Don’t jump at the first licensing partner that comes along. Otherwise, you may wind up with one who can’t deliver on their side of the licensing agreement. Finding out after you sign the agreement that your partner doesn’t have the money, manufacturing or distribution capabilities is too late. Now you’re stuck trying to find a way out…which often turns into a costly legal battle. But there is a way to avoid this costly and time-consuming mistake.
The number one goal is to find the best possible licensing partner. When it comes to intellectual properties, one size does not fit all. The key to finding the right licensing partner is making sure your intellectual property fits with the licensees business operation or model. The better you match the capabilities of the licensee, the more likely they will get your IP into the market successfully.
Inventors often contact me when they are in trouble with their licensing partner. In one situation, the inventor developed an aftermarket product for the truck industry. He signed a licensing deal with a company who claimed they could get it into the market. After about 2 years of trying to get out of the deal,he finally got the rights back. But it cost him lots of money in legal fees, and, because the company didn’t deliver the product, all his potential customers disappeared.
Research helps you decide if your potential licensing partner capable, meaning they’ve got the resources, such as manufacturing and distribution. If your patented product requires complex electronic components, a company that produces only injection-molded plastic products is not a good fit for your patent. This holds true all the way down the line of the company’s marketing processes, inclusive of distribution. Your IP must fit through their distribution channels and is right for their customers.
A good starting point for the due diligence process is requiring the potential licensee complete a licensing application.The licensing application will give you good background information, and flag any potential issues. This is the fastest way to learn about the company and its experience.
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 give us their plans to commercialize the IP.
Determining if your IP fits the capabilities of the licensee is the first step. Not only does it cut the risk, it also makes it more likely that your potential licensing partner will successfully bring your IP into the marketplace.
