Jul 09
29
Negotiating a License Deal
What does it take to get a new product licensed? The following is excerpted part 3 of a 6-part series published on CrunchGear, by Chris Hawker, about his adventures (and misadventures) getting his inventions to the consumer market.
Even if you are not an inventor, this is a practical, real-world, inside look at what it takes for an entrepreneur to persevere and succeed.
Here is the excerpt:
The key terms to negotiate in a patent license are royalty rate (typically 2 to 6 percent of gross revenue for products), annual minimums (important in case the product doesn’t sell), upfront monies (which licensees hate), and length of deal (you want a chance to renegotiate after a few years if you get a homerun!). Of course, there are other points to be negotiated, and the language of each can be argued, too. The final document can be more than 20 pages, so there is plenty of opportunity to run up a large legal bill. But if you can agree on the first four points, you can agree on the rest.
The royalty rate and term discussions are relatively straightforward, but it is difficult to argue for upfront fees or annual minimums unless the product has an established history. Therefore, you really have to guess and see what the market bears.
Click the link to read The Inside Story of the Life of an Invention, Part 3, as well as the entire 6-part series.
