Licensing a new product idea is not easy. Here is some inside knowledge to help ensure your idea has the best chance.
The first thing is to think your how your idea will look to the Head of New Product Development or Technical Director of a company. They are likely to have a list of twenty odd ideas that they are currently considering working on, that they have come up with through working consistently in that market sector for years. They have probably ranked these ideas using a suitable idea assessing criteria and have a range of ideas ranked from 'no-hope' through to 'Wow'. Most are probably ranked good but with a few issues to be overcome.
The company's product development team will be working on new products currently and several will be at various stages of development. Into this process comes an entrepreneur with a new idea. The company know that months of assessment, validation, IP due diligence checks and negotiations will follow should they like the idea. So what will persuade them to go through all this?
Well the idea is going to have to be 'Wow' for them to be interested. It is easier for them to develop their own ideas, and they retain 100% of the profits, rather than sharing the profits with you. Basically, your idea is probably going to need to be better than their best in house idea. It will also need a watertight patent and have a decent, easy to reach market to warrant the effort of the assessment process.
How do you achieve this?
1. Make sure your presentation is the absolute best it can be. This will probably mean employing a professional product designer to ensure the concept is designed to be manufacturable, styled, viable and almost ready for production. Prototypes often help convey a level of viability beyond drawings and often therefore result in more lucrative licensing deals for the entrepreneur.
2. If your idea isn't that great, then don't bother attempting a licensing deal with large companies, tackle the small companies who may not have in house development teams working on a list of good ideas.
3. Get your patent drafted by a professional patent attorney. Any company will fully assess your patent and you don't want to embarrassed by the company expressing that your self-drafted patent isn't worth the paper it's written on and that they can simply produce your idea without paying you a penny.
4. Try to ascertain the size of the market. If it is obviously large then great, if not then some market research may be required to prove the potential of the product concept.
Once you have dealt with the elements above, the next sensible steps are as follows:
- Build a list of companies that would be suitable to sell your product.
- Ring the companies to find the contact details for the technical director or director of R&D.
- Make contact with the director and establish if the company is prepared to review new ideas from individual currently.
- Ask the director to sign an NDA (if they refuse it may still be worth approaching the company, particularly if you have a strong patent application.)
- Send them a hard copy of the product sell sheet.
- If they say that they are interested then take professional advice from a licensing expert.
In conclusion, it is possible to license ideas to companies but it is not straight forward. A little bit of effort and investment up front will give you the best shot at getting a decent deal and you often only get one attempt so make sure you give your idea the best chance of success by presenting it professionally.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
