License Your Idea to a Manufacturer

Manufacturers

If you do not want to go through all the time and hassle of bringing an idea to market yourself, there is an alternative: license your idea to a manufacturer. In doing this, you are granting someone else the right to create your idea and bring it to buyers via the marketplace. However, there are some important steps and considerations that you should keep in mind if you choose to do this. In this article, we will make you aware of them.

First, a few words about what it means to license an idea. Licensing an idea actually means licensing a patent, which protects your idea. If your idea is not patented already, you will want to apply for one. You can call 832-683-1527 for more information on filing for a patent. Once your patent is filed it will be considered ‘patent pending’ which will give you the ability to begin presenting it to investors, patent buyers, manufacturers, and retailers looking for patents to license or purchase outright.

Important Steps to License Your Idea

Legally speaking, you have licensed your patent when you (the licensor) grant exploitation rights over your patent to a licensee (the person you are licensing it to.) In this case, the licensee is whichever manufacturer you have licensed your patent to. “Exploitation rights” simply means the right to create, market, and/or sell something based on what that patent protects. A patent license is also a legal contract, and that contract is what will spell out terms precisely which exploitation rights are being granted. These include any performance obligations the licensor might demand of the licensee. This means that if any performance obligations are included in the contract (ie, “You must produce X number of sales by the year X.”), and they are not met, this could lead to the license being terminated in its entirety.

If this sounds complicated, it can be, but it is actually quite simple. The biggest consideration is finding the right manufacturer to license your patent to. To do this, you should check resources like the Thomas Register to find manufacturers related to your idea. These are the people most likely to want to license it from you. There are other easy ways of finding manufacturers to license your idea to, as well. See our article “Researching Your Market Online” for more details. Once you have narrowed down a list of 10-20 relevant manufacturers, the next step is deciding on the terms of your license agreement.

License Your Idea: Terms of Your License Agreement

As mentioned earlier, most license agreements include one or more performance obligations. These are simply requirements that the manufacturer (licensee) must fulfill in order to keep the license. If you have certain expectations that you want to enforce, such as X number of sales in the second year or a 4% profit margin, performance obligations is the way to enforce them. Of course, both parties will have to agree on the obligations before they become final. There is also the issue of royalty requirements, where you can specify that you must receive X dollars in royalties monthly, annually, or semi-annually to keep the license agreement alive. These are ways of ensuring that your own financial needs are met from licensing your idea to the manufacturer.

Making sure those needs are met is probably the biggest consideration of all. How much are you going to ask for in royalties? You cannot get greedy, but you must ensure that your costs are paid back and the money you get is worth your while. Tally up the money you have spent so far and keep the total in mind when setting royalty requirements.

Another consideration is the term of the agreement. Do you want a longer or shorter agreement? Well, that depends on your circumstances. Do you want to someday capitalize on this patent yourself? If so, you might opt for an agreement of 5 years or less. However, if you’re the kind of person who just wants to collect the royalty checks and move on to something else, a longer agreement might suit you best. The key is to choose the length consciously, based on your true needs and goals.

Of course, you should also use a patent attorney for the duration of this process. Licensing a patent is not something you should “wing it” with, as there are complex laws involved and severe penalties for breaking them. Additionally, a good patent attorney can also warn you if you are about to license your idea in a way that harms you. What if the manufacturer tries to get away with paying you a pathetically small sum in royalties? Situations like these are when it pays to have an attorney on your side, so don’t feel shy about spending the money to get one.

If you can keep these considerations in mind and the timing is right for your product in the market place, you will have a much better probability of profitably licensing your idea to a manufacturer.

Eric Corl is the President of Idea Buyer LLC, a new product development company that owns and operates IdeaBuyer.com- The Online Marketplace for Intellectual Property. The site gives inventors the opportunity to showcase their intellectual property to consumer product companies, entrepreneurs, retailers, and manufacturers. You can email him at EricCorl@IdeaBuyer.com.

9 Responses to “License Your Idea to a Manufacturer”

  1. abe martinez Says:

    I have invented a fine piece of equipment for the Paint striping feild. From all my research ,I have 1 competitor, and this competitors product is inadequate and just does’nt work right. I know I’m a painter of 45 years and used this product. Infact 14 painters who I work with also agree. So, being an inventer I had to do something. And I did. I have a patent and number because my product is far superior then any on the market. I’ve done my home work. Within the week I’m going to give the painters at Denver International Airport, where I work, a demonstration. They are in dier need of my product and ready to buy at least 6. That’s Just 1 airport. Their are 5,128 paved airports in the US. Plus all the DOT’S in the USA would want at least 1. Thank You for reading this. Please let me know what you think. ABE

  2. Chadwick Thompson Says:

    Way to go Abe, i am in the same situation, there is none like my Patent and I seem to be having a problem Licensening it to Manufacturers, I would like a non-exclussive contract for 3 years, Man I am having Problems with it, It is a Motorcycle Accesories! There is 1150 Harley Dealers in the US. I sure would like to get that one. Congratulations again on Your Patent. Way to go!

    Chadwick
    chadwick_tho@hotmail.com

  3. patty Says:

    i have intevented a wiper blade cover too i want to sell the i dea to a manf, dont know how.

  4. Jacob Says:

    I would like to license an idea. Its practical and will save fuel. Its simple and is used for other purposes, except on automobiles. It can be easily added as a new feature which every driver will appreciate.

    But the million dollar question is how to present it to the manufacturer without getting it copied into their own?

    Please advise through jacoommen@gmail.com.

    Thanks,

    Jacob

  5. Tremaine Jackson Says:

    i have a 1st made invention called the Vehicle Generation System i can reall use some extra help in gain a deal. contact me for website.

  6. SHIRLEY BRANCH Says:

    I have an invention that is in the Patent Pending process. It Sneakers, they have a unique design. I am having a Website produced, a prototype, and a box developed for the sneakers. If you are interested please contact me.

  7. Andrea Mosley Says:

    I have invented an apparatus that aids the feeding of babies, nothing like it exist and it will go global and sell as long as babies are being born. I have a patent pending status, a market and profit analysis that I paid a company to perform. My goal is to obtain a licensing agreement. I ventured out on my own contacting major manufacturers and I received a great amount of interest, however because I didn’t have a full granted utility patent, or a prototype for others those companies couldn’t go any further than liking my idea. Marketing companies are saying that they can get me a licensing for a sall fee of course… Im just wondering if I should go with the marketing company, partner with an investor to manufacturer on my own, or seek smaller companies for a licensing agreement. Any advice is appreciated… missann1029@yahoo.com

  8. patrick collins Says:

    I have a patent that has been trademarked. I would like some ideas on how to present it to manufacturers so that it can be licensed and put on the market. I have produced a catalog and clothing samples that are available for the manufacturer to see. What steps do I need to do to proceed from here? If you are interested in assisting me further, please contact me.

  9. rolando Says:

    I have applied for a patent for “something” that one could run the bicycle on high gear so one can go on high speed without exerting tremendous effort on the pedals. In fact, one can forget he/she is pedaling the bicycle at all. One can just enjoy biking without breaking a sweat. I wanted to license it to bicycle manufacturers. How can I present my idea to them?
    Thank you.

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