Tips for Licensing an Invention

John Hastie, a former aerospace engineer, is the classic example of the overnight success. Well, overnight if you consider ten years overnight. In reality, many successful inventors can relative to this timeline.

Hastie invented Acusharpe Razormate, a rectangular unit that keeps personal razors sharp for months through a magnetic process. Hastie spent nearly a decade developing, producing and selling his product before he licensed it successfully to UniQuest, a Falconer, New York firm, in 1987.

When an inventor licenses an invention, he or she gives the manufacturer the right to reproduce (or lease) a protected (patented, trademarked etc.) work in exchange for royalties. This is a good alternative for inventors with little time and/or business management skills. It frees the inventor to do what he or she does best: create. After all, even in the age of entrepreneurship, not everyone wants to (or is qualified to) run a major company. For these hands-off entrepreneurs, licensing an invention to a company for a percentage of the profits makes the most sense.

Once the product is licensed, the manufacturer takes on the burden of manufacturing, promoting, and insuring the product. Most importantly, the manufacturer bears the entire financial burden from that point forward.

In 1990 alone, manufacturers had licensed products to the tune of $10 billion! But don’t let that impressive figure lull you into believing companies will stand in line to take over your product.

As John Hastie discovered when he tried to peddle his Acusharpe Razormate, companies tend to be skeptical about both your product and your professionalism. For example, even though Hastie had been working with heavyweight companies Amway and Brookstone, he ran into problems when he attempted to sell K mart on the idea of distributing his product. Company executives didn’t think consumers would believe that a razor could sharpen itself without some type of electronic gizmo. The fact that Hastie had a good product that people loved once they tried it never entered the equation.

That reaction shouldn’t have been a surprise to Hastie, who had invented the Razormate almost by accident. While his wife was away for a few days, Hastie didn’t feel the need to put his razor away after use. Instead, he would let it sit in the sink basin. Each day when he came back, he found that his razor became sharper instead of dull. As an engineer, he decided it must have something to do with a reaction between the steel and an element in the basin.

He experimented, and found that the razor continued to sharpen. When his wife returned home, he explained his find to her. He laughs when he describes his wife’s reaction. She said something to the effect of: “Have you told anyone else about this.” He assured her he hadn’t told anyone besides her. “Good. Don’t,” his wife told him. Hastie explains that she believed people would assume he had lost his mind.

The engineer in him took over and he de-engineered the scene of the invention. He used his findings to create the Razormate.

For all the good words that went along with his product, and through facing all the naysayers, Hastie found that a good product was little assurance that anyone would want to license the product.

Indeed, an inventor should not rely on the belief that a good product will mean people are clamoring to buy that idea. So, where does that leave you if you’ve invented the next “brainchild” invention? Basically, you must try to see into the minds of the executives of whatever company you approach. Before you dig around for a crystal ball, however, follow these hints:

-Realize that companies aren’t particularly thrilled about dealing newcomers. And that’s putting it mildly. Sure, you may be a professional, and you may have a great product, but countless others who have wasted the company’s time have come before you. Your idea and your presentation must be 100 percent professional. This doesn’t necessarily involve an outlay of cash. Just be sure to double-check all correspondence for spelling, typos and grammar.

-Target your potential manufacturers carefully. Don’t haphazardly send your ideas around on the chance that one of your stray bullets will hit a target. Determine which companies buy your type of product by checking out the nearest competition and products similar to yours.

-Narrow down your choices and hone in on the particulars of a handful of businesses. Do these businesses look at outside products? Just because they’ve never handled a product like yours doesn’t mean they won’t; it just means you may have a longer road ahead of you.

-Determine the company’s royalty schedule and a typical advance against those royalties. This is where networking comes in handy. You can ask other inventors about a company’s standard royalty deals and advances. Those in the creative community generally share marketing ideas freely, so tap into this obvious resource.

Making Your Move
Once you’ve decided to approach a company, carefully investigate the potential licensee and gear your presentation to its particular needs. Remember, you must always answer the question: “What can you do for me?”

Like it or not, at this stage of the game, you are no longer an inventor, you’re a salesperson. Your job is to convince a company that your product will make money for it. Unfortunately, businesses do not care that you’ve invested countless dollars in bringing the invention to market or that you’d like to retire off the proceeds. You must approach each company individually and relate your product to the company’s need.

Part of presenting a professional image is knowing when to stick to your guns and when to give in on negotiation points. For example, inventors should expect two things: royalties on the net sales of each item, and an advance on those royalties. If you give in on either of those points, you not only sell yourself short, but you also mark yourself as a novice.

When it comes time to close the deal, remember: Deal with the decision-makers. If you ever played the game “Rumor” as a child, where one person whispers something into another’s ear and so on until the tenth person whoh repeats it recalls an entirely different version, you’ll understand why middlemen can seriously undermine a negotiation. Then, when the negotiating is over, get everything in writing. If terms change, write a letter expressing your understanding of the new terms, and make sure the manufacturer agrees.

Cover Your Bases
Once the contract is drawn up, don’t be too hasty to sign on the dotted line. Scrutinize the contract to ensure your invention will be brought before the public and marketing effectively. For example, you could set a date by which the product must be introduced. Also, stipulate that if the company does not produce “x” amount of sales for your product (be conservative), you reserve the right to take back the product before the licensing agreement lapses. This way, if a company is using your invention as a reserve, you can reclaim it while the idea still has value.

It is obvious that a good product doesn’t mean that companies will be lining up at your door to offer you money to license your product. It should also be noted that a proven track record may make it a bit easier, but the inventor must still go in search a company to license his product. It doesn’t work the other way around. John Hastie’s Razormate has done very well in the marketplace (because it’s a great product, by the way). He has invented another product which may do just as well. Nonetheless, it is his job to find a company that is interested in his product. To that end, he has elicited the help of Kessler Corporation, a company dedicated to assisting inventors worldwide who want to offer their inventions for licensure or sale. In April, 2006, Kessler Corporation listed Hastie’s latest offering: The Magnetic Power System, which involves electrical power generation. It was developed in response to a growing population that will prove existing A.C. sources barely adequate.

If you follow the advice given in this article, and never give up even if the urge strikes you one, two or 175 times, you may be able to join the elite group of inventors known as “overnight successes.”