Taking short cuts to get a deal done quickly is tempting. While taking the easy way may seem like a good idea, you can wind up with a bad licensing partner and an agreement riddled with pot holes that can lead to disagreements, wasted time, effort and money, and ultimately a damaged relationship with your licensee.
Don’t jump at the first offer that comes along. You must do your homework and make sure this potential partner has the money, man power and resources to successfully get your IP into the market. When I was at the studios, they had a policy of not licensing startups. The reason is start-ups often didn’t have the resources (especially financial) to support the product, especially if the property took off at retail. If a licensee couldn’t fill the retail orders, it would hurt the brand and potentially cause the retailer to back away from the property.
One of the biggest mistakes in licensing is not doing due diligence before signing the licensing deal. Ending up in a reactive deal because an opportunity presented itself may seem like like a good idea at the time. But don’t assume that a licensing agreement will take care of any problems that “pop-up”. Nothing is more draining in both time and money then having to litigate your way out of a licensing agreement.
The starting point for every licensing partnership begins with due diligence process. This step is often overlooked,yet it’s a critical and important when considering a licensing partner. It’s basically the process of getting as much information as needed about the potential partner. The more you and your potential licensing partner know about each other, the better you can determine if the partnership makes sense.
One of the easiest and fastest ways to research a licensing partner is asking them to complete a licensing application.You can get some good background information, and quickly identify any potential issues. When I was licensing movie and TV shows, the first thing required of every potential licensee was the licensee application. It included references for retail buyers, distribution and banking, which I always checked. Plus they had to provide their plans to commercialize the IP.
Finding ideal partners for your IP is not easy. It doesn’t matter what you negotiate if the company you’re dealing with is not honest. Always research the companies with whom you contract. The more homework you do in advance, the more resources and headaches you’ll save down the road.
Free Licensor Due Diligence Checklist
This free Licensor Due Diligence Checklist will help you quickly research and qualify potential licensing partners. It covers the 4 key areas of information you need to know before your sign a licensing deal.
Click here to get this free checklist.