Deciding when to license your intellectual property is always a question. License your IP too early and no one is interested. License it too late and the market is shifted in a new direction.
Keep in mind, your intellectual property goes through a life cycle. First, it's created, then it moves into development, then it's launched into the market. The ideal time to start licensing it is somewhere between the completed development and when it's proven itself in the market, and it's ready to grow and expand.
So how do you decide if it's better to license your IP or market it yourself? To help you answer that question, here is a list of seven signs that licensing may be a better or additional go-to-market strategy than just making and selling it yourself.
1. Your IP is an incremental improvement to an existing technology used in current products or by other companies. Industries such as high-tech and consumer products use incremental IP to improve their products with new features increasingly desired by consumers. Some examples include Apple's iPod (the incremental accessories are licensed), GPS systems (incremental version for cars), and automobile features (the incremental IP improvements such as electric windows, ABS brake systems, airbags, and many others).
2. Your IP is market-ready, meaning it works and customers will buy/use it. This includes making sure it's protected, customers are identified, and it's been tested with a prototype or is selling on a limited basis, such as online or through retail stores.
3. You're competing in a crowded field with lots of players and there is a high risk of potential infringement. An example is the high-tech industry, which is not only highly competitive, it also prone to lots of patent infringement litigation.
4. It's in an existing market where customer loyalties already exist with particular brands and companies. A good example is soda beverages, where Coke is the dominant brand with high consumer loyalty to their product. It's very difficult (if not impossible) to convince these customers to drink a different cola drink. This consumer loyalty enables Coke to capitalize on these customers with their other types of beverage products.
5. Existing companies dominate the distribution channels for your IP. Food is a good example. It's very difficult and expensive to get a new food product on supermarket shelves. Big food companies, such as General Mills, Kraft, and many others dominate the retail shelves. I worked with a client that invented a packaging and dispensing system for the professional hair salon market. Very large consumer products companies, such as L'Oreal and others, dominate this distribution channel. Rather than try to compete against these big players, it's better to license one of them.
6. Your IP is complex, requires a lot of R&D, regulatory approval, or rights to other outside IP, and makes raising capital difficult. Or your IP is in a technology area that's not favored by investors, such as semiconductors and consumer electronics.
7. You don't have a management team with experience and resources.
Keep these seven signs in mind when considering whether licensing is the right strategy for your IP. Timing is everything when it comes to licensing. Changing technology, customer demand, legal regulations, and a score of other things are constantly creating new windows of opportunity for your intellectual property.
If you're not sure, contact us today for a short consultation call. We'll discuss your IP and explore your licensing options.
Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies. His decades of experience run the gamut from medical devices to food technology to consumer products. He's licensed some of the biggest Hollywood entertainment blockbusters including the Batman Movies (1 and 2), and the number one kid's action TV show, the Mighty Morphin Power Rangers. Rand speaks about licensing and is a featured speaker at investment conferences, trade shows, colleges, and startup events. His first book, Hidden Wealth: The Money Making Power of Licensing was released in 2019 and is available on Amazon.com. He's also a published writer with articles appearing in several prestigious trade magazine including The Licensing Journal, Intellectual Property Magazine, and License India. Rand also mentors at the Cal State Fullerton School of Business and Economics and is a judge for their startup business plan competitions.