How to Work with Licensing Agents

If you're an intellectual property owner who is not familiar with the licensing process or you don't want to manage your own licensing program, then a licensing agent is a good option for you. Although an agent adds to the cost of a licensing program, they bring experience, know-how, and resources.

An agent provides critical licensing services including identifying new business opportunities, conducting due diligence on potential licensees, ensuring compliance with contract terms, facilitating the transfer of IP assets, monitoring quality control, and collecting royalty payments due.

Many licensing agents also offer consulting services to help you develop and position your intellectual property so it's attractive to potential licensees. I often work with clients to identify their IP assets and assist them in making sure their rights are secure. Then I create a licensing strategy that details the money-making opportunities for those IP assets.

Most licensing agents will want to be exclusive, meaning they are the only agent that can represent your IP. Commissions for licensing agents generally average between 30% to 40% of gross licensing revenue and may run as high as 50%. Agents require the IP owner to pay certain expenses such as trade show costs, costs of creating promotional packages and display and solicitation materials, travel costs and legal fees.

A minimum initial term of two or three years is typical since it often takes that long to develop a property, find licensees and begin to receive royalties. In addition, an agent will want an option to renew the agreement for one or more additional terms. Typical renewal options include automatic renewal, at agents option, or performance based on the agent achieving a certain amount of royalty income.

If the agent agreement term ends (and is not renewed) or terminates early, the IP owner will still have to pay commissions to the agent. Typically this includes all licensing deals completed and in “active negotiation” that close within a certain time, such as six months after the termination. Renewals and extensions are often paid at a reduced commission rate and can include a sliding scale (e.g., 40% for the first year after termination, 30% for the second year, and 20% for the remaining years).

Licensing agents(and most licensees) rarely get involved with raw idea concepts that are un-researched, unprotected, and untested. An intellectual property still in the idea stage is the wrong time to seek out a licensing agent. These idea concepts have little or no value. The right time to approach the licensing agent is with a ready-to-go IP, that is tested and has the necessary research to back up its true value.

A licensing agent will save you time, money and resources. Their expertise and knowledge of the licensing business can help you identify, manage and successfully generate revenue with your IP. More importantly, they keep you out of trouble and make sure you find the right type of licensing partner.