Much has been written about the decision tree to decide whether to exploit an idea yourself or let others do it, either exclusively, or together with you. We’re assuming here that you have already been through that and have decided that some form of licensing is your most advantageous business approach.
Licensing is a process by which you can let others exploit your ideas and still generate some income. The basics of licensing find their origin in patent law which conveys a certain “monopoly right” to the patent owner. The patent owner typically has invested a considerable amount of time and money in developing and perfecting his/her idea. A patent granted by the US Patent and Trademark Office (USPTO), allows the patent owner to exclude others from using this idea without his/her permission. Giving permission (typically for a fee or "royalty") is called “granting a license".
Ideas, designs, certain artwork, and creative writing, as well as your “secret sauce” can be protected from unauthorized exploitation by others by a variety of means. Ideas and inventions typically are protected by patents. Designs, artwork, trade names, etc. are most often protected by registered trade marks. Creative writing, including computer software, is most typically protected by Copyright. Trade Secrets are just that - a particular blend or concoction of ingredients known only to you and to those whom you authorize. Collectively, all these are referred to as “Intellectual Property” or IP, for short.
Granting a license is accomplished with an instrument called a License Agreement. Basic ingredients to such an agreement are some definitions of the licensor (you), the licensee (your customer), a “licensed product” (what it is you are allowing your licensee to make and/or sell), a description of the licensed technology, a delineation of the licensed IP, a section describing the fees involved and the payment schedules, a section detailing for how long the license lasts, as well as some general representations, warranties and disclaimers. When asking us for a quote please let us know the industry your technology is to be used in. Some published sample agreements for a variety of situations can be found on this site here.
From the variety of agreements on that site you get an idea of how complex the subject can become. As you can see, there is little commonality amongst any of these agreements. If you are contemplating licensing for the first time, it is probably best to let a professional guide you through the process.
Once you have negotiated a license and your licensee is ready to start, it’s time to set up some back-up infra-structure. Your licensee(s) may need some technical support, for example - how can you best provide that? You will need some means of verifying any reports and/or payments you get from your licensee(s). Estimating your resource requirements for all this can be daunting, but somebody who has done this before can help you with this as well.
For a little more more depth of analysis, please sign up for our free Licensing Fundamentals outline that should help get you started in at least asking the right questions.
