Brand Licensing vs. Patent Licensing – How to launch a new product through Licensing
IMC Licensing
January 28, 2020
We get several calls from start-up companies and entrepreneurs about utilizing licensing to launch their product. The conversation usually goes something like this.
“Hi, I am calling because I want to talk to you about licensing my product. I have this amazing new product that I developed, it’s completely unique, and it will change how people eat cereal (or insert other topic).”
IMC: “Ok, do you need help finding a brand to use on your product, for example, the Cheerios cereal bowl?”
“No, I need help manufacturing and selling this. I have a patent on my product, but I need someone to mass-produce it and sell it at retail. Would General Mills want to license my design to create and sell my product?”
At this point, I like to jump in and explain how brand licensing works vs. patent licensing.
With brand licensing, your brand needs to have brand equity or value. Brand equity is defined as the commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself.
For example, take a brand like OREO, it has very strong brand equity, and people will buy an OREO ice cream treat over a no-name chocolate cookie ice cream treat. The OREO brand is increasing the value of the ice cream treat. Consumers know what they are getting in terms of a flavor profile and trust the product quality because they make good quality cookies. Therefore, Unilever (ice cream treat manufacturer) will license the OREO brand to make and sell the OREO ice cream treat. Unilever would pay OREO a percentage of the OREO ice cream treat sales (a royalty) for using their brand.
Patent licensing is a revocable agreement between a patent owner and a manufacturer/company (often referred to as a Licensee) to transfer interest in a patent to the manufacturer/company who can benefit from and enforce the intellectual property rights. (Source upcounsel)
For example, a tech company named NuCurrent licenses its wireless charging patents to Apple and Motorola. (Source GreyB)
Licensing your IP or patent to a company for them to use is much more difficult. According to a Forbes article, the chances of successfully licensing your IP is low. “A study by Edward Zimmer and Ronald Westrum revealed that only about 13% of inventors who attempted to license their invention were successful. (This data was based on people who responded to the study, which probably skews the percentage positively. Those who were unsuccessful were probably less likely to respond at all).” Additionally, patent specialist Stephen Key advises, “I cannot emphasize this enough. Licensing an idea to a large company will take time and money, and the investment comes upfront.”
Patent Licensing is not an expertise of IMC’s, but here are some articles that explain patent licensing.
- Patent Licensing: Everything You Need to Know by Upcounsel
- Patent Licensing 101: Everything you Need to Know by GreyB
- The 4 Step Process to Patent Licensing by Muzammil Hassan, Team Lead, Patent Infringement, and Nitin Balodi, Team Lead, Market Research
- Should You License or Manufacture Your Invention? By Brian Farkas
- License Your Product Idea to a Fortune 500 Company Using These Steps by Stephen Key
- When an Inventor Calls by Brian Fried
Also, here are two companies that provide services to help license inventions and patents.
“So, how IMC can help?”
We can help you license a brand for your new product. We would represent you as the Manufacturer and solicit different brand owners on your behalf. For example, we could solicit Cheerios, Fruit Loops, and other relevant cereal brands for you to make and sell the life-changing cereal bowl. However, you would still be responsible for launching the product: you would have to manufacture the product, sell it to retailers, create and execute a marketing plan, handle any consumer complaints and report sales back to the brand. To use their brand, you would pay the brand owner a royalty (a percentage of your sales, anywhere between 2% and 18% depending on the product category).
“How would it work for you to represent us for licensing-in a brand?”
We would work with you to identify brands that might be a good fit to license. We would then solicit those brands on your behalf, and if they are open to a licensing partnership, we will negotiate a licensing contract with them. We would then help you work with the brand team to secure all the approvals you need to launch the product. There would be an upfront solicitation fee that you would pay us, and we would also earn a sales commission on the sale of the licensed product.
“Why would we have to pay you a fee, don’t you get paid on commission?”
To cover the upfront cost, we have to charge a fee. The fee is typically minimal but would vary depending on the category and number of brands we would solicit on your behalf. The reason we can’t work solely on commission is that we need to cover our cost to solicit the potential partners. We don’t make money on the solicitation fee. We get paid and rewarded from the commission structure of our programs.
The other problem we run into with licensing is we can do a lot of work upfront, and if the deal falls through, we won’t ever earn a commission on the program, and therefore we would never get paid. We can’t operate with the risk of covering all upfront costs because licensing deals are volatile and can fall through at the last minute for unforeseen reasons we can’t control.
We love bringing brands and manufacturers together to create smart licensing deals and innovative products. Please reach out to us if you need help connecting with a brand, and if you are in the early stages with your invention or patent, we are rooting for you and can’t wait to see your new product come to life!
A top product extension agent since 1997, IMC works with companies worldwide. Reach out to schedule a call.
