Successfully Licensing Your Intellectual Property - Tip #1

You’ve invested time and effort to bring your invention to fruition and to bring your new product to market.  Or you’ve come up with the perfect trademark – something that suggests the key attributes of your product but is also clever and original.  You’ve done all the right things to protect your intellectual property, from patenting to depositing your copyright material to filing a federal trademark application (maybe even an International Registration).

Your launch was a huge success.  And now there are people who want to license your intellectual assets for a new product line, usually in a field in which you have no experience or no desire to exploit on your own.

This is oftentimes the point at which some business people mysteriously lose their business sense.  Perhaps they succumb to the excitement of finding a business partner who believes in them and their ideas, and perhaps they’re just not all that familiar with licensing or with this new product line.  Anxious to get the deal done and start that new revenue stream, they rush into an agreement, thinking that all they need to do is sign the license and let their new business partner do all the work building a new business for them.

But, as you can imagine, there are potential pitfalls in the licensing process.  This series of blog posts, which I’m calling “Successfully Licensing Your Intellectual Property,” will provide tips periodically on best practices and avoiding these pitfalls.

So, here’s tip # 1:  Usually, the license shouldn’t be the first agreement.

If the license agreement is the first document that the parties are reviewing, you may have lost some opportunities already.

A well-drafted confidentiality agreement should come first.  Suppose this deal falls apart?  Remember that your intellectual assets include not only patents and trademarks, but also know-how and trade secrets, which are not going to remain secret for very long if you haven’t protected them with a confidentiality agreement.

Confidentiality agreements can have broad applications and implications.  You may not even want the fact that you have been engaged in licensing negotiations to become known, so be sure to start with a confidentiality agreement.

Your potential license partner may suggest modifications to your invention – to improve its chances of commercialization, perhaps, or to refine certain aspects of its function.  In such cases, you might need a co-development agreement, too, but a provision in your confidentiality agreement specifying who owns what rights in any further developments is also essential.

At a minimum, a simple, well-drafted confidentiality agreement, presented to your licensee early in your discussions, puts your partner on notice that you take your intellectual property rights seriously and that you know what you are doing.  A confidentiality agreement heightens both parties’ awareness of confidentiality issues and reduces the possibility that inadvertent disclosures to third parties will be made.

Image by flickr user Casey Marshall, used under the Creative Commons Attribution 2.0 Generic (CC BY 2.0) license.  Image has not been modified.

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About the Author

Arthur J. DeBaugh

Art DeBaugh focuses his practice on trademarks, marketing/advertising/promotions issues, copyrights, trade dress, trade secrets, and business and corporate matters. 
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