Are you someone who can come up with truly great ideas? Or are you someone who is better at what Stephen Keys describes as “the practical realities of running a successful product business, like manufacturing, distribution, and marketing.” Well, it doesn’t matter where you fall on the spectrum, either way, entering into a licensing agreement might be the easiest way for you to make money while doing the things that suit you most.
According to Keys, if you are the creator of the idea (i.e. potential licensor) you may be thinking, “’I’m the one that came up with this great idea, but now I’m only getting paid a tiny fraction of each unit that sells?’” However, as Keys highlighted, that is a futile attitude if you are not also willing to do the heavy lifting of bringing a product to market while simultaneously bypassing the opportunity for earning passive income.
Of course if you are the potential licensee, you will be able to get a cut of the profits for a really successful idea, all by capitalizing on your ability to bring dreams into reality. Because this is a win-win relationship, Keys believes you should think of the licensing relationship “as a partnership. One of the most significant benefits of partnering with a powerful licensee is getting [the] product to market faster, which is crucial in this day and age.”
Even with all these benefits, Keys believes there is one more positive reason why you should embrace licensing agreements: “is its ability to fend off me-too copycats. When a product is successful, others will try to copy it. It’s that simple. The more successful a product is, the harder others will try.” So, though a smart inventor would “have thought about potential workarounds before filing intellectual property….all the IP in the world isn’t worth much unless someone is willing to enforce it.”
Having a powerful partner can help you defend your assets, and help to prevent the possibility of copycat winning by simply tying you up in time and costs during litigation. That is why having a little backup via the licensing agreement is a very good idea. Even if it means you both share the costs of litigation, it’s better than doing it alone.
Though Keys did a good job of describing the benefits of the licensing relationship, before you enter into any such agreement, don’t forget to read our post about How To Get The Most Out of Any Licensing Deal.