by the U.S. Department of Energy Publication #DOE/GO-10098-667, October 1998, 33 pages. Note: You can obtain a free copy of this publication by mail or faxing (202) 586-1658 at: U.S. Department of Energy, Att Marilyn Burgess EE-20, OIT Resource Center 5F-064, 1000 Independence Ave SW, Washington, DC 20077-5650. Description: "Licensing Intellectual Property, A Primer (Booklet) 33pp". Order No: DOE98-IIPI. Only one copy per customer. Note 07/06: This publication is now available online at www.eere.energy.gov/inventions/docs/license.pdf
If you are an independent inventor or a small business owner, you might assume a free, short (33 pages) government publication is not a serious source for information about licensing and not worth your time. However, in the case of this publication, your assumption would be in error. It is jam-packed with authoritative information provided by the Licensing Executives Society (LES) and it is presented in plain English and without legal gobbledegook.
The Introduction notes that licensing is complex and not a quick and easy process. The biggest factor causing this complexity is that independent inventors and small businessmen find themselves dealing with people who speak virtually a different language and have different expectations.
To talk successfully with these people, the inventor or entrepreneur must tell what they want and what they have to offer in a manner that indicates they understand the industry involved. Also, that they are familiar with the market imperatives and that they can provide market, technology, and product information that is realistic and that is based on thorough research. The small firm or inventor must also seek out those best suited to make their product, process, or service a success in the marketplace.
The publication is divided into four areas: what licensing is, deciding to license, finding a partner, and negotiating a licensing agreement.
Chapter One, "What Licensing Is", defines the terms involved, such as license, licensing agreement, and intellectual property. It notes that there has been a tremendous growth in licensing in the past twenty years. To share in this growth, you must have a business strategy. It stresses the evolutionary nature of your effort. Finding a licensing partner requires ever more gathering, organizing, and analyzing of information.
The one best bit of advice you must heed is to "do your homework". Know the language of the business and the industry that your technology, product, process or service fits. Another fundamental is "explore your options widely". An example cited is a candy taffy machine that was found to employ a principle that could be applied in designing a concrete mixer!
Chapter Two, "Deciding To License", concerns itself with the "fundamental question -- is it worth it?". Among the interesting points brought out in this chapter are that some firms will pay considerable amounts of money, in order to prevent an invention from coming to market. Another interesting fact that it cites is that as a general rule 25-33% is the licensor's share.
This chapter also cites several cautions. For example, if you license too much of your technology you may, over time, be putting yourself out of business. Also, make very sure to protect your intellectual capital properly and don't give away portions of it as some may think twice about its value. Never forget a license negotiation is a legally-binding agreement. "Go alone at your peril."
The chapter lists and discusses 11 industry factors, such as life cycles and market buying characteristics. It also lists 13 elements for evaluating potential markets. It discusses sources of information such as libraries and trade associations. It stresses the importance of carefully listening to people in the industry.
Quite often inventors are not "people persons" and fail to realize one good conversation with someone experienced in the industry may yield more vital information than weeks of library or publication research. It discusses three common mistakes often made early in the licensing game: rushing product development, thinking licensing will save a failing business, and failing to properly market the technology.
Chapter Three, "Finding a Partner", notes that the farther along your technology is, the more attention it will attract. A prototype that can be tested reduces the perceived risk. Six other factors that affect your intellectual property's value are discussed. One is that a patent application written in plain English improves your chances.
The writers discuss ten common characteristics of industry that will aid you in understanding industry. Five factors regarding markets within an industry are examined. Seven reasons why customers buy a technology or product are reviewed. Partner qualification is commented upon and we are reminded licensing to the wrong firm can be disastrous. A warning is given to never sign anything in the early stages, except possibly a confidentiality agreement.
Chapter Four, "Negotiating a Licensing Agreement", makes the point that your agreement is "a complex, legally-binding document that should be written and reviewed by experienced hands". Some 13 areas concerning typical licensing are given and 53 specific points listed. The importance of carefully defining terms is cited and it is vital to have a termination clause -- not only from the bad-faith standpoint, but to cover unanticipated conditions that may arise.
Two case studies are given in the appendix.
This short publication is like costly pure maple syrup which is produced by boiling down a great deal of raw material. However, here your cost is only the postage stamp needed to request a free copy.