Steps to Product Licensing

Product licensing can be a great way for inventors to make money from their ideas without having to go through the hassle of mass producing, marketing, and distributing the final products.  Licensing has monetary benefits for inventors and can also create additional licensing opportunities with other large companies or licensees.  Knowing the steps to take when licensing a product will help inventors to avoid making beginner mistakes that can cost a lot of time and money.

The first step to licensing a product is finding potential manufacturers that would be interested in becoming licensees.  Inventors should identify at least a dozen manufacturers that they would be interested in working with to negotiate licenses for their products.  Some companies that guide inventors through this process recommend that inventors identify as many as one hundred possible licensees.  While identifying so many potential licensees will be time-consuming, there are a lot of good resources for inventors.  Some sources of information on potential manufacturers include Harris Info Online, Industry Search, and Thomas Register of American Manufacturers.  Once you have identified potential manufacturers, you need to review the list and decide which manufacturers you would like to work with the most.  These manufacturers will get moved to the top of your list.  Once you have the manufacturers ranked this way, you will need to contact each individual manufacturer and get the contact information you will need to send out your marketing information.

The next step of the product licensing process is preparing and submitting your marketing materials.  Your marketing materials will consist of a marketing letter and may also include a brochure or copies of your professionally rendered patent drawings.  When you write your marketing letter, you should focus on the features of your product and how adding your invention to the company's list of products would benefit the company.  You don't want to include a lot of personal detail about yourself or about how you invented the product.  Before sending these marketing materials out, you may want to have each company sign a nondisclosure agreement.  This can help protect your intellectual property rights should a company try to produce and distribute your design as their own.  Once you have submitted your marketing materials, you may not hear anything for a few weeks.  It may take some companies nearly a month to open and read your marketing letter.  You may want to follow up with each company in four or five weeks if you have not gotten any response.

Once you have submitted your marketing materials and gotten one or more responses, you need to negotiate the terms of the license.  Because there are many types of licensing agreements, and you have the potential to make a costly mistake, you should use the services of an attorney during any licensing negotiation.  An attorney will be able to help you get the most benefits from licensing your product to one or more manufacturers by helping you to negotiate licensing fees, royalties, and other terms of each licensing agreement.