LICENSING AND LICENSING AGREEMENTS IN A NUTSHELL
Also
The Royalty Deal
By
Attorney
At Law
(See Notice of Disclaimer at Bottom of Page)
[Please note: If you wanted LICENSING VERSUS FRANCHISING, press here to change].
Who is Attorney
·
·
He
represents clients all over the world in establishing the exploitation legal
architecture to manufacture and market services and products through licensing.
·
He
has represented hundreds of client in helping them launch or further exploit
the value of their idea, service or product, and he does so at fees those are
fair, reasonable, and more than competitive. (NOTE: Ask him how he can do the
legal work for less than half the cost that a competitive major law firm would
charge.)
Preamble
Licensing Is A Worldwide Phenomenon. I have represented clients in
many countries around the world and most of the states of the
Introduction
With My Personal Thoughts
- I have represented inventors and people that have
the rights to products for over 20 years.
The inventor often is a “different breed of cat” so to speak. They are fearful and paranoid that
someone will steal their idea, and well they should be. But often they become paralyzed by these
fears and do nothing about getting their product to the market. The fellow who invented the cordless
phone came into my office years ago, and suffering from these fears he
took the invention to the grave while others turned it into a multi-billion
dollar market. Think of what this man did to his family! I understand these people, and they
have to know that there are ways to minimize these risks by making the
stealing of an invention or idea such a potentially successful lawsuit
with such huge damages that thievery is deterred.
- To protect yourself you need (1) the right legal
structure and it is not always a license structure, (2) excellent
negotiations, (3) protective documentation, and (4) you have to put the
fear of God in them that if they mess with you no matter how big they are
they will pay an unacceptable price.
This last “attitudinal” point is extremely important, and it comes
from facing them up “eyeball to eyeball”.
[The representative of a large Chinese manufacturing client
remarked to me after a negotiation on distributing a product in the
- In some cases but not all, I like to see
inventors hook up with (a) entrepreneurs to move the product along, and
(b) investors who can provide the capital to either fund operations or
seed operations so that other methodology is used for funding. Remember this: Seldom will investment
capital follow an inventor; it will follow an entrepreneur (i.e. management)
with an invention. Investors invest
in people first, products second.
Most of the time, the inventor is the worst person to be the
entrepreneur, but unfortunately he/she would rather not get a profitable
deal done than share the profits with a good entrepreneur and an investor
or two. The inventor can be
protected in these arrangements, so that if the deal does not work out
(i.e. is not profitable to all) he/she can get out of it. I have noticed in some situations that
if the inventor is running the show, then the tale is wagging the dog and
sometimes that dog “won’t hunt”.
- However, in some situations I have had clients
who did it all and were highly successful. They set up the manufacturing, the
marketing, and the distribution.
Side Notes:
·
[MOST IMPORANT POINT TO REMEMBER: You must create and develop a TOTAL STRATEGIC
PLAN as to the essential elements to take your product from where it is now to
paying you and your family profits. To
be successful you cannot say, “I’ll do this and then I’ll do that and see what
happens, or I will take care of that problem when the time comes”. [When I began to
advise and help clients to develop a Total Strategic Plan, I saw a consistency
in results that I had not seen before.] After over 20 years of practicing
law in this area, I am satisfied that this is the only path to follow unless
you feel very lucky. If you do not have
a Total Strategic Plan, then you are probably unknowingly praying and waiting
for a miracle. You must take control in
an orderly and organized fashion to achieve your goals by faithfully executing
each of the elements of your PLAN. If
your product has any place in the market, then you will have success!]
·
[WARNNG! See warning below on use of form license
agreements. The people who sell these
are charlatans preying on the people who think they do not have money to pay an
attorney. They may as well be selling
scalpels, so that you do not need a surgeon and you can do your own heart
transplant on yourself. They are
“low-lives” who cause unbelievable harm.
How would anyone who is not educated in licensing know what form
agreement to buy?]
·
[WARNING! A warning about invention marketing
firms: They are 99% frauds and will only take your money and give you B.S.
and nothing more. What makes you think
that you could ever find that 1% that is not a fraud? You should NEVER pay an upfront fee to
evaluate your product.]
·
[WARNING! If you are looking at a
consultant’s website and the website does not have a street address, I suggest
stay away! I was just looking at a
website of McGrow Consulting on “franchising”.
I do not know anything about them, except they do not have a street
address where you can tell where they are located and they only have an 800
number so there is no area code to locate them.
I always sense someone is up to “no good” when they seem to be hiding
through such non-disclosure. McGrow
might be the best in the world, but they make me uncomfortable. I only use them as an example of things that
worry me and I warn people against things that worry me. I’ve been in this business over 20 years, and
a lot of things worry me from the “smell test”.]
