Licensing is an active process. If you don’t do anything with your intellectual property – meaning make, market or sell it, then nothing will happen. Taking action through the licensing is what starts the process of making money with your IP.
The first step of the action process is developing a licensing strategy. Just like a business or marketing strategy, a licensing strategy defines the who, what, where, when, how and why.
Think of it this way: when you create intellectual property, you enter the innovation business. Innovation is what drives new products and services—so get out there and do something. Make contact. Act on it. That’s the most important thing: you have to act on your IP. If you don’t act, nothing gets done. Your IP will drift away to someone more motivated to do something with it (and possibly infringe on your IP!).
So what’s your action plan? How do you act? What’s involved? When you are thinking about your options, ask yourself, “How can I take advantage of the money-making opportunities that this intellectual property offers?” or “What are the different ways I can use my IP?”
In this article, I’ll share with you three basic licensing strategies. You can use one or more of these strategies, whether you are an IP owner or a company looking to license in rights to an IP.
The first strategy is to license directly. Rather than making and selling the products or services yourself, you’ll license out the rights to someone else in return for royalty payments.
The second strategy is a joint venture. A JV is a partnership between you and someone else. For example, you may form a JV with someone who has the marketing and production expertise. Or you may need someone to help you finish the development, and in return, split the licensing revenues. A JV is similar to direct licensing, except you’re forming a partnership to help you license your IP.
The third strategy is to sub-licensing. A sub-license allows your licensing partner to go out and license your IP to other partners. For example, you may have an IP for a new toy, and you grant a “master license” to a toy producer. They in turn then have the right to sub-license or re-license your IP to other companies. Here’s how a sub-license works. The master licensee pays you a royalty of say 8%. They license your IP to other companies at 10%. They pay you 8% and keep 2%. They get revenue from both their direct sales and from the excess royalty generated from the sub-license agreements. It gives them a powerful incentive to help build the market for your IP. The more successful that licensee is, the more likely they’ll attract other licensees in non-competitive categories.
These are just three examples of the licensing strategies you can use with your IP. If you don’t want to do it yourself, you can hire a licensing agent to manage your licensing program for you. Regardless of what strategy you use, the most important thing you can do is taking action. Remember, if you don’t take action with your IP, nothing will happen.
If you’re ready to take action, you’ll need to take the right kind of actions. Click here to learn about the five most important licensing tools you need to manage and make money with your IP.