Negotiating a mutually helpful licensing deal requires information, apply, persistence, and time. Based mostly on my expertise teaching inventors, most of us don’t get pleasure from it. Which is unlucky, as a result of negotiating is each an artwork and a ability — and may truly be fairly pleasurable. That stated, negotiating any contract is troublesome at greatest. Even for essentially the most seasoned professionals, negotiating a licensing settlement isn’t straightforward.
After negotiating about 30 of my very own licensing agreements, and serving to tons of of others do the identical in my function as cofounder of the inventRight program, I prefer to assume I’ve realized a factor or two. However, nonetheless, I used to be stunned and delighted by the ideas and methods I lately realized from Benjamin Kwitek, inventor and Director of Innovation at the University of Colorado, Colorado Springs.
He has signed greater than 20 licensing agreements overlaying about 250 patents, together with his inventions in addition to portfolios he manages for different inventors and ventures.
On the College, he works with college students to assist them commercialize their concepts. He travels around the globe advocating for innovation, entrepreneurship, and the democratizing energy of mental property.
I used to be particularly concerned about discovering how Kwitek had managed to license the identical product — a comfortable, ergonomic pen grip — to many rivals, amassing over 100 million items bought.
Amongst his different licensed inventions on the market? A way for manufacturing a transportable cinnamon roll bought in Taco Bell and plenty of different locations.
A significant takeaway from our dialog is that each potential licensee has particular wants, and the easiest way to barter is to seek out out what these wants are. We concentrate on find out how to negotiate non-exclusive licensing agreements specifically.
Whatever the particular kind of contract or settlement you’re negotiating, I imagine you will see that nice worth in his perspective and recommendation.
Stephen Key: “Ben, it appears such as you have been in a position to license the identical invention to a number of corporations. Is that true? I am actually curious how you probably did that.
Benjamin Kwitek: Sure, it’s. Nearly completely, my licensing contracts have been non-exclusive.
Steve: How did you do this? As a result of that is not straightforward.
Ben: No, it is not straightforward to do. A pair preliminary offers flowed from some patent litigation. The take care of that was, ‘You get a non-exclusive, however that is all you are getting. I am going to struggle longer and more durable if I have to, so take the deal.’
Then, you utilize that [first deal] as leverage or as momentum while you strategy the subsequent firm. There’s quite a lot of copycat habits out there. So, if it is adequate for Apple, it is most likely adequate for Samsung or Microsoft. As soon as you may get one firm in your nook, then you’ll be able to play them off one another in a modified father or mother lure and get extra to enroll in the license.
With regard to the pen grip product, the primary licensing deal truly got here out of the litigation. I attempted to license to them unsuccessfully for a very long time and so they in the end advised me that they weren’t . Once they got here out with a product that utilized my know-how, I approached them once more. They simply ignored me this time, not surprisingly.
Then I discovered a legislation agency in Texas that had been one of many large 5 tobacco legislation corporations. That they had quite a lot of sources, they have been a bit loopy, and so they have been from Texas. Do not mess with Texas as they are saying. They appreciated me sufficient to take the case on contingency and put high quality sources behind me.
I bear in mind we flew to a listening to in Beaumont, Texas, and as a substitute of flying into Houston after which driving over, we took one in all their personal jets. I bear in mind my council giving the council from New York a very exhausting time, saying, “Did you fly business? We simply took the company jet right here.”
These New York attorneys making a $1,000 an hour will need to have been considering, “How is it that this insignificant inventor from Colorado is flying right here on a company jet?”
Ben: Over time, I’ve turn into extra refined at creating working relationships with the businesses I do licenses with. For instance, proper now, I am very pleasant with my licensees. I may name them and go to lunch with them. Whereas, after I began, I needed to be a bit bit extra adversarial. What I realized alongside the way in which has helped me to create extra win-win agreements.
Steve: How do you set the suitable tone?
Ben: Ideally, you get a heat intro from somebody, in order that they belief you extra to start with as a result of they know that you realize somebody in frequent, principally. This helps form their notion of you as an innovator who has performed offers – somebody who will get it.
Then, I believe you instantly set an empathetic tone by saying, “Hey, hear, I perceive the place you are coming from. This is the place I am coming from. If we do that correctly, let’s discover a win.”
Steve: What’s a very powerful a part of a licensing settlement for you?
