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Knowledge Center Idea Generation Intellectual Property Market Research Commercialization Prepare for Commercialization Option Number 1: Licensing Option Number 2: Venturing Mentoring and Incubators Publications and Links on Commercialization Funding Publications
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Option #1: Licensing

Licensing involves granting others certain rights to your technology. The terms of any licensing agreement can be totally negotiable—there's nothing that dictates what you and/or a willing licensee has to do or include as part of the agreement. The important thing is to formalize the terms in the form of a contract or other legally binding document.

There are several different ways to approach the licensing option:

  • One approach is to make an outright sale of all your rights in a technology to another party. While the terms of any such arrangement can be negotiated, this approach means you would most likely be giving up any future rights to the technology or its use. In exchange, you would receive something you regard as being of equal value—usually one or more monetary payments.
  • Another approach is to enter into an exclusive licensing agreement with a single party. You would still retain ownership of the technology, but grant the other party certain rights to use or otherwise derive value from the technology. In exchange, you would likely receive royalty payments based on some agreed-upon measure—e.g., number of units produced; number of units sold; some percentage of gross profit. An exclusive licensing agreement might be:
    • truly exclusive, in which case you might agree that the other party will be the only other party to be granted rights to the technology; or
    • exclusive to a certain defined use or application or region, which would restrict how or where each licensee may exercise the rights you have granted them to your technology.
  • Still another approach is a non-exclusive licensing agreement, which typically involves granting certain rights in the technology to multiple licensees, some of which might compete against each other. Again, you would still retain ownership and most likely receive royalty payments from all licensees based on some pre-determined measure.

There are both advantages and disadvantages to licensing your technology. Among the advantages are:

  • the possibility for upfront and recurring payments to the technology developer
  • the opportunity to off-load most or all of the risk of commercializing the technology
  • gaining access to others who have the knowledge and experience to successfully commercialize the technology
  • gaining access to others who have the resources—e.g., funding; organization; marketing and distribution channels; industry
    contacts-to properly commercialize the technology
  • greater freedom for you to focus on what you do best—new technology development

Licensing also carries with it some disadvantages:

  • partial or total loss of control over the technology's commercialization
  • the often daunting task of finding just the right licensee(s), and subsequently, following up on licensing agreements to make sure the negotiated terms are being met

Independent technology developers and owners of small technology companies seldom possess the knowledge, contacts, experience, and other resources normally needed to successfully commercialize their technologies. As such, licensing is often the first commercialization option considered.

Negotiating a Licensing Agreement

Without question, whoever owns the intellectual property rights to a technology may negotiate their own licensing terms and agreements. There is nothing that requires the involvement of an attorney or some other third party, such as a licensing professional. All that is required is a willing licensor—who owns the rights to the technology—and one or more willing licensees—who want to secure the rights to use the technology.

That said, most individuals knowledgeable in technology development and commercialization would agree that success is much more likely if you retain the services of an experienced licensing professional. Just as with patent attorneys and agents, the licensing professional you choose should be able to demonstrate knowledge and experience in the subject area of your technology. Such professionals will understand the acceptable parameters of licensing arrangements within their targeted industry(s) and may very well be able to help identify potential licensing candidates.

Finding a reputable licensing professional who will protect your best interests can be challenging, especially for technology developers in more rural areas. One excellent resource for identifying prospective candidates is the Licensing Executives Society International (LESI). Founded in the U.S. in 1965, the LESI is now an international organization with societies in numerous countries and more than 10,000 members from throughout the world. The U.S.-Canadian society of LESI represents a valuable source of licensing information and assistance. Its Web site allows visitors to search the LES Licensing Consultants and Brokers Directory online.

Other good sources of information include:

The Licensing Decision
(PDF 13.6 MB). Download Adobe Reader. U.S. DOE.
This document is designed to help small businesses and independent inventors better understand intellectual property licensing. It provides straightforward, clear descriptions of the major issues facing inventors and small firms: making decisions to license for business reasons, finding a licensee, and negotiating a license.

Selling Rights to the Technology
"Negotiating Technology Licensing Agreements" — World Intellectual Property Organization. This short article discusses selling versus licensing and notes discussion points for establishing long-term partnerships.

"Licensing: How to License Your Patent"
This article by the National Invention Fraud Center offers a four-step process for patent licensing, as well as links for locating manufacturers and negotiating tips.

Licensing Rights to the Technology
FAQs on Technology Transfer and Licensing — Licensing Executives Society International This document answers basic, essential questions about technology transfer and licensing.

Licensing NIST Technologies
The Technology Partnerships Division Web site outlines licensing procedures for innovations patented by the U.S. Department of Commerce's National Institute of Standards and Technology (NIST). It also provides sample licenses, has a searchable database of NIST licensable technologies, and includes instructions on how to apply for a license.

Licensing
The Technology Commercialization Center of the New Jersey SBDCs has reprinted this seminar presentation by Michael J. Lennon of Kenyon & Kenyon.

"Product Marketing: Why Corporations Often Reject Independent Inventors"
This article published by The Enterpreneur Network gives some insight into reasons why corporations might reject inventions produced by independent innovators.

Sublicense Rights — A Key Issue in Technology Licensing — Palmer & Dodge, LLP
This brief piece highlights some key issues to consider related to sublicensing, including consent, sharing of sublicense income, and survival of the sublicense.

Wright State University
This university's Research and Sponsored Programs office discusses the basics of a licensing agreement and the difference between a sales agreement and a licensing agreement.