Negotiating a mutually useful 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 might truly be fairly pleasurable. That mentioned, negotiating any contract is tough at greatest. Even for probably the most seasoned professionals, negotiating a licensing settlement isn’t straightforward.
After negotiating about 30 of my very own licensing agreements, and serving to a whole bunch of others do the identical in my position as cofounder of the inventRight program, I wish to suppose I’ve discovered a factor or two. However, nonetheless, I used to be bowled over and delighted by the information and techniques I lately discovered from Benjamin Kwitek, inventor and Director of Innovation on the College of Colorado, Colorado Springs.
He has signed greater than 20 licensing agreements masking about 250 patents, together with his innovations 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 all over the world advocating for innovation, entrepreneurship, and the democratizing energy of mental property.
I used to be particularly thinking about discovering how Kwitek had managed to license the identical product — a gentle, ergonomic pen grip — to many opponents, amassing over 100 million models offered.
Amongst his different licensed innovations available on the market? A way for manufacturing a conveyable cinnamon roll offered in Taco Bell and lots 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 give attention to the best way to negotiate non-exclusive licensing agreements particularly.
Whatever the particular sort of contract or settlement you’re negotiating, I imagine you can see nice worth in his perspective and recommendation.
Stephen Key: “Ben, it seems such as you have been in a position to license the identical invention to a number of firms. Is that true? I am actually curious how you probably did that.
Benjamin Kwitek: Sure, it’s. Virtually solely, 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 must, so take the deal.’
Then, you employ that [first deal] as leverage or as momentum once you strategy the following firm. There’s loads of copycat habits available in the market. So, if it is ok for Apple, it is most likely ok for Samsung or Microsoft. As soon as you will get one firm in your nook, then you may play them off one another in a modified mother or father entice 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 they usually finally instructed me that they weren’t . After they got here out with a product that utilized my expertise, 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 massive 5 tobacco legislation corporations. They’d loads of sources, they have been a bit loopy, they usually have been from Texas. Do not mess with Texas as they are saying. They favored 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 extremely onerous time, saying, “Did you fly industrial? We simply took the company jet right here.”
These New York attorneys making a $1,000 an hour should 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 change 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 might name them and go to lunch with them. Whereas, after I began, I needed to be just a little bit extra adversarial. What I discovered alongside the way in which has helped me to create extra win-win agreements.
Steve: How do you set the proper tone?
Ben: Ideally, you get a heat intro from somebody, so that they belief you extra to start with as a result of they know that you recognize somebody in frequent, mainly. This helps form their notion of you as an innovator who has accomplished 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 an important a part of a licensing settlement for you?
Ben: There are three issues which might be critically vital in my thoughts. One, the monetary elements. So, ensuring that I’ve created the most effective deal doable to maximise income coming again to me. Two is ideally non-exclusivity, in order that I’ve obtained 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 obtained firm B within the wings.
Three, I attempt to have the proper to reveal them to different potential licensees – usually beneath an NDA. If I can name ACME Tech Firm and say in that first name, “I’ve licensed this portfolio to Google,” they have a look at me fully in a different way than if I say, “I’ve obtained these concepts and I believe they are going to 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 discuss to another person concerning the expertise.
Steve: However not the juicy particulars.
Ben: Appropriate. And in some methods, that works to my benefit, as a result of if you happen to inform somebody that Google licensed your patent, they might assume it is for far more cash than it truly was, as a result of it is Google and it’s straightforward to go looking how a lot revenue they make.
Steve: What do you do to get the best worth for the product you are pitching?
Ben: It is completely different in each scenario, and it usually depends upon what rings the bell of the corporate that is going to license it. If they seem to be a very aggressive firm, one of many drivers I take advantage of is displaying them what their product or providing seems like in comparison with their opponents. 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 stay with, however that additionally secures what I need. And once more, that’s not at all times 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 attention-grabbing. I need 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 opponents 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 can provide them a greater deal as a result of you are going to amortize the associated fee with another firms, 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 if you happen to can play up the lead and scale 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 obtained 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 will be the primary winner with a extra superior product.”
Steve: Properly, Ben you’re actually a intelligent man.”
Many individuals don’t need to be the primary. There may be quite a lot of energy in having 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 proper to inform others in your licensing settlement is a superb tip, as a result of now you may leverage your first contract to acquire your second.
Further strategies that can assist you license the identical invention a number of instances
— Search out completely different classes for licensing consideration.
Does your invention have completely different purposes? In all probability. This is a chance so that you can dream and picture. I licensed the identical primary thought — that of a rotating label — throughout many alternative classes, together with back-to-school, housewares, and promotional merchandise, by utilizing my creativity and specializing in the innovation.
This fashion, your licensees don’t instantly compete.
— License your invention to a producer that provides a number of industries.
Licensing my packaging expertise to CCL Label, a label converter, was the present that stored on giving, as a result of they solid 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.
A lot of the seasoned skilled inventors I interview negotiate their very own licensing agreements, which makes loads of sense, as a result of negotiations are a key step in constructing a relationship. It’s gentle expertise that finally get these offers accomplished, since you’re coping with individuals.
When you’ve by no means negotiated a licensing settlement earlier than, please, do your self a favor by working with somebody who has loads of expertise. They are going to allow you to keep away from leaving cash on the desk.
To be taught extra about the best way to negotiate a licensing settlement from a enterprise perspective, learn “What You Want To Negotiate With The Largest Firms On Earth.”