, or will the IP owner offer support? You must 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 consider this. Can you market this brand or IP independently, or need some support?

One of my clients 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.

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

Licensing rights to an IP is an excellent strategy for building your business. But asking the right questions is critical to understand what you’re getting into. Before signing the agreement, 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 time, money, and resources than it returns in new revenue opportunities.

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