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One of the major advantages of owning rights to an intellectual property (IP) is the ability it gives you to sell the rights or license them over a specific period of time. It is one thing to own IP, but it’s a whole different thing to put the patent to practical use and benefit from it.
In cases where inventors and owners of IP have no financial, business, or technical know-how to explore the diverse applications of their inventions, the idea of licensing the IP to a third party can indeed be a great way to monetize your idea.
What is an IP Licensing Agreement?
An IP Licensing Agreement is simply a contractual partnership struck between the owner of a specific IP and another party. A license agreement is really a contract under which the holder of intellectual property (licensor) grants permission for the use of its intellectual property to another person (licensee), as set forth by the provisions of the contract. The agreement stipulates the third party has the authorization to use the IP in different applications and in turn they pay the IP owner an agreed amount of money, often known as a royalty.
There are different types of licensing agreements, but the bottom line is that they allow a third party to use a registered patent or other identified intellectual property, with complete authorization of the owner, provided they meet the financial commitments set in the license agreement.
The Benefits of Licensing Your Intellectual Property
Patent licensing has a number of great benefits. However, it is important to know that not all licensing agreements lead to desired and profitable outcomes for the inventor. Before signing any agreement, first ensure the party you are working with has the resources and commitment to take your IP to the next level.
Benefits of Licensing Intellectual Property
- You Don’t Have To Incur Manufacturing Or Distribution Costs: One of the main reasons why a lot of inventors license their patents is based on the need to avoid the high manufacturing and distribution costs that may arise should they decide to put their patent into a variety of applications. Remember, an IP is not a business, so getting a financial return from it may require a comprehensive organizational structure that may not be readily available for most inventors.
- It’s A Convenient and Easy Option: The idea of licensing patents is also seen as an easy and convenient option towards getting the most out of these inventions. Developing a business using the IP from the ground up may take years of hard work but licensing the technology or the patent to an already established company can be a great way of launching the patented products in the market faster with no stress at all. Besides, the logistics of running a business can be tiresome for most people.
- You Get The Chance To Launch Your Product In The Market Faster: Developing the organizational structure needed to manage your product and its sales can take years. In addition, getting the necessary distribution and manufacturing requires massive investment. Generally this is not something that can be accomplished in a few months. However, licensing your IP to an established company can ensure that your product is launched in the market faster and within the shortest time possible.
- Risk Sharing: Launching a new product or invention into a new market is a risky affair; however, with a licensing agreement you can actually share this risk with a different party just to make sure that you reduce your risk against devastating losses should they occur.
- Gives You A Competitive Advantage: Licensing your IP can give you a competitive advantage over other players in the market. If you license your technology to one of the biggest distributors in the market, for instance, it easier for your product to get outstanding market penetration which will in turn increase sales and promote the brand to as many customers as possible.
Tips To Negotiate a Favorable Licensing Agreement
Getting the best licensing deal is easy and the following are some simple tips that can help you in this process:
- Understand You Have Some Leverage: The IP that you own is just as important as the investment needed to make it a business.
- Understand The True Value Of The IP: You need to know just how valuable the IP is in order to get the best deal.
- Always be open-minded due to the fact better ideas may arise during the license agreement negotiations.
Licensing your IP has a number of great benefits for inventors out there. It can be a great way of getting significant returns from patents and other types of intellectual property. The licensing process begins with talking to a patent attorney or learning how to patent an idea.