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Licensing may be answer to global marketing

03/22/07
Ian M. Berkowitz

I have been working wi-th a cli ent that believes he possesses one of the most robust and technological breakthroughs that the world has seen in the last 50 years. The group is comprised of two technologists and a business development and operati-ons part ner.

    During the last six years, the business partners have been working together researching and developing the technology to the point where they can n-ow cre ate speci c applications from the technology.

    In this case, the technology has the potential to be used in many applications bene ting the industrial, military and aviation industries.

Decision time

    Once an application or two has been perfected, then the principals have a major decision to make. Do they move forward and develop what could end up being a billion dollar business? Or do they turn it over to another company who has the money, background, contacts and skill set to fully exploit the technology to its full potential?

    The concept of licensing can give an inventor, developer or creator of a product or t-echnol ogy the option of turning a well designed, well conceived and perfected product into a w- ell com mercialized and well promoted product. Quite often, inventors of technologies and products are idea driven and not necessarily business savvy. You might even say that they possess the ability to develop and create many things but don’t have the keen sense or the desire to take it to the- market place.

A major benefit

    That is where licensing can be a tremendous bene t for a-n inven tor or developer. A good licensing agreement can be a win/win for both the inventor and th-e licens ee, the promoter, manufacturer or marketer.

    Technology licensing is- a con tractual arrangement in which the licensor’s patents, trademarks, service marks, copyrights, trade secrets, or other intellectu-al prop erty may be sold or mad-e avail able to a licensee for com- pensa tion that is negotiated in advance between the parties.

    This compensation, commonly referred to as royalties, may be a lump sum royalty, a running royalty, which is a royalty that is commonly based on a speci c volume of sales or production, or a combination of both. Inventors and developers frequently license their technology to companies that conduct business in- the in dustry that the technology is based in order to manufacture, market and/or fully exploit the t-echnol ogy into the marketplace.

    A technology licensing- agree ment usually enables a rm- to en ter a speci c market quickly, and poses fewer nancial and legal risks. The inventor or developer is not bothered with owning and operating a manufacturin-g facil ity, developing and execu-ting ma jor sales and marketing plans or employing and managing- a busi ness operation to further support the overall growth of the products that support the technology.

    Licensing also permits -the in ventor or developer to leave behind all of the problems of running a business and just focus on the existing technology and its future enhancements. For these reasons, licensing can be a particu-larly at tractive method of “exporting” for inventors or developers with little business experience or w-ho sim ply possess the drive to create and not market and sell.

Helps service trade

    Technology licensing is not limited to the manufactur-ing sec tor. Franchising is also an -impor tant form of technology licensing used by many service industries. In franchising, the franchiser, called the licensor, permits the -franchi see, called the licensee, to employ its trademark or service mark in a contractually speci ed manner, in the form of a franchise- agree ment, for the sales and marketing of goods or services.

    The franchiser usually c-ontin ues to support the operation of the franchisee’s business by providing advertising, accounting, training, and related services and in many instances also supplies products needed by the franchisee.

    Technology licensing h-as cer tain potential drawbacks. One negative aspect of licensing is that control over the technology is weakened because it has been transferred to an una liated rm. If that rm does not have the ability to promote the- technol ogy properly then the inventor or developer might not get the most bang for the buck.

    Make sure when negotiating a licensing agreement to include speci c commitments by- the li censee as to how, what, when and where they will be promoting the technology.

    Most importantly, make sure that if the licensee does -not per form or meet the requirements to promote, market and sell the technology or products then you, the inventor or developer, can regain full control of the t-echnol ogy in order to market it yourself or nd another partner to market and sell for you.

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Ian M. Berkowitz is a former attorney/advi - sor with the United States Small Business Administration in Washington D.C. During his tenure with the Federal Government he speci - cally worked in the areas of disaster relief for homeowners and businesses and government contracting. He is currently a p- racticing busi ness and real estate attorney in Boca Raton. In addition to his law degree, Ian also holds a Masters Degree in Government from The John Hopkins University.