4 Steps to Developing a Licensing Deal

Experienced licensing professionals use different approaches for developing a licensing deal. Typically these include initiating contact with potential licensees either in person, such as at a trade show, by email or over the phone.

The first communication includes general discussion about the IP ( e.g. general descriptions of the IP or public information such as article or published patent) and whether there is mutual interest in moving forward with a potential licensing deal.

After confirming mutual interest in moving forward, the licensee and licensor will meet in person for a more detailed presentation on the licensing opportunity. This is the point in the process where a non-disclosure agreement (NDA) may be necessary prior to the IP owner (licensor) providing more details about the IP.

After this preliminary information stage, the licensee will usually want to do some due diligence to confirm the commercial viability of the IP. The licensor will want to check the licensee by the types of products (or services) it has brought to the marketplace and the level of success they’ve had with these products.

If both parties remain interested after the their due diligence, the deal then moves into negotiating the essential business terms of the license, which are detailed in a Deal Memo or Terms Sheet.

Keep in mind, the licensing deal will only happen when both sides conclude that the benefits of the deal are greater than the cost, or loss, required to make the deal possible.

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