I’ve got a million-dollar idea that will make me rich. How many times have you heard this? In reality, it’s a long shot to make money from an invention, much less become a millionaire from it. The odds are slim and obstacles are many. To find out what inventors think about licensing and their own experience we conducted an online survey on the topic and compiled a snapshot of the results.
This survey was conducted to uncover some of the beliefs that many inventors feel about licensing their inventions. The community of inventors we surveyed have had varying degrees of success when it comes to creating a product. They’ve manufactured anywhere from 1-20 products each, covering a variety of different inventions. All of them have taken their inventions to market but only a small percentage of those surveyed found success in licensing.
Some of the responses we received on why companies have not licensed their inventions varied.
“A lot of stars have to align to get a licensing deal: you need to find the right company to present to, the right person in the right company, have the right product, be the right price, and be at the right time.”
“None of the earlier inventions had enough market potential. My current invention had 2 licensing offers that I passed on.”
“I turned them down when they tried to change the terms immediately before licensing.”
“Not enough people in the company signed off on it.”
There’s more to licensing than just delivering a product. It’s about marketing, research, funding and a little bit of luck. Those inventors surveyed invested anywhere from $2,000 to $250,000. Most of our inventors surveyed wrote the patents themselves, but a few had help from a professional.
Almost everyone believed that you CANNOT license just an idea only, but they’re split right down the middle on if you need a working prototype to get a licensing deal. One of our inventors noted, “if people question whether a product is really viable, then a working prototype can put their mind at rest and peak their interest.”
None of the parties surveyed used a third party to represent them to license their products. “Most companies will not promise to protect your idea. Submitting an unprotected idea can cause full loss of value of your product – companies may get spooked that someone else has seen it and could legally copy it and you may not be able to get a patent if you have shopped it in public without a provisional. For this reason, if no patent protection is filed for, it is crucial to at least get a signed NDA (which many companies will not sign)” one inventor wrote. But 10% of the inventors have used a third party to invest with, that split royalties with them, while the majority launched their inventions on their own.
In their own opinion, we asked what percentage of inventions get a licensing deal? Almost all those surveyed believed it was less than 5% but they differ when we asked what percentage of licensed products make money for the inventor. The answers varied, but the most common answer believed it to be 70-90%
What’s the most helpful advice these inventors have received in regards to licensing? Here are a few responses:
- Use product category requests from various companies, pinpointing their needs.
- Have a known entity write cease and desist letters, and don’t be afraid to license.
- While you can hire experts to help with tasks, you need to educate yourself enough to determine if the third parties are doing good or bad work.
- I have not paid for a third party to represent me. I have found that there are many ways to present your idea yourself for free….Focus on the problem you are addressing and how your product provides a solution.
This week we asked the inventors opinions. In our next issue we hear from the other side, the licensing agents and product scouts, and we ask them why the success rate is low for inventors.