How can we license out our technology?
Check you have your IP in order
Q. We are a manufacturer that has developed a solution for one of our customers, and are now getting a lot of queries about it from other people. We would normally make the product ourselves, but are considering licensing the technology, as we’re not sure we can meet demand. We’ve taken out a patent, but what do we need to do to set up a licence?
A. Licensing is a great way of capturing the value of a product if you can’t commercialise it directly. However, there are many aspects that need to be considered when licensing. Let me focus on a few key issues to set you on the right path.
First, ensure you own the product. Check your contract with the customer you developed this solution for to make sure you own the intellectual property (IP) arising from this work. Next, identify the IP surrounding your product and its strength. You say you’ve filed a patent, but has it been granted and where has it been filed? You probably also have drawing, manuals and perhaps some potential customer lists for the product. These define your licensing package and its value.
What you charge for your licence will depend on the structure of your licence deal. If you decide on royalties, you can gauge the value from your profit margins for the product. Your licensee will need to make a profit, so the royalty will probably be around a third or a quarter of the profit margin.
To get started, identify potential partners in markets where you hold the IP and send them some non-confidential product information. Ask those interested to sign a non-disclosure agreement (NDA) and define your key needs in an outline term sheet. Negotiations can be complex, so use a licensing professional to draw up the final agreement for you.