·
[WARNING! An additional warning is that doing business
with firms that set up overseas manufacturing in return for a share of the
profits or marketing rights to certain territories is very treacherous
business. Their contracts are wide open
and allow them to cheat you on the price you pay, the cost of the manufacturing
utilities (e.g. injection molds), and they are usually very short on accurate
accountings. Stay away! You can get to the offshore manufacturers
without going through these scammers.]
·
[WARNING! Another warning about marketing firms: They will exact a large fee, and for that fee
usually give you a thick pile of boiler
plate papers which have your name and product name inserted and that tells
you nearly nothing…except that they know all the buzz words of marketing. After
they deliver this “marketing plan” to you, then they ask for the “big bucks” to
execute the plan. Many do not know how
to execute the plan; they only know how to fill in the blanks on the
boilerplate-marketing plan.]
·
Testimonial Letter About Me (Requires
Adobe Reader 7.0). From time to time I get nice emails or
letters from clients, and I have never posted them on the website. I have posted a most recent letter at RealtyFlex. just to see if it is helpful to you who are
wondering about me…and who wouldn’t wonder in this crazy internet world. Let me know what you think! Too self-serving? Bragging? But someone said in the sports
world, “If you can do it, it ain’t bragging.”
That’s kind of the way I look at it after 20+ years of doing it.
·
Nevertheless, whatever path is taken, my
job is to maximize the profits of the client inventor or person who has the
rights to the invention, product or idea.
End
of Side Notes
_____________________________________________________________________
Coming Soon!
A NEW BOOK BY ROBERT TOWNSEND
LAWYER’S GUIDE: Advising Clients on New Product Exploitation
Here is the number one question I
hear everyday from people who have new products or ideas: “How do I begin? How do I get started? Where do I start?”
I have heard that question five
hundred times at least. So, I am
preparing an e-book that will answer that question, and lead the reader from
the creation of the idea to depositing the first check derived from the profits
of the idea. Unfortunately, many people go to the
invention advisory companies and are immediately ripped-off for at least
hundreds of dollars and later usually thousands of dollars. I decided
to write this book, because I talk to other lawyers who hear this same
question, and they don’t have the answer.
Then they see their clients turn to the invention fraud companies in
desperation just to do “something”, hoping that maybe this invention company is
not a fraud.
I am writing the book in easy to
read language so that the lay person can understand the book as well as my
brethren lawyers. The date and price
will be published soon. The book will be
priced so that the price is a fraction of what you would pay fraudulent
invention firms and receive little or nothing.
In this book you will get extremely valuable, hands-on, information
based upon my years of experience in this area.
If
you wish to be notified of the publication date, please send me an email today
at bob@townsend.net. There is no obligation to buy, but you can
look at the Table of Contents when it’s available and see if this book is for
you.
_________________________________________
The Licensing
or Royalty Agreements
- Licensing and royalty agreements are treacherous areas
of contract law, because not only must the terms of the license or royalty
agreements be clear and understood by all parties, but the mechanism for
securing payment must also be fully understood and implemented so that the
licensor or royalty holder is assured of payment; i.e. that the licensor
or royalty holder has more than just an agreement to receive payment but
that he in fact receives payment. This sometimes is a highly complex area
that requires securitization techniques and knowledge of the utilization
of banking instruments where they can be of help. Notwithstanding the above, it is also
imperative that the agreement is clear, concise and user-friendly,
agreements that a non-lawyer can clearly understand. This is helpful in
the event that there are later disputes that may arise between the
parties.
- Multiple Point Agreements. Often
times to get the job done we include in a single agreement various
combinations of manufacturing agreements, marketing agreements,
distributions agreements, licensing of proprietary rights to products,
licensing use of copyrights, trademarks, and trade names. In fact, most of the time only a license
agreement will not get the problem solved.
In addition there are issues of utilizing joint ventures,
partnerships, limited partnerships, limited liability companies,
corporations and franchises. All of
these matters have to be considered as tools to be used in (i) protecting
the proprietary rights of the client in the licensed product, and (ii)
maximizing profits for the client and his family.
Use of Form
Agreements
- Some people think that all they have to do is
purchase a form of a license on the Internet, fill it in, and they will
have an effective licensing agreement.
Using a form is an invitation to disaster! If you are not an
experience lawyer in licensing, how would you ever know what form to
buy? So you buy one, and try and
adjust it. Once you have a form in
hand, then you have (a) to know which paragraphs and language apply to the
matter at hand, (b) what is left out of the form that is essential to full
protection, and (c) whether this is the best form for this situation
(often the forms do not apply though they look like they may apply). The people who sell these forms are in
my opinion committing fraud on the public in implying that all one needs
is to buy a form and their legal licensing issues are covered.
- I have seen the use of forms, and the outcomes
are almost always disastrous when a dispute arises…which it always
does. Also, when one needs funding
for the sub-licensing of a product, a master form agreement is not the
best thing to put forward to your funder, as the funder’s counsel will see
what it is (i.e. an inadequate form agreement) and usually not protective
of the proposed investment; so the investment is not made. If one is going to sell stock in a
company with a license as an asset, a