When should you bring in a licensing attorney? Now that you have a licensing contract, you might be unsure about what to do next. How do you go about negotiating a licensing agreement? What do you need to know? Read this article to avoid making any mistakes.
People often ask me, “Steve, what should I do once I get a licensing agreement?” Or they’ll say, “Can you recommend a licensing attorney to help me with my agreement?” Let me share my approach when I receive a licensing agreement.
I’ve been doing this for years, so I handle all the business terms myself because I know what I need and how to negotiate. Only at the very end do I bring in a licensing attorney to help with some specific terms to protect myself. However, I never let an attorney negotiate the whole agreement for me.
Why? Because attorneys get paid to find problems. If they review the licensing agreement and suggest many changes, it can turn the document into a mess. This could delay the process of getting the deal done. I know the steps needed to complete the deal successfully every time.
Licensing attorneys are fantastic, and you’ll definitely need their help. But when do you actually need them? Here’s my approach: I start with the easy parts to build momentum and get everyone on the same page. Once everyone is invested and motivated, tackling the harder parts becomes easier because the project is already in motion.
I always focus on making sure the company I’m working with is happy and that we’re making progress together. The first thing I tell them is, “I know there will be some obstacles and problems, but I believe we can work through any issues because I’m excited to work with you.” This sets a positive tone and shows that we are committed to solving any problems that come up.
When I get a licensing agreement, I’ve seen so many of them that I know what to expect. While there are some differences, the issues tend to be similar. If something looks complicated, I don’t worry because I know I can negotiate a fair and balanced agreement.
At inventRight, we’ve been doing this for over 25 years. Every time we receive a licensing agreement, we ensure the deal is fair for everyone involved. Only once in 25 years did we advise a member not to sign a deal because it wasn’t good. Usually, we can go through the agreement, correct the things that aren’t right, and get it to where both parties are happy with the deal to move forward.
Effective Strategies for Negotiating a Licensing Agreement
Many people ask me, “Steve, what are some simple tips you recommend?” Here’s what I usually say:
Ask the Right Questions
Start by asking questions that will help you get a positive response. I always ask these questions at the start to set things in motion because I know what questions will get a “yes.” For example, I always ask, “Do you want an exclusive?” and most of the time, the answer is yes.
Define the Territory
Next, I ask, “Where would you like the exclusive rights to apply?” They provide a list of territories they want, which is another easy “yes” that keeps things moving forward.
Determine the Duration
Finally, I ask, “How long would you like the exclusive licensing agreement to last?” They give me a time frame, and once again, this is an easy “yes” that helps advance the negotiation.
When it comes to negotiating a licensing agreement, I prefer to start with the straightforward parts to keep things moving. People often ask me, “Steve, do you use a term sheet?” Sometimes I do, and sometimes I don’t. Many people like having a term sheet to tackle the tough issues first. However, I prefer what I call a “yes term sheet,” which helps us get started on the easier aspects.
But here’s the thing: sometimes I skip the term sheet altogether and go straight to drafting the licensing agreement. Why? Because that’s where the real work is, and it helps me see the big picture and focus on what truly matters. I push for the licensing agreement as soon as possible so we can get to the important details and finalize the deal.
So, what are some of the big, challenging aspects of a licensing agreement? Of course, the minimum guarantees, the royalty rate, ownership of improvements, and the grant of license are crucial. Navigating these parts takes some skill to ensure fairness and balance. However, I’ve done it many times, so it’s not a big issue for me. You can see there’s a lot involved in negotiating a licensing agreement. That’s why I enjoy doing it—I feel comfortable with the process. I prefer handling it myself to get the deal done efficiently without creating unnecessary problems over minor details.
That’s why I don’t involve a licensing attorney in the business terms. I handle those myself, but I do consult a trusted licensing attorney at the end. They review the contract to ensure everything is clear and that I am protected. This includes checking for indemnification and other important clauses to make sure the language is precise and protective.
Why DIY Licensing Negotiations Can Backfire and How We Can Help
A common mistake people make is trying to save money by negotiating a licensing agreement on their own, especially if they’ve never done it before. I often hear from people saying, “Steve, I should have listened to you. I tried to handle it myself, but now I’m in trouble. I was in a hurry and wanted to save some money, but it backfired, and now I’m paying the price.”
Negotiating licensing agreements is like playing a chess game. The more experienced player is usually the one who comes out on top. If you need help with your licensing agreement, reach out to us. We understand that today it’s not easy to find the right companies or get your materials to the right person. Our program, Gateway, is designed to handle all of that for you. We’ll make sure you’re connecting with the right companies and pitching your idea effectively to get a positive response.
Companies see many ideas, and you need to navigate this process carefully to stand out. If you need expert help, call us. Gateway is here to manage everything and increase your chances of success.
