As regular readers of our blog will likely remember, we recently published a post describing factors you should consider before signing an intellectual property licensing agreement.
The first three factors to consider:
- Research: Find out whether the IP you might license is protected by patent or trademark.
- Advantage: Determine whether the competitive advantage the licensed IP would give your business would warrant its cost.
- Math: It might cost up to 14 percent of your revenues to license certain types of IP. Make sure it’s worth it.
Read the entire blog post here.
Four factors to go.
According to the Inc. article by Jim Schleckser, CEO of the Inc. CEO Project (a head-spinning attribution if ever there was one), he’s often asked why licensing deals are based on revenue rather than margins or units sold.
The answer: from the licensor’s point of view, revenue is the hardest to hide and easiest to audit. The other measures are simpler for the licensee to manipulate.
If you’re licensing a patent, it might be best for you to have it last the life of the patent. If you’re licensing a trade secret, however, you might want an exit provision that allows you out of the license agreement should an alternative become available.
Before signing a licensing agreement, find out if anyone else will have access to the same IP. If yes, you might be able to negotiate much more favorable terms. But if you want and need exclusivity, it might be worth paying a licensing premium.
Schleckser writes that a sticking point in some agreements is when the licensor insists on minimum payments. If the licensee fails to make those payments, the licensor can exercise their termination right to end the agreement or to turn it into a non-exclusive deal.
If some IP or technology can be a game-changer for you, a licensing agreement can make a lot of sense. Before entering a licensing agreement, discuss its upsides, downsides, costs and benefits with a qualified intellectual property attorney.