Become knowledgeable on key components to licensing and royalties.
Key Components to Licensing
With the pace of innovation and shorter product life cycles, companies are in need of new products.
Licensing allows inventors to leverage a company’s brand and position in the marketplace.
Lower Cost and Risk
The inventor supplies the intellectual property while the company ramps up manufacturing and sales.
Frequently Asked Questions
The common questions we receive regarding licensing out your invention.
What is licensing?
At its basics, licensing is like leasing out your invention. You retain ownership in your invention’s intellectual property, but you grant rights to another company to manufacture, import, advertise and sell your invention within a certain territory for a period of time. For those rights, the company (or “licensee”) pays a per unit or percent royalty on all sales. The benefit to an inventor is that they don’t need to pay for all of the tooling/manufacturing, warehousing, fulfillment, liability insurance, etc., making the upfront costs associated with launching the product far less. Also, the inventor benefits in selling higher volumes since they leverage the company’s existing distribution channels and brand name.
Which companies license inventions?
With the increasing pace of technology and consumer appetite for new products, product life cycles are shortening. In order to maintain or grow market share, more and more companies are opening their doors to products that have been developed outside their company. Consequently, it has become very rare for a company with a product line to not accept invention submissions.
NOTE: As you consider a company to work with, focus on those with complementary brands and strong distribution into the channels you envision your invention selling. This way, you are benefited by their brand and access to market, and they get a new innovative product to add to their line.
What are the key components to a license deal?
As with most deals, the key components to a license deal revolve around the financial arrangement. Those are the royalty rate, advance (and/or bonus) and yearly minimums. The royalty rate can be a percentage of sales or a set per unit amount; the advance is an amount at signing that serves as a portion of the royalties already due to the inventor; and the yearly minimums is a set amount of units that need to be sold each year for the company to retain the license.
NOTE: Be sure to include required reporting and a right to an audit to insure accurate payments. Also, in the contract require the licensee to list you as a named insured in the product liability insurance.
What are the typical royalty rates?
Royalties range vastly across various industries. In consumer markets (housewares, hardware, toy, etc.), commonly royalties range from 3-7% of the wholesale price.
Will a company actually pay me for my invention?
The short answer is yes. That said, a company is NOT looking for a project, they are looking for a product. Consequently, an inventor needs to develop the product enough to at least prove the concept as well as develop a professional presentation so that it’s taken seriously. This is where our Design for Licensing strategy comes in.
What is your Design for Licensing strategy?
Our Design for LicensingSM strategy is our proprietary system that develops your invention by taking into account exactly what a company needs to license it. We develop the critical components of your invention focusing on industrial design and position your product with marketing material that highlights your unique selling proposition to capture a company’s interest. No unnecessary engineering is performed that would accumulate bloated billable hours or fees — just a streamlined, cost effective approach that seeks to maximize an inventor’s chances of licensing their invention without breaking the bank.
Will you actually seek to get my invention licensed?
Absolutely! Once your qualifying package is completed to your satisfaction, we would utilize our many contacts and begin reaching out to companies that are well positioned to get your product on the market and pay you a royalty. Our staff will make cold calls and attend trade shows to reach out to companies, professionally present your invention, negotiate royalties, prepare the contract and manage the license agreement.
How much are you paid if you get my invention licensed?
First, it is important to note that that there are absolutely no out-of-pocket fees for those who utilize our licensing consultation services after the completion of a qualifying design package. That means you do not pay for our time, travel, office expenses, contract preparation, etc — since we are paid on contingency (or commission). We are paid as a percentage of the royalties/advances/minimums/buyouts that we get you…if we get you nothing, we are paid nothing. If we are successful, we receive 20% of the license income and you retain 80%. Finally, please note that our 20% only begins when you recoup the amount you paid to Enhance for the design work.
Which trade shows do you attend?
Every year we attend the trade shows listed below and we will also add new shows depending upon the portfolio of products that we are representing at any given time.
- Consumer Electronics Show (CES) – January in Las Vegas
- PGA Merchandise Show – January in Orlando
- Toy Fair – February in New York
- International Housewares Show – March in Chicago
- National Hardware Show and Lawn and Garden World – May in Las Vegas
- Super Zoo Pet Show – July in Las Vegas
- Electronic Retailers Association (Infomercial Show) – September in Las Vegas
- ABC Kids Expo – September in Las Vegas
- Automotive Aftermarket (AAPEX) and Specialty Equip (SEMA) – November in Las Vegas
Learn More About Our Process
Details on all of the steps, from preparation to launch.