5 Secrets to Making Your IP “Licensable”

Just because you invented a new product or got a patent doesn’t mean it’s “licensable.” To make it licensable, you must take specific actions with your IP. Not just any actions but the right actions.

In this article, you’ll learn about the five most important actions and the secrets to making your IP licensable.

Secret 1- It’s Market Ready (or very close)

The closer your IP is to market-ready, the more interested a company will be in licensing it. Confirm your technology is on the market before trying to license it. Most companies aren’t interested in unproven technology.

A market-ready product or technology saves a company time and money when developing and launching a new product. The price (royalty rate) a licensee will pay depends on how quickly they can get it to market. For example, the royalty rate for an unproven technology may run 1%- 2%. On the other hand, a consumer product in the market may get a 7%- 10% royalty. A good rule of thumb is that the closer to market-ready your IP is, the higher the price a licensee is willing to pay.

Secret 2 – It Will Generate Profits

The Number 1 rule of licensing – Licensees don’t license IP…they license MONEY. Understand that “licensees buy ‘MONEY – NOT patents, trademarks and copyrights.” To successfully license your IP, a potential licensee must feel it is worth the risk they take to commercialize it.

For example, if you show the licensee that your IP will generate $20 million in sales over the next five years and that you’re offering the licensee $3,000,000 in profit at a 15% profit, you’ve got a basis for a big licensing deal (and to show the value of your IP).

Secret 3 – It Offers a Big Competitive Advantage

Your IP is licensable if it solves a specific problem, fills a significant need, or creates a new marketplace. A big part of what makes your IP licensable is what it offers in terms of competitive advantage.
Is it a solution that genuinely fills an unmet need in the marketplace? You must identify what sets your IP apart from the competition (competitive advantage).

Competitive advantage has something that others don’t have. It’s like creating a moat around your IP. If you have a patented new cooking technology, consumer gadget, or new software program – something others don’t have – you have an advantage. That’s what licensees are looking for.

The more significant the competitive advantage, the more licensable it is.

Secret 4 – It’s Packaged for Licensing

Potential licensing partners will be more interested in licensing your IP if they understand what it does and how and why it’s essential. Packaging your intellectual property in a way potential partners will find attractive makes your IP easier to license.

Providing information about why the IP is better, demonstrating a working prototype, and clearly explaining marketing information can all help to interest the licensee.
Information on test markets, product sales, customer feedback, sourcing production materials, operating manuals, or other supporting proprietary information will enhance your licensing opportunity “package.”

A well-documented licensing package also helps speed up the process of reaching an agreement and shortens the time it takes a licensee to complete their evaluation of the IP.

Secret 5 – It’s Protected

Identify your IP parts and decide which ones are the most commercially viable. Focus on protecting the most valuable parts first. Those are the ones you’ll want to develop and use for licensing.

Protecting your IP often relies on a “bundle” of IP rights. For instance, the software is protected with multiple types of IP: the program information is copyright, the software brand is a trademark, its packaging is trade dress, the source code is a trade secret, the box shape is a design patent, and the use of the software is protected by an end-user licensing agreement (EULA).

Remember, the number 1 key question for a potential licensing partner is to make money with your IP. Your IP’s real value is how a licensing partner can use it to increase revenues, cut costs, or gain a competitive advantage. The more these actions you complete, the more licensable your IP becomes, and the greater the likelihood a company will license it.

If you’re still unsure whether you have a licensable IP, contact me today. We’ll briefly discuss your IP and what needs to be done to make it licensable.

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