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Phases of Product Development: Licensing Phase
Preparation To Engage
Once the engineering is complete, the cost of tooling and producing in place, and
a patent filed for and marketing research complete, we will be positioned for the
licensing campaign. In this phase, our staff and/or attorney will prepare:
- A non-confidential executive summary for the initial contact with potential
licensees. This summary will briefly describe the advantages and attributes
of the concept without disclosing any pertinent details.
- An industry standard Confidential Disclosure Agreement (CDA).
- A presentation package, which usually includes, but will not necessarily be
limited to, the following:
- Concept illustrations, demonstration video, picture and/or
a prototype
- Detailed summaries of the market research findings
- Status of intellectual properties (i.e., patents, trademarks,
and copyrights)
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Engage Potential Licensees
After the above items are complete, a member of our staff will be
designated as project director responsible for initiating contact
of selected companies identified in the Target Company Search. In
this phase, through personal and/or telephone interviews we will
determine:
- Their attitude toward licensing
- If there is a "not invented here" (NIH) problem
- Their criteria for new idea submissions
- Their share of the market, if available
- An "intuitive entry point" and route to the licensing director
- Their licensing policies and protocol
Once we have obtained this information and qualified the potential licensees, we
will send the Executive Summary and CDA to the person responsible for new
product submittals. We will follow up the submittal until we receive the signed
CDA, or at 10, 30, and 45 days. Upon receipt of the CDA, we will forward the
presentation package. This will be followed up on the same basis as outlined
above.
Presentations To Licensees
After a definite interest has been established with the potential licensee(s), we
will begin collaboration for the purpose of TRANSFERRING the concept per the
terms outlined in our AGENCY AGREEMENT. This process usually involves the
following:
- Agreeing conceptually to the methodology and approach (including a
formula to determine royalties) to be used in the TRANSFER.
- Reducing verbal agreements to a draft of a non-binding LETTER OF
INTENT.
- After terms in the draft are agreed upon executing, the LETTER OF INTENT
by our clients and the potential licensee(s).
- Reviewing and approving of their developmental plan.
- Scrutinizing of the values placed on the elements in the formula, such as
cost of goods, cost of sales, etc.
- Determining the scope, breadth, and extent of their manufacturing and
distribution capabilities.
Once this has been completed, we will determine the components to be
deliberated in the licensing agreement. The most critical points to consider are:
- Cash to offset developmental cost. This could include, but not be limited to,
development of their prototype, patents, trademarks, copyrights, marketing
research, etc.
- Exclusive or non-exclusive rights
- Royalty rate
- Minimum royalties
- Foreign filing and registration responsibility
- Due diligence to market
- Payment criteria
- Exit strategy if marketing stops
- Infringement enforcement responsibilities
- Hold harmless
- Product liability responsibility
After this, we will negotiate and execute the Licensing Agreement per the terms
and conditions our clients agree on.
Needless to say, we will attempt to negotiate the agreement for maximum royalty
to our mutual benefit, assuming we are working with the client on a
revenue-sharing basis.
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