In a previous article, I laid out the many reasons why people with product ideas should consider licensing as an avenue for bringing them to market.
Primarily because speed to market is more important than ever, I believe licensing is the best route for most simple consumer product ideas. Strategically, partnering with a market leader cannot be beat. Together, you can accomplish what would have taken you years on your own in just six months.
Inventions that are very new and/or complicated are generally not a good fit for licensing, because they’re risky. Securing a licensing deal depends on your ability to take away perceived risk.
I discovered the beauty of licensing when I joined the startup Worlds of Wonder in the mid 1980s. Being in charge of plush design and development during the company’s two number-one hit toys — Teddy Ruxpin and Lazer Tag — was enlightening. I was tasked with overseeing our production lines in Asia. Eventually, after I had spent eight weeks overseeing the construction of talking teddy bear after talking teddy bear, a thought dawned on me.
I didn’t want be here — I wanted to be like Ken Forsse, the wildly imaginative inventor who had devised and licensed Teddy Ruxpin. Each time WOW sold a bear, I knew Forsse was earning passive income. Wherever he was, he was free to focus on his next great creation. I wanted to get paid for my ingenuity — not my physical presence — too.
But when I began sharing my concepts for new toys with WOW, my bosses weren’t interested. I already had a job, they reminded me. Not too long afterward, I left the company. Once I knew it was possible to rent my ideas to companies in exchange for royalties, I had to give it a shot — which is how I ended up developing the following process for licensing ideas.
Since then, it has been successfully applied across a variety of industries, including medical, tech, automotive, and packaging. The old ‘patent-and-prototype’ method of product development is just that: Old. More importantly, it’s simply not effective.
You do not need to shelve a great idea simply because you do not know what to do with it. You do not have to let a lack of capital prevent you from getting off the ground.
Today, you can get the critical feedback you need to determine best next steps before investing significantly in any one of your ideas, which is truly radical.
Here’s how to get started launching your product idea without starting a business.
Study the market. Before you move forward with your idea, you must understand how it measures up to other products like it. Is its benefit strong enough to compete? You need a point of difference to license an idea. The only way to find out is by studying the market. First, search Google Images. Closely examine products that are similar to your concept, making note of how much they cost, how they are packaged, who manufactures them, where they are sold, and their main benefit. Is the market crowded?
Next, search for patents that are similar to your product idea. I prefer using Google Patents. This is what’s known as doing a prior art search. (Prior art is anything that might prevent you from claiming originality, which is necessary to obtain a patent.)
You can’t craft an effective roadmap forward without familiarizing yourself with the past. How have products in this category evolved? Big-picture wise, I’m not too concerned about what I discover in patents, because so many of them describe only concepts. These products never actually made it to market. If that’s the case, your task is to find out why. You can do so by contacting the patent owner. The insight you gain will be priceless.
Make sure to read what consumers are saying about these products on Amazon. I also recommend visiting brick and mortar retailers in person to do further research. Reading trade magazines and attending trade shows are two other great ways of familiarizing yourself with the industry at large. Where is it headed?
What you learn during this step will help you assess the marketability of your idea, which is essential. Remember, the main reason startups fail is no market need.
If you cannot find any products similar to your idea, that’s a big red flag, because there might not be a demand for it.
For nearly 20 years now I’ve been mentoring product developers as a cofounder of inventRight. Ideas that get licensed are simple improvements to existing products. What constitutes a simple improvement? Simple improvements can be implemented using existing manufacturing technologies. They don’t require educating consumers, which is prohibitively expensive. They can be easily explained in a sentence and prototyped inexpensively by cannibalizing other products.
Use what you uncover during this step to refine your initial idea. Depending on what you find, you may also decide to walk away at this point.
Create a list of about 30 companies that manufacture similar products and are friendly to outsiders. These days, most companies have embraced open innovation — meaning they have a process for reviewing idea submissions — but not all. Industries in which there are only two or three major players are challenging, as they have little incentive to innovate. Mid-sized companies that are hungry to grow are often your best bet.
Remember, licensing is a numbers game. The more companies you contact about your idea, the more chances you give yourself to license it. When I was just starting out, I gave up on an idea after only a couple of companies I reached out to turned me down. That was a mistake. It’s not uncommon for my students to contact to many, many companies before finding a licensee.
Your potential licensees are companies that manufacture similar products — yes, the same companies you took note of when you were studying the market. As you create your list, Google each company followed by the words “complaints” and “lawsuits” to weed out unscrupulous actors. Cultivating trust is an essential part of this process.
File a well-written provisional patent application. Patents are not required to license an idea. Yes, despite what you hear on Shark Tank. The lifespan of most consumer products is fairly short these days. Your product could be off the market before the United States Patent and Trademark Office issues your patent. (I’m specifically referring to simple consumer products, not products that require large amounts of capital to develop, and thus patent protection.)
The key word here is “well-written.” An effective provisional patent application encompasses potential workarounds and variations. It also includes many drawings. It’s written with the market in mind. If you were going to steal your idea from yourself, how would you?
I know you’re fearful. So many people will tell you without hesitation, “Get a patent.” But I review licensing agreements every week. Guess what? None of them involve patents. Bad advice that is free will actually cost you.
In my next article, I will explain in detail how to write a $70 provisional patent application that has value — one that you can use to secure a licensing deal.
Originally published on Forbes.com March 7th 2018.
