Fast-growing industries offer a great licensing opportunity. One example is the cannabis industry which is quickly growing as states legalize recreational and medical use. To meet the skyrocketing demand, companies are scrambling to find new technologies for production and delivery of cannabis in all forms from medicinal purposes to edible products.
One small company licensed a patented technology for nasal delivery of cannabis oil. Another company licensed a dehydration and decontamination production system for cannabis. Neither of these companies had any technology to capitalize on this market. Instead of trying to develop something internally, they licensed in technologies enabling them to quickly enter the cannabis market.
That's one of the most effective ways of using licensing. Rather than spending all your time and money on risky internal development, licensing a market-ready technology gets you into the market faster and generating revenue sooner.
So how do you find the right licensing opportunities? It takes time to find the right intellectual property. It's a dynamic process, that requires being active in the market looking for the right licensing opportunity.
For some of my clients, I operate as their “eyes and ears” and help them find IP to license in. I've worked with several clients who wanted to license popular movie franchises. This is a tough IP to license because these properties are often locked up in long-term licensing deals between the studios and large manufacturers. But sometimes, we were there at the right time, and licensed rights to a new product category and territory that was just opening up.
But finding an IP is only the first part. The next part is making sure the IP rights are free and clear, and understanding what's included in the license. If you fail to ask the right questions, you can wind up with an IP that costs you more than just a licensing fee.
The first question is verifying the IP owners do in fact own the IP. Do your homework. If it's a patent, do a patent search to confirm its ownership, that all the maintenance fees are current, and there are no infringement actions. Before licensing a brand, make sure the trademark is registered for the products or services you're seeking to license, and the IP owner isn't in a dispute with a licensee or someone else.
Second is understanding exactly what rights the license includes. If it's a patent, what is the technology and does it need know-how? For example, a new patented product requires the manufacturing know-how to produce it. If this know-how isn't part of the rights, you'll be unable to make and sell it. If it's a movie or a TV show, does it include the use of character or celebrity images? If you don't find out exactly what components or pieces of the IP will be included in the license, you can wind up missing the most critical parts for commercial success.
The third is what is expected of you as a licensee. Are you on your own or will the IP owner offer support? You must really understand what you're getting into. For example, a big entertainment studio or consumer products brand will sometimes give support, such as retail programs, and sometimes they won't. You must take this into consideration. Is this a brand or a technology you can develop on your own, or is support for the IP owner critical to succeeding in the market.
One of my clients faced this issue when we licensed one of the big auto brands. The agent representing it told us “The company offers no support. You're on your own. Here's the license. There's no advertising, no promotion, no nothing.”
It was surprising the licensor didn't offer any retail support, such as buyer introductions, or a retail program for cross promotions with other licensed products. But their position was the brand was so big and well-known they didn't have to offer anything beyond the license rights.
That's a good example of what can occur. When this happens, it's a critical issue that is the difference between success or failure in the marketplace. Especially if you've got limited financial resources to market and promote the IP.
Licensing in market ready IP is a great strategy to capitalize on new fast-growing markets. It requires staying active in the search to find the right type of IP and licensing opportunity. Be sure to verify the IP ownership and confirm what rights are included. Most important, be sure to find out what support the IP owner is providing so you know exactly what you're getting into before you sign the licensing agreement.
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.