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Licensing

Page history last edited by Alison Wong 10 years, 5 months ago

original post on June 2, 2010. 

 

Hi PD,

     I'm curious to hear from any of you who have successfully licensed product ideas (esp in the consumer product and food industry).  I'm wondering how your experience has been and how you fit it in in addition (or not) to a full time job.  Would love to hear success/not so successful stories :) Thanks so much in advance!!  
Thanks,
Alison 
pd2006
1. From Jamie Page:

Hi Alison

I have a few experiences that may be interesting.  I'll give a little detail and you can ask for more if you want.

 

I've had mixed results licensing products, but I know people who have had good results.

Below is a link to a product called the Ergopod that I developed with some friends that got a lot of exposure in catalogs etc, but ran into a fundamental market problem.  We sold it as the most comfortable and ergonomic chair that could reasonably be taken to a soccer game etc and it was priced at $49.  Seems reasonable?  They sold poorly because despite great comfort improvement (and other improvements to how the chair works), it appears that consumers still compared it to $10 camping chairs.  Also, the catalogs that initially sold it didn't do the best job in their presentation (but then again we always think that!)  I think we made $20k in royalties over a couple years which was substantially less than if we had been able to bill the development time at consulting rates.

http://www.amazon.com/Ergo-Lounger-14274-00-Ergopod-Chair/dp/B00075LUK2

 

My (former) product design company had a contract with Staples to review and vet entries from their innovation contest and make recommendations about which products to award and/or license.  A few entries (several out of maybe 100,000 submissions) did well.

 

We were able to get that contract because 2 colleagues had run an independent invention/company matchmaker service (they still do).  Many such services are not reputable, but my associates were one of the few good ones.  They had spent 20 years forming relationships with companies (including Staples) who now regularly ask them if they have come across any ideas targeted to their markets or manufacturing processes.  They vet thousands of ideas and every year they make a handful of very good matches.  I'll give more details and examples if you are interested.By working with them, I got to see all sides of many deals and it was fascinating to see what worked and what didn't from business, market, product and manufacturing perspectives.  Even with years of PD experience at that time I was still surprised by things that made or killed the deals.

 

One of the interesting "fish that got away" stories was that my friends with the matching business passed up (rejected) a product idea that went on to be licensed by Staples and became the Word Lock which was one of their top selling products in 2005 or so.

 

I have lots more specific stories, but I'll wrap this up here with a suggestion that the process has a much higher chance of success if you have a relationship with potential companies before the invention process starts.  some companies and industries are friendly enough that they will actually tell you what they are looking for. (albeit vaguely and usually involving unobtainium)  But my experience is that it is far better to work on relationships and getting additional insight up front rather than inventing something and trying to match it with a licensee afterward.  

 

Jamie

MSME 95

 

 

2. From Tony Hu:

Alison - Back in the day, Jamie and I collaborated on a couple of promising items that unfortunately didn't get picked up. I agree with him that relationships are very important. However, most of my licenses happened the other way around - they were with companies I cold called or were introduced to. I did develop many concepts in response to wish-lists (mainly from toy companies), but they were less successful for me - maybe because hundreds of other inventors received the same wish lists.

My formula was to create as good a prototype as possible along with a very compelling presentation (often with video). Stanford PD folks are usually great at this part ;). Then I would pitch to multiple companies simultaneously to drum up interest and hopefully leverage them against each other. Concepts become much hotter when there are firms competing for the rights!

I found that it takes much more time to license a concept than to develop it. If it took me 3 months to come up with an idea and prototype it, it would often take 12 months to finally sign a deal. I have a lot of respect for sales people! While it's possible to do this part time, you need to be available during work hours to make phone calls, have meetings, and go to tradeshows where you can pitch to many potential licensees in one place.

Once you license out your invention, it's no longer your baby. The licensee is in control and is responsible for the success or failure. This can be frustrating, especially if they aren't performing to expectations. There are so many factors that can make or break a product - cost, timing, packaging, quality, etc. If everything comes together though, cashing in that royalty check can be very sweet!

After years of inventing, I worked on the other side, reviewing inventions, and discovered how little time/effort is often given to inventors. I was responsible for developing several lines of products and had no time to respond to the dozens of invention submissions. Larger companies sometimes have hundreds or thousands of invention submissions each year. This is not meant to be discouraging, but it partially explains why it generally takes a lot of time, patience, and persistence to close a deal.

 

3. From Joe Croft:

Hi All-

I'm new to the email list.  Been out of contact with the alumni group for over a decade, but one of the companies I started up a while ago is hitting its stride and we're hiring, so I contacted Bill to see what the best way get back in touch with people would be.  He introduced me to the list.  It's been cool to see some familiar names and see what people are doing.

 

Larry, let me know if you need any more contacts in the juvenile industry.  Ju-Ju-Be ( www.ju-ju-be.com ) is a company I started about 5 years ago and we're well entrenched.  Our booth was across from Zoli at the ABC tradeshow two years ago.  We get approached by licensees on a regular basis and turn most down, but sometimes there are ideas that are too good to pass up.  On the other side of the licensing arrangement, another company I started, GUNNAR Optiks ( www.gunnars.com ), does a ton of licensing.  Both from the brand/marketing side, and from the technology/patent side.  Endless hours of negotiations and contracts, but they can be very useful in the long run when they're synergistic and not antagonistic.  The key to any licensing deal is the it's not a WIN/WIN situation....it's got to be a BLOCKBUSTER GRANDSLAM HOMERUN /BLOCKBUSTER GRANDSLAM HOMERUN situation.  Otherwise it's not worth the set up and maintenance.

 

4. From Darren Kim:

I have a successful product licensing experience that I can share with you.

I licensed a product called 'FlyLight' (USB LED Task Light) back in 2000 to a computer accessory company called Kensington.  The product is still on the market and I am still receiving royalty checks although much less than the first few years of the contract. 

At the time, I was working full time doing freelance consulting and developed the product in my spare time.  I worked on it off and on for about 1 year before putting in 3 months of concentrated effort to complete 2 functional prototypes, a presentation (with video), credible BOM/financials and provisional patent.

'Better to be lucky than good'

A work friend who saw the functional prototype set up the initial meeting with Kensington for me.  It was an easy sell because only two things seem to matter in that first meeting:
1. Product - I plugged the prototype into a laptop and it lit up.
2. Financials - I showed them the BOM and the financial projections

It took about 2 months, 2 more meetings, and several phone calls before the business frame work was agreed to.
It took about 4 additional months to iron out the legal contract, dot the i's/cross the t's, and sign the contract.

The product was first shown at COMDEX (now defunct) in Nov
The product was awarded '2001 Best Accessory' by PC Magazine

The patent was complete in little more than 1.5 year.

It has not been all bed of roses because there was a very stressful week of decision making in the second year because of a patent issue that the licensee brought up.  However, I have been very satisfied with the licensing of the product over all.

 

5.

 

 

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