I have been licensing my own ideas for more than 30 years. For the past 13 years, I’ve been teaching others how to license theirs. Some industries have embraced open innovation with outstretched arms. They want and need our ideas. Others have been slower to recognize its immense benefits. And then there those industries that are just plain difficult to license an idea to.
If you want to live the licensing lifestyle, you need to be aware of what those are. My intention is not to dissuade you from trying, per se, but to highlight the many challenges ahead. In the end, you may decide that moving forward with a different idea is a smarter move (if licensing, and not venturing, is really your goal). The reality is that inventors have a tendency to become attached to their ideas–so attached that they fail to see the writing on the wall. I prefer working with ideas that are easier to license. Why wouldn’t I? My goal, after all, is to profit from my creativity.
1. Food products/recipes. Every couple of weeks, I receive an email from an entrepreneur who has a recipe he wants to sell to a large consumer packaging company with great distribution. Can he license it? The problem with recipes/food products is that the vast majority cannot be protected with intellectual property. Large companies want to buy food products that have been tested in the market, that have proven sales. Basically, they want you to do all of the work upfront, like building a brand. I’ve seen this play out again and again. It takes years of hard work to establish a brand in the marketplace! There are a few exceptions. If you have a new way of delivering food, like via the product’s packaging, you can protect that with a design patent and/or a utility patent. If what you’re manufacturing is a new process, you can protect that as well. (Most of the patents related to food that the USPTO grants are coming out of laboratories, and not kitchens.) You can trademark your brand, of course, which has value. You could try protecting your recipe via trade secrets and an NDA. But most companies will not sign an NDA that doesn’t stipulate that it applies for a limited amount of time.
In other words, to bring a recipe/food product to market, you will need to start a business.
2. Apparel. People in the fashion industry complain that their signature lines of clothing are knocked off within weeks. Establishing perceived ownership over apparel is extremely difficult at best. And given the length of time that designs are in the marketplace, I think most forms of protection would be a waste of your time, anyway. Trademarks have value. If your design has some kind of utility, you could try filing a provisional patent application on that.
3. Packaging. I’ve been in this industry for more than 20 years now-so it is with conviction that I say that this is an extremely hard industry to license an idea to, unless you’re intimately familiar with it and therefore know how packaging is produced and used. Without prior knowledge, you’re at an enormous disadvantage. Machines that supply packaging are extremely expensive and designed to operate at high-speed. If your idea requires the creation of a new machine-no matter how great it is-companies will balk at the cost. There are also issues of scalability. Being able to provide evidence of demand, such as a purchase order, helps. Licensing an idea to the packaging industry is challenging, but I understand why people try: The potential rewards are huge.
4. Software. Who doesn’t have an idea for a new app? I bet you yourself have thought of at least a few. Unfortunately, it’s like the wild, wild west out there right now. More than 250,000 patents have been filed on smart phones alone. In other words, the landscape is crowded-really crowded. Hardly a day goes by that I don’t read a headline about companies that are suing each other over intellectual property infringements. You can copyright code and you can file patents related to software, but it’s exceedingly difficult to do given the current environment. NDAs can be important.
5. Toy. The toy industry has been relying on freelance toy inventors for decades. Unfortunately, that doesn’t mean the industry is any easier to break into! Most large toy companies require that you work with a toy broker-who will share your royalty payments-as a filtering mechanism. These companies receive thousands of submissions each year, so it really takes a lot to stand out. I have submitted hundreds of ideas to toy companies over the years; out of all those ideas, only one resulted in a licensing deal. Thankfully, the Michael Jordan Wall-Ball sold for more than 10 years. I got lucky! The thing about the toy industry is that it’s been around forever. You have to know what’s been done before to design something novel and new.
Just because an industry is difficult to deal with, doesn’t mean you shouldn’t try. But please, understand how the game is played. Licensing one of your ideas to these industries will take more time and a lot more knowledge. I’d like to also add that throughout this article, I’ve been talking about IP. As always, what’s most important is establishingperceived ownership. I don’t think anyone ever owns anything, really. But to license most ideas, you will need to create the impression that you do.
Originally published on Inc.com May 8th 2015.
