Companies that are potential licensees can be found by looking in magazines or catalogs that feature products by companies that are within an invention’s field of industry or one can go online and search using terms on search-engines that describe an invention and find companies that way. It is important to secure a patent pending before presenting an invention to manufacturers for licensing consideration.
Research Potential Licensee-Companies
The manufacturing/marketing company an inventor licenses his invention to, is called the “licensee” and the inventor or his agent is referred to as the “licensor.” If an invention is in an industry such as pet supplies, fishing tackle, health & beauty aids, etc., then one simply gathers information on companies that are in the invention’s field of industry, so that those who look reputable can be contacted about reviewing the new product-invention.
The advantages in securing a License Agreement for an invention include the following:
- Ongoing royalty payments
- marketing expenses are the licensee’s
- an established company can gain wide exposure for inventions
- product liability and patent-related legal issues are the licensee’s responsibility
When methods used for locating potential licensees, yield lists of companies that look to be high quality and reputable in their industry, one can then contact them by written-letter or by email to request an opportunity to submit an invention to their new product buyer.
One can then either follow-up on letters/emails with a phone call or it can be requested that contacted companies reply to the letter sent, to confirm receipt of it and/or interest in a more detailed submission. The advantage of mailed letters is that they can be sent return-receipt, so that an inventor knows it was received, on a specific postmarked date.
It is usually more effective to state in a letter or email that it will be followed-up with a phone call. When one receives responses from manufacturers interested in further reviewing an invention, one can either send a product sample/prototype and further written details about the invention or request an appointment to present the invention in person at their buying office.
Rehearsing and Timing Presentations
A presentation should be practiced before making one in person. An inventor should be well prepared to make a presentation for their invention but should also insure that the presentation is timed, so that it does not exceed a reasonable time-limit.
A presentation generally should not exceed 20 minutes in length because executive buyers with manufacturing companies are usually extremely busy and a shorter power-presentation can be effective and is usually the best approach. A buyer can extend the length of a presentation if he chooses to, by asking questions after an inventor is done with the initial presenting.
Composing a License Agreement Proposal
An inventor should compose a sample license agreement that shows all of the terms and conditions that need to be included in the contract, leaving certain terms blank, such as the amount/percent of royalty that will be paid and the length/term of the contract in years that it is initially in force. Having a proposal on-hand gives an inventor the readiness to negotiate terms, should a presentation meeting reach that stage of interest by a buyer.
Terms and Conditions
An inventor may wish to set the term that a License Agreement is in force with a manufacturer (length of time) for only one or two years, with an option for renewal at the end of the term. This way, renewal depends upon the initial sales performance of the licensee. An inventor might also wish to include the condition of minimum sales that are accomplished per contract year by the manufacturer/licensee.
It might also be a good idea to include a clause in the contract that gives both inventor/licensor and the licensee the right to terminate the license agreement. This offers both parties a protective clause in the event for example that the licensee fails to pay royalties at the set contractual time periods or for other legitimate reasons. A licensee might also respectfully terminate a License Agreement in the event they feel they would be unable to fulfill their obligations, so that the inventor/licensor can pursue better options.
Requiring Timely Payments
The royalty-payment conditions can require royalties, to be calculated and paid, quarterly (4 times a year) or monthly, etc., and should the licensee become past-due in making royalty payments (by 10, 15 or 30 days, etc.); the licensor has the option to terminate the contract in writing – such as with a 15 or 30 day notice.
Inventors should take their time in pursuing License agreements carefully. Being in too much of a hurry to license an invention, can result in bad decisions when entering into contracts that are binding and that must run their full terms unless terminated due to violations of terms. It is in an inventor’s best interest to fully consider his options when entering into a License agreement and to do so with the help of an attorney if necessary.