Using licensing to finish development or market testing can be a faster and less expensive route. It’s also a great way to build a licensing partnership. Because licensing is a flexible tool, you can create a tiered-licensing deal. It can be based on the successful development and testing of the IP. From there it can expand into a broader long term licensing deal.
There are a number of ways you can structure the deal. For example, you can license rights to a foreign market, where it is sometimes less expensive to test the product. Or you could license rights to a limited geographic territory, before expanding to a larger market.
I used this strategy with a client who had invented a new tie-down flexible cord (i.e. a better bungee cord). They introduced it into the market, got immediate interest from from international distributors. We structured a two part deal – first as an exclusive distributor to test the market. Based on the sales success, we expanded it to an international licensing deal, with rights to make and sell the product in Europe.
By the way, you can also use this strategy to for other types of OPR, such as distribution channels. For example, if you want to sell into the mass market but lack the resources, you could license a company with big sales operation to sell exclusively through this retail channel. You get the benefit of exposure to a bigger market and additional income from the licensee.
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