Licensing an invention v Marketing it yourself

A dilemma for many inventors is deciding which exploitation road to go down. Do you aim to license the invention to a company for royalties, or drive it all yourself as a start-up venture? The circumstances of individual inventions and inventors differ so much that there is never going to be a one size fits all solution. General guidance is possible though, so here’s our take on the main factors you need to consider as an inventor.

Let’s get one thing out of the way first. In abettermousetrap.co.uk’s experience, inventions are more likely to succeed if the inventor manages his or her own project. That may seem like an argument against licensing, but read on.


Invention licensing


What’s good:

  • The licensee has (or should have) far more money, technology and other muscle than the inventor.
  • A licensing agreement should remove or reduce risk and cost to the inventor.
  • The invention becomes a product relatively quickly and gets into all the licensee company’s markets.
  • Even a small royalty per unit sold may add up to significant income.
  • A good long-term relationship with a good company is worth having, and can lead to other opportunities.
  • It’s less bother. The inventor is freed up to do more inventing, or whatever else he or she wants to do.


What’s less good:

  • Getting companies to consider a licence at all can be extremely difficult. Most inventions never get through the door.
  • Negotiation can be a slow and tortuous business – typically many months, during which companies drag their feet, shift goalposts, and not infrequently walk away at the last minute. (In fairness, some inventors can be difficult too.)
  • Time and effort spent chasing a licence could be time and effort spent getting the invention to market by other means.
  • The bigger the company, the smaller the inventor. The inventor’s ability to influence anything may be zero.
  • No matter how good an agreement looks on paper, it can soon become worthless if the company doesn’t perform, plays dirty or loses interest. We’ve blogged about this previously.
  • There may still be a lot of work involved for the inventor: chasing sales figures, checking royalties, dealing with IP matters etc. In a good relationship this is work well worth doing, but poor or evasive communication is a common complaint.


Inventor-led production and marketing


What’s good
:

  • It may be the only way the inventor can hope to succeed if no company shows interest in licensing.
  • Things happen more quickly. Or things happen, full stop.
  • The rewards can be much greater than from royalties.
  • The inventor is a driver, not a passenger, and learns a lot about business, which is A Good Thing generally.
  • Entrepreneurs are more respected than inventors! More doors will open.
  • Inventor-run businesses are often eligible for funding and support that isn’t available to inventors as individuals.
  • There is much more direct contact with customers and the market, so the inventor-entrepreneur can respond to changing demand and doesn’t depend on the original invention staying current.
  • Having a product that is selling puts the inventor in a much stronger position to seek licences from other companies.


What’s less good:

  • The risk can be enormous, and painful if it all goes wrong.
  • It’s highly demanding of the inventor’s time, nerve and relationships, so it isn’t a good option for every inventor.
  • Collaboration is vital, especially on shoe-string budgets, and inventor-entrepreneurs often report problems with designers, manufacturers and others who don’t share the vision.
  • The inventor may end up at the mercy of investors and business partners, and lose control of the invention.


Middle ground

Because most companies are indifferent to inventions, any inventor whose heart is set on a licensing agreement may have little choice but to start a business to prove that the invention can sell and is therefore worth a licence.

So: take your invention idea to a company and they probably won’t want to know. But take a product that’s selling, and they may be much more ready to discuss licensing possibilities.

There’s no easy way to decide which invention commercialization strategy to go for. But you’ve got to behave entrepreneurially to some extent – probably a large extent – even if your preferred end result is a licensing agreement. So your actual behaviour, if you really want to succeed, may need to be much the same whichever route you take.

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