Whether you are an experienced inventor or a newbie who just came up with your first big idea, the Inventor Smart Monthly newsletter is for you! You will find valuable tips, useful resources and words of wisdom that can help you move your invention forward!
Inventor Tip from Brian Fried
Understanding Licensees & Licensors, Calculating Royalties and Licensing Agreements
Product licensing can be simply explained as the licensee, which is a manufacturer, is also responsible for the distribution. They may have their own factory locally or overseas and have a built-in sales team or hire sales reps to present products – hopefully, your invention – to buyers, retailers, and e-tailers.
You, as the licensor, are responsible for the intellectual property you bring to the table for the licensee to rent the rights for a particular industry. When they sell your product, you earn a royalty. And royalty is a percentage of the wholesale price the manufacturer sells the product for. If the licensee also sells, let’s say, direct- to-consumer and not to a wholesaler, there is more margin to go around so you may receive a higher royalty rate on those types of sales. So, let’s start off by going over the sales cycle and what it means for you. If the product costs $2 to manufacture and sells for $4 wholesale, then the retailer sells it for $8.99.
As the licensor, you may receive between 2% and 10% royalty rate of the wholesale cost, relative to the industry and profit margins. Let’s say we agreed to a 5% royalty rate on the wholesale cost which is $4, which calculates to $.20 cents per unit as your royalty payment
Before you consider approaching that licensee, research the volume of sales that they currently do with their existing products and what distribution channels they sell into. They may have major big-box retailers and your product sells well, and every $.20 royalty can add up to bigger royalty checks. If they sell to smaller independent stores or niche retailers, it may still sell well, but the point here is to understand and discuss expectations with your potential partner, licensee.
You want to do a deal where you and the licensee both earn and it makes sense for both of you and for them. For us inventors, it may seem like a 5% royalty rate is a small percentage, but you can also end up having a 100% royalty rate and they sell zero. So, you have to think about what the licensee does and their expenses they have to manage, like having to pay their company employees and other overhead including the production of your product. They work with the buyers, closing the deal to receive purchase orders and handling all of the logistics. On top of all that, they have tight margins to work with from the retailers, and of course, pay you, and still make a profit. They have most of the risk. Yes, you do too with all that you’ve done. A lot of pieces of the margins to go around for everybody to earn from.
Earning royalties can either reap rewards of major income or as an additional income stream for you while you still have your day job or you are working on your next idea. Either way, the goal is to get your product out there for sale and be proud to be an inventor!
How do Licensors and Licensees Find Each Other?
Creators of IP (intellectual property) often need to find licensees who can make the investments needed to bring their creations into being as commercial products. Similarly, people/businesses that are well positioned to manage the essential business end of the deal are often not very good at creating.
So, how do these folks find each other? Most often it’s through good old fashioned word-of-mouth networking and research. IP owners usually have ideas about how and where their product could be used or sold and are familiar with companies that are already selling similar kinds of products.
In addition, the Internet with its vast resources and powerful search engines is also making it easier to find potential partners for commercial ventures all over the world.
Source: The Basic of Licensing by Licensing Executive Society (USA and Canada) Inc.
How do I go about licensing my patent to a 3rd party?
Each situation is unique, so there is no one “correct” way to go about licensing a patent. In some countries, a patent applicant’s intention to grant a license to third parties can be published in the official gazette. To find out more, get in touch with your national IP office.
In general, however, it is possible to say that if you intend to license your patent, what is important is diligent preparation. Before starting negotiation with a potential licensee, you should be informed of the current situation and future prospects of the relevant market and technology. Moreover, you should find out about the commercial state of a potential licensee and the associated financial value of your patent, etc. You should reflect on your own business objectives and carefully consider how entering into a licensing agreement fits into your short- and long-term business strategies.
National Inventor Club – Check out the library of highlight Clips From National Inventor Club Meetings! Great information to watch from many of our guests sharing their expertise.
It’s a free resource compilation of video clips for you to watch and help you through commercializing your idea or new product inventions. Check out the video channel here: LINK
National Inventor Club is one of the largest and most active communities for inventors, innovation, and service providers that support invention and continues to provide a nationwide platform for great guest speakers, networking, and connections founded and moderated by Brian Fried, who has been running inventors clubs for over 15 years.
