Questions to Consider Before Licensing an Invention

Got a great idea that you think others will pay you to use? Before offering it up for licensing, ask yourself the following questions.

Did you invent a process that could save companies time? Did you create a machine that would revolutionize an entire factory? You might consider licensing your invention in exchange for royalty payments. Many inventors dream of the steady income stream that licensing can afford. But before you try to license your invention, you would be wise to consider the following questions:

1. Can you prove your ownership?
You can't license your invention unless you can guarantee your ownership. Ownership may be challenged by your employer, a coworker, a contractor, or another inventor. For example, imagine that you created your invention during work hours using company resources. Your employer might feel entitled to ownership of the resulting product, and consequently any resulting revenue. For more information, see Profiting From Your Patent FAQ.

2. Is your idea protected by law?
You will have little luck licensing your idea if it can't be protected under a legal principle such as a utility patent, design patent, trade secret, trademark, or copyright. An "idea" cannot be sold, since a mere idea is not protected. Without such protection, any competitor can freely copy your work. For more information, see Qualifying for a Patent FAQ,Copyright Basics FAQ, or Qualifying for Trademark Protection FAQ.

3. Have you researched prospective licensees?
Learn about the industry and the companies to which you are considering licensing your invention. One of the worst mistakes you can make as an inventor is to solicit a company blindly, without knowledge of that company or the overall industry. Be sure that the company or industry is not already widely using your invention, or a better version of it. This will save you time and grief.

4. Can you demonstrate your idea?
A licensee is unlikely to sign an agreement unless he or she is convinced that your idea actually works. Do you have a prototype? Can you provide a convincing demonstration? If you don't have a prototype, can you make a convincing presentation using sketches or computer models? Remember, you must be half inventor and half showman!

5. Do you have a nondisclosure agreement?
Unless a patent has issued for your idea, it's best not to disclose it without a nondisclosure agreement. If you meet with a company executive and tell him or her about your invention without any sort of protection, the exec might decide to develop the invention without your involvement, much less payment. One way to prevent this from happening is to force the company to sign a non-disclosure agreement before the meeting in order to secure your ability to sue, should the company decide to take the idea you presented in the meeting. For more information, see How to Protect Your Invention When Pitching It.

6. Can you sell your idea effectively?
Business people are oriented towards the bottom line, so review the costs and commercial potential of your invention before pitching it. Your invention might be your baby, but to someone at a large company, it's just another unsolicited product. If you can't pitch your invention aggressively, find someone who can. If you are not a persuasive salesperson, consider affiliating with a business person or an agent.

7. Have you considered branding?
A raw invention can be enough to convince a company to enter into a licensing agreement, assuming you have created a helpful and unique product. However, you might also consider other aspects of branding before engaging companies to license it. Does it have a catchy name? Is that name trademarked? What about a logo? Did you print glossy brochures to explain the product in the pitch meeting? Do not underestimate the importance of savvy branding.

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