Dear Alumni,
I’ve been approached by a lighting manufacturer to design some lighting for them; I would like to get some idea what the range of licensing percentages is for this industry. Any information would be greatly appreciated, and added to the Wiki.
Thanks,
-John
Hi John,
I'm going to assume you are talking about royalties, not licensing, since it sounds like you haven't done the actual designs yet. I inquired with our president on your behalf, and the one outside inventor/designer we have worked with got a 2.5% royalty. He always approached us with a rough works-like or looks-like mechanical concept, and we did the actual work to turn it into a product and paid for all the tooling and production costs. In cases of patent filings, we paid for the application costs, and are the owner of the patents, but he is listed as a 2nd inventor on the patents. Some of the concepts he brought us were more complicated/sophisticated than others, but I believe we always gave him the same rate. I don't think he was paid anything for concepts that never made it to market.
As for range, apparently one of our sister companies hired an outside designer, and only gave him 0.75%, which our president (rightly, I would say) described as "ridiculous"...
And if you draw the eye/ire of Philips' attorney's, they will force you to pay between 3-5% to use their wildly over-broad LED patents!
Hope this helps!
- Christian
My rough guess would be anywhere from 2~8% of sales, but obviously that’s a big range. I think a lot of it depends on how much your contribution is relative to the whole product. If you’ve designed everything the percentage would be higher; if you’re just contributing a component or element, probably a lower royalty. Alum Fred Bould (link here - go to very bottom of page for the “Pablo Lamps”) has experience in the lighting world as I recall - maybe ping him directly?
Best,chris
Chris MiksovskyFounder and CEHhumangear, inc
John,
Oldie, but good start,..http://www.core77.com/posts/23366/Product-Licensing-101-So-Lets-Talk-Money
http://www.thedesigntrust.co.uk/the-design-doctor-how-do-royalties-work/
John and Alumni,
I second David Northway’s recommendation for the article on the Core 77 blog. The author is clear and his royalty rates (2%-5%) reflect the deals I’ve seen in the toy, housewares, and tools markets. Licensing is a hard way to make money. When I was at D2M we licensed a patented and unique ratchet wrench to Snap-On tools - it was a $100+ item and had the benefit of Snap-On’s amazing distribution system - and let’s just say that no one got rich.