Reserve your spot now for upcoming NIC monthly meetings, click the link for RSVP.
In case you missed the November NIC meetings or you’d like to watch or hear it again, visit this link:
The Got Invention Show features a 30-minute interview where an inventor promotes an invention, seeks a licensing deal, or looks for distribution opportunities. Host Brian Fried focuses on his guest’s challenges and solutions. He asks about their journey, where they are right now, and what will come next. He invites guests to offer words of wisdom to viewers and listeners.
In one of the past episodes of Got Invention Show, we had a chance to meet Karen Tenenbaum of Money Masters.
Karen is the founder of Money Masters, Inc. and co-creator of Walter the Vault. Walter the Vault is an animated character who promotes financial literacy for children. He focuses on how to save reasonably, spend responsibly, invest wisely, give appropriately, and budget regularly. The ultimate goal is to teach children how to make responsible and informed decisions about money. You can visit our website at www.walterthevault.com for more information.
Karen is the co-founder and served as Chairman of the Board of Directors for Commerce Plaza, Inc., a non-profit company promoting financial literacy, that is now part of the YES Community Counseling Center. Commerce Plaza introduces children to the business community in order to prepare students for employment and a successful future. “The Children’s Business Center” teaches elementary students about the free enterprise system, careers, economics, citizenship, and the general skills needed in the world of work. Through a hands-on and simulated work environment, students receive paychecks, make bank deposits, write checks, operate businesses, prepare cost sheets, think critically and work as a team.
Karen regularly presents to multiple professional groups on both IRS and NYS tax issues, as well as on issues relating to financial literacy. Karen spoke on the Passage to Profit Show on iHeartRadio discussing how she teaches kids about financial literacy. She has been interviewed by Joe Connolly, WCBS 880 Radio, for their Small Business Spotlight, as well by Fox5 on “Speaking to Children About Money” that aired during Financial Literacy Month. Karen served as the inaugural Chair of the Financial Literacy Committee of the NYS Society of CPAs, Nassau Chapter. Karen has done multiple presentations and created a Family Financial Literacy Fair for the NYS Society of CPAs, Nassau Chapter, the Girl Scouts and the Boy Scouts. Walter the Vault has been showcased at the Long Island Children’s Museum Kidz Expo. Karen has been in news articles, on local cable television shows and radio programs, including Money Magazine, Long Island Business News, The New York Times, Newsday, The Trusted Professional, News12, Channel 12 Job Line, Bloomberg Radio, Telecare “Family Comes First”, Bonnie D. Graham’s “Something to Talk About,” and Govs Radio.
An attorney for over 35 years, Karen and her team represent taxpayers in IRS and NYS tax matters. Karen is a frequent speaker on IRS and NYS tax issues for numerous professional groups on topics such as New York State residency, IRS and NYS collections, and more. Her knowledge and leadership have established her as a leading tax attorney in the NY area.
She developed an interest in promoting financial literacy from her first-hand experience helping others with tax problems. Visit www.walterthevault.com
Would you like to be our guest on the Got Invention Show? Schedule your interview today to promote your prototype or product now available for sale to now reaching 100 million households!
You and Host Brian will do a 28 minute interview and once the interview is completed, you can use it for your website and social media and we air on Amazon Fire, Roku TV, YouTube TV and next month we will be on Apple TV!! The podcast audio version of your interview is played on Spotify, iHeartRadio, Google and Apple Podcasts and Amazon Music! Small fee, great promotion for you and your invention!!
An overview of a trademark application and maintenance process
Step 1: Is a trademark application right for you?
Trademarks, patents, copyrights, domain names, and business name registrations all differ, so it is important to learn whether a trademark is appropriate for you.
Step 2: Get ready to apply
- Mark Format
- Identification of good and/or services
- Filing basis
- Trademark attorney
- Do I have to use one?