Ben: There are three issues which might be critically vital in my thoughts. One, the monetary facets. So, ensuring that I’ve created the perfect deal doable to maximise income coming again to me. Two is ideally non-exclusivity, in order that I’ve bought the flexibility to go to others with the identical invention. That manner, I get one other chunk on the apple. Even when I depart cash on the desk with firm A, I do know I’ve bought firm B within the wings.
Three, I attempt to have the suitable to reveal them to different potential licensees – typically below an NDA. If I can name ACME Tech Firm and say in that first name, “I’ve licensed this portfolio to Google,” they take a look at me fully in another way than if I say, “I’ve bought these concepts and I believe they’ll be big.”
Steve: You need to have the ability to leverage the connection earlier than the product launches.
Ben: Sure, earlier than it launches. As quickly because the settlement is signed, I can then speak to another person concerning the know-how.
Steve: However not the juicy particulars.
Ben: Right. And in some methods, that works to my benefit, as a result of for those who inform somebody that Google licensed your patent, they could assume it is for far more cash than it truly was, as a result of it is Google and it’s straightforward to look how a lot revenue they make.
Steve: What do you do to get the very best worth for the product you are pitching?
Ben: It is totally different in each scenario, and it typically is determined by what rings the bell of the corporate that is going to license it. If they are a very aggressive firm, one of many drivers I exploit is exhibiting them what their product or providing appears like in comparison with their rivals. So, you pitch it nearly like an advert company at that time.
For others it is, what’s extra vital to you, time, or cash? I discover an equilibrium that they will reside with, however that additionally secures what I would like. And once more, that’s not all the time straightforward since you’re making an attempt to get of their heads to seek out out what it’s that is motivating them.
Steve: That is actually fascinating. I wish to get again to non-exclusivity for a second. Will you clarify the way you negotiate non-exclusive licenses? In any case, that first licensee is investing their time, cash, and power in your product. And you are going to go to their rivals after they develop a marketplace for it? You are loopy!
Ben: You have to be within the relationship and attempt to have a rationale as to why that is vital. You may give them a greater deal as a result of you are going to amortize the price with another corporations, however they get it first.
I believe there are two levers there: How a lot you are paying and the way a lot of a lead you have got. And for those who can play up the lead and cut back the cash, that makes it extra interesting.
Steve: Okay. However let’s say now I am that competitor. You gave it to the opposite man first, and he is bought a lead on me. He is branded. Everybody is aware of that model. How do you overcome that argument?
Ben: With the second participant, you say, “Your competitor has demonstrated there is a marketplace for this, however you are able to do it higher. You do not have to be the primary mover; you may be the primary winner with a extra superior product.”
Steve: Nicely, Ben you’re actually a intelligent man.”
Many individuals don’t wish to be the primary. There may be an excessive amount of energy in with the ability to inform a possible licensee that one other firm has sufficient confidence in you and your invention to maneuver ahead. Together with the suitable to inform others in your licensing settlement is an excellent tip, as a result of now you’ll be able to leverage your first contract to acquire your second.
Extra methods that can assist you license the identical invention a number of instances
— Hunt down totally different classes for licensing consideration.
Does your invention have totally different purposes? In all probability. This is a chance so that you can dream and picture. I licensed the identical fundamental thought — that of a rotating label — throughout many various classes, together with back-to-school, housewares, and promotional merchandise, through the use of my creativity and specializing in the innovation.
This manner, your licensees don’t instantly compete.
— License your invention to a producer that provides a number of industries.
Licensing my packaging know-how to CCL Label, a label converter, was the reward that saved on giving, as a result of they cast offers to have my invention seem on all kinds of merchandise. That’s how my Spinformation rotating label ended up on nutritional vitamins, nutraceuticals, liquor, water, tea, and extra.
Many of the seasoned skilled inventors I interview negotiate their very own licensing agreements, which makes quite a lot of sense, as a result of negotiations are a key step in constructing a relationship. It’s comfortable expertise that in the end get these offers performed, since you’re coping with individuals.
In the event you’ve by no means negotiated a licensing settlement earlier than, please, do your self a favor by working with somebody who has quite a lot of expertise. They’ll provide help to keep away from leaving cash on the desk.
To study extra of the methods that serial inventors use to commercialize their innovations, learn my interviews with Dr. Gary Michelson and Woody Norris.
To study extra about find out how to negotiate a licensing settlement from a enterprise perspective, learn “What You Want To Negotiate With The Largest Corporations On Earth.”