Almost every inventor considers licensing his or her invention to a manufacturer in exchange for a percentage of royalties of all sales of the product.
Your great new innovative product solves a problem almost everyone has. You make a few prototypes, then file a patent on the concept to protect it from infringers. Next, you present your invention to a manufacturer of similar products; they love your invention and want to license your product so they can manufacture it, package it, and market it. Soon lucrative royalty checks will begin arriving in your mailbox.
Sadly most inventors, rarely obtain a successful licensing deal. One survey of inventors suggested less than 13% were successful in licensing their invention. I suspect the success rate may be lower than 13%, perhaps as little as 5%.
In a previous blog, I discussed some tips for licensing your product.
Many inventors fail to license their product because they fail to prepare adequately prior to presenting to a potential licensee.
Preparing to License Your Product
Let's assume that you have compiled a list of companies that might license your invention and you have set up an appointment to meet with your first potential licensee. Here are the key actions you must take before you leave home to meet with the licensee:
- Do your homework: understand their business and who their key competitors are
- Have an enticing intro and clear description of the unique benefits of your product
- Prepare a professional “leave behind” presentation of your product
- Know, specifically, what you hope to achieve
Understand their business, key competitors, and financials
The biggest mistake an inventor can make is to focus on themselves and their product; why it is so fantastic and will make everyone in the room rich. This guarantees you will lose the attention of everyone in the room in 10 seconds.
Your presentation should be all about them, not you.
You are there as an independent product developer (never call yourself an inventor) with an innovative new product that could be a perfect addition to their existing product line.
To gain knowledge of their business, obtain detailed information on their strategies, their product lines and financials. Every public corporation must provide an annual report, a 10K report (annually) and 10Q reports (quarterly) chock full of valuable information. These publicly available reports are easily obtained from a variety of sources.
In the next blog, we will describe how to use this information.
Have an enticing intro and clear description of the key benefits of your product
My first product was a thin, flexible wallet (now selling in major retailers as Wonder Wallet). Below are two different intros, see if you can spot the enticing one:
- Hello, my name is Alan Beckley and I have a cool wallet I just know you will want to add to your product line.
- Hello, my name is Alan Beckley. I developed a thin, flexible wallet that holds twice as many cards, yet is half as thick as other wallets. Let me show you how it works, why it could be a perfect addition to your product line and how it can help you grab a bigger share of the Millennial market.
Obviously 2 is much more enticing and focused upon them and their needs than is 1.
Your presentation should be no longer than 15 minutes and, in general, you should talk directly to those in the room and avoid a PowerPoint presentation if possible.
Know, specifically, what you hope to achieve
At some point, your key contact at the company will ask you a very important question in a very subtle way, such as “What are you looking for?”
This means, what do you propose as the key provisions of a licensing agreement. This question is analogous to an interviewer asking “so why should we hire you?” You need to be prepared in advance with a crisp, concise answer that shows you expect to win the deal.
I am seeking an exclusive license on all worldwide sales of the product with a 5% royalty.
They will want an exclusive license meaning they will be the only company allowed to manufacture, package and sell your product. This gives them an advantage their competitors will not have.
You want the license to include sales that occur anywhere in the world (not just the US). Lastly, you propose a royalty percentage that is merely a starting point for negotiations.
I'll give more detailed suggestions in the next blog.
The next blog is Presenting Your Product for Licensing