Posted by: Robin Gronsky | May 1, 2012

Licensing Your Idea for a New Product

There are lots of inventive people out there who are thinking up ideas for new products and changes to existing products that make them better.  These inventors think that they have to create a prototype of their invention (at a hefty cost) and then spend the time and money to patent their invention (spending yet more money) and then they try to find their market.  You can cut some of the time and money out of this scenario by licensing your idea to a manufacturer.

Licensing is renting out your idea to someone else who will take your idea and transform it into a product, and then market and sell it to the public.  The licensing agreement that you will sign with the manufacturer will specify how much you will receive as a royalty on each item that the manufacturer sells.  The royalty is your payment for your idea.  If the manufacturer can sell thousands of your item, you can make a tidy sum of money.  If your idea is huge, you can make millions 

The smart move is to spend as little time and money as possible on your invention before you start talking to manufacturers.  You need to find out whether there is any interest from someone who will pay you money.  If your idea is difficult to manufacture or there doesn’t seem to be enough of a market out there for someone to make a lot of money, they won’t agree to license your idea.  And you won’t have spent months building a prototype and thousands of dollars filing for a patent for a product that may never be successful.

Before you talk to any manufacturers, you want to file a provisional patent application, which costs less than $200 (and you don’t necessarily need a patent lawyer).  This gives you a year to shop your idea around and you now have a “patent pending.”  The provisional patent application also keeps someone from stealing your idea.  You may want to have a patent lawyer review your application before it gets filed.  If a manufacturer tweaks your idea before licensing it, you need to file a new patent application but you can negotiate your licensing agreement to have the manufacturer pay the patent attorney and filing fees.

You may face a lot of rejections from manufacturers before you find one that will license your idea.  It’s a numbers game.  The more of a market for your idea there is, the more likely you are to find someone to want to license it.

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