Step 3: Prepare and submit your application
- Set up a USPTO.gov account
- Monitoring application status
- Applicant address and email address
Step 4: Work with the assigned USPTO examining attorney
- USPTO reviews application
- USPTO issues letter (office action)
- Applicant timely responds to letter
Step 5: Receive approval/denial of your application
- USPTO publishes mark
- Registration of certificate issues for applications based on use
- Notice of allowance issues for application based on an intent to use the mark
- Applicant files timely statement of use or extension request
- Applicant does not file timely of use or extension request
- USPTO reviews statement of use
- Applicant response to fails overcome all objections
Step 6: Maintain your registration
- Registration certificate issues
- Monitoring registration status
- Registrant address and email address
- Protecting your rights
To learn more about the trademark process, read here. https://www.uspto.gov/trademarks/basics/trademark-process#step1
“ Every person has their way of doing things, be it in sports, entertainment or politics. I personally prefer doing my preliminary search and applying for a provisional patent myself.
This way my idea is protect and have a date. Then I will engage an expert for a thorough search and the rest of the patent journey will be conducted by expert.”
Steven Ogare, Inventor and Member of National Inventor Club
Are you ready to pitch your invention? Now Casting for the Got Invention Show’s “Pitch Your Invention” Mini Series!
Pitch Your Invention is still casting inventors with inventions for a special media series introducing yourself and demonstrating your invention with a 2 minute pitch!
-We’re looking for inventors to give their best 2 minute pitch of their product or prototype and be a part of our upcoming program! (no cost to you and recordings happen from your webcam into our studio).
-If you’re selected, you can be a part of our episodes that may air on Amazon Fire, RokuTV, YouTube TV, Spotify, iHeartRadio, Google and Apple Podcast and Amazon Music! If you’ve already submitted, please do not apply again, Brian is starting to feel better and will get started soon!
– If you have yet to apply, click here: www.pitchyourinvention.com
Got Invention Show
Check out Brian’s latest book just published!!
Do you have this great idea for an invention in your head? Are you ready to learn how to make money with that invention?
- This book is about taking action so you can take that great idea out of your head and make smart decisions to help you make money. Here’s how it works:
- We’re going to walk through the steps of getting started with your big idea.
- We’ll also explore how to turn your idea into a real prototype.
- We’ll discover resources to protect your ideas and, of course, help plan your future.
So why did I write this book? I want to provide the opportunity for more inventors to learn the process it takes to experience the invention brought to life. Not only to make your invention a reality, but to learn how to earn from your inventions.
A shop for Inventors, innovators and patent holders - Check out InventorMart.com!
This is a shop for you! You’ve worked hard on your invention, now you can wear DESIGNS & MERCH made with you in mind! Find shirts, hoodies, sweatshirts, hats, stickers, blankets and over 1,000 unique items to show that you are proud to be an inventor. check out InventorMart.com
About Brian Fried
Brian Fried, serial inventor with 13 patents, is an award-winning authority in the invention industry, a sought-after celebrity guest speaker and an advocate for the invention community. As Chief Invention Officer of Inventor Smart and Expert Inventor Coach, Brian represents inventors at every stage of the invention process, project managing new up-and-coming inventions from idea to manufacturing or as an invention licensing agent to secure deals with major brands and earn royalties for inventors.
Brian is the founder of the National Inventor Club where guest speakers focus on topics of interest to the inventor community.
He is a 3x author and his 3rd book, How to Make Money With Your Invention Idea was just published in May 2022. He also hosts Got Invention Show and Radio where you can watch on RokuTV, Amazon Fire, YouTube TV, and you can hear his podcasts on Spotify, iHeartRadio, Amazon Music Google and Apple Podcasts. Brian recently launched a new merch line with various designs for inventors, InventorMart.com
You can visit Brian’s personal website at BrianFried.com and check out his invention that have been licensed where he earns royalties and manufactures others that he sells on his own currently found in retailers.
Brian’s Inventor MasterClass is now available! If you want to evaluate your invention, find out if licensing or manufacturing is the right decision for you, sign up for an eLearning course at InventorClass.com. National Inventor Club Members receive a discount. For inventor resources, more information and additional tips, visit Inventor Smart.
Sponsorship opportunities available for future newsletters. If you’d like to promote your product or service please contact email@example.com or call (631)565-7074
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Brian and the Inventor Smart Team