What Are Invention Licensing Companies and How Do They Work?

What Are Invention Licensing Companies and How Do They Work?

inventor meeting with licensing company

With the help of Elite Inventions, you can access the benefits of partnering with an invention licensing company

Invention licensing companies are critical in helping entrepreneurial inventors bring their innovative ideas to market. These organizations provide valuable resources and expertise that guide an inventor through the complex process of successfully licensing their product’s patents. In this blog post, we will explore the various aspects of working with invention licensing companies—from perfecting your idea to negotiating royalty agreements.

We will discuss how these firms assist in determining marketability, protecting intellectual property, and navigating patent requirements. Furthermore, you’ll learn about identifying target industries for potential licensees and conducting thorough background checks on them.

Lastly, we’ll explore the costs involved in licensing an invention—including free submission opportunities and rev-share deals—as well as tips for finding suitable partners to license your product. We will also cover royalties for licensed inventions by examining factors affecting royalty rates and industry-specific considerations.

The Role of Invention Licensing Companies

A licensing company will assist you in bringing your product to a wider audience

An invention licensing company will help you perfect the invention, determine its marketability, and protect it under patent laws. They may also provide feedback on your invention in an effort to prepare you for a future licensing deal. By granting a license to a company that can manufacture and sell your invention, you become the licensor and receive royalties while someone else takes on production responsibilities.

Perfecting the Invention

Licensing companies work closely with inventors to refine their ideas and develop prototypes. This type of collaboration between the inventor and the licensee helps ensure that the final product is both functional and appealing to potential customers.

Determining Marketability

To successfully license an invention, it must have strong commercial potential. Licensing companies conduct thorough market research to identify target audiences for products, analyze competitors’ offerings, and determine pricing strategies for maximum profitability. If your invention is deemed viable, there is a better chance you will get offered a licensing deal.

Protecting Intellectual Property

  • Patents: Licensing companies can provide guidance on filing patent applications and enforcing patent rights against infringement by others.
  • Trademark Registration: Registering trademarks associated with your product will safeguard ownership rights over branding elements such as logos or slogans used within marketing materials.
  • Intellectual Property Protection: Licensing companies help with intellectual property protection to ensure that your product’s patents are secure and that you can collect royalties.

Getting Your Invention Licensed

Want to license your invention? Make sure it has a “wow factor” and is patented to protect your intellectual property

It is important that you do not approach licensing opportunities until your invention is completely fleshed out. Licensees want to see products that have potential but need to be refined. If you are just beginning the prototyping process, you are not yet ready to license your invention to a brand or distributor. 

Patent Requirements

Enforcing patent rights is crucial to protect your intellectual property, so make sure to obtain a patent for your product before seeking potential licensees.

Identifying Target Industries

Focusing on specific industries, such as toys, pet products, gardening tools, and outdoor activities, will improve your chances of finding suitable partners interested in licensing agreements.

Conducting Background Checks

  • Analyze Company Track Records: Research each prospective licensee’s history in dealing with inventions similar to yours.
  • Evaluate Industry Trends: Assess how receptive certain industries are towards new innovations from small businesses or individual entrepreneurs.
  • Determine Market Leaders: Identify large market leaders who may be more inclined to acquire distribution rights through licenses instead of developing their own competing products internally.

Quarterly royalty checks and periodic royalty payments can be yours if you play your cards right and license your invention efficiently.

paying for licensing

Costs Involved in Licensing an Invention

Don’t let costs deter you from licensing your invention, but be aware of potential expenses

Getting an invention to just the prototyping phase can be expensive. That’s why when you consider licensing your invention, you need to be aware of the possible additional costs. However, there are also free submission opportunities! Let’s take a look at some of the costs associated with licensing an invention.

Free Submission Opportunities

Take advantage of free submission opportunities offered by invention licensing companies to showcase your invention and connect with potential licensees.

Rev-Share Deals

Entrepreneurial inventors can benefit from revenue-sharing agreements with larger market leaders to maintain ownership rights over their intellectual property while partnering with strong distribution channels.

Additional Potential Costs

  • Patent Fees: Filing for a patent can cost anywhere between $5,000 – $15,000+, depending on complexity and scope.
  • Attorney Costs: Working with an attorney specializing in intellectual property protection during negotiations or enforcing patent rights against infringers can incur additional expenses.
business meeting with potential licensees

Finding Companies to License Your Product

Thorough research and analysis are essential when looking for suitable partners to take your innovative ideas toward commercial success

When you partner with an invention company like Elite Inventions, we will help you find the right partner to license your product.

Research Potential Partners – Look for businesses in relevant industries with a history of successfully licensing products or collaborating with inventors.

Assess Company Track Records – Analyze each prospective licensee’s track record in product development, marketing efforts, and intellectual property protection.

Analyze Industry Trends – Stay current by attending trade shows or subscribing to relevant newsletters and magazines.

Royalties for Licensing Inventions

Inventors have the potential to make money by partnering with invention licensing companies

Negotiating an equitable royalty fee, reflective of the worth of your intellectual property, is essential when granting a license for your invention.

Factors affecting royalty rates

Market size, product patents, potential licensees, and industry norms can all influence royalty rates. According to IP Watchdog, strong intellectual property protection can lead to more substantial royalty payments.

Negotiating fair agreements

Entrepreneurial inventors should be prepared to negotiate terms that benefit both parties. This includes determining an appropriate percentage of net revenues or periodic royalty payments based on projected sales figures and other pertinent information about their invention.

Industry-specific considerations

  • Toys: Inventor-for-royalties licensing deals are common in this sector, with typical inventor royalties ranging between 5% – 10% of wholesale prices.
  • Pet Products: Royalty rates tend to fall between 4% – 8%, but they can be higher if the licensee obtains unlimited exclusive license rights or assumes responsibility for enforcing patent rights against competitors.
  • Gardening Tools: These products often see royalty rates of 5% – 7%, with quarterly royalty checks being the standard payment method.

FAQs About Invention Licensing Companies

How to License an Invention to a Company

Perfect your idea, protect it with a patent, create a compelling presentation, research potential partners, submit your idea, and negotiate royalty agreements.

What Are the Royalties for Licensing Inventions?

Royalties vary depending on industry standards, product type, market size, and projected sales, typically ranging from 2% to 10% of net sales or gross profit margins.

License or Manufacture Your Invention?

Licensing allows inventors to earn royalties without managing production and marketing. However, it may yield lower profits than self-manufacturing/marketing. Consider financial resources, entrepreneurial drive, and risk tolerance levels before deciding.

What Is a License for a New Invention Called?

An exclusive or non-exclusive patent license agreement is a license granted by an inventor allowing another party (licensee) to use their patented technology or innovation.

As an inventor, licensing companies are a valuable resource to bring your ideas to market, perfect your invention, determine its marketability, and protect your intellectual property. However, it’s important to keep in mind the costs involved in licensing and to research potential partners carefully before submitting your ideas for review. To increase your chances of success, understand patent requirements, demonstrate the “wow factor,” and negotiate royalty agreements when working with licensing companies. Ultimately, the decision to license or self-manufacture/market your product is up to you, but weighing all factors is crucial before making a choice.

Elite Inventions will help you find a licensing partner for your invention and will assist in the negotiation process to get you the best possible deal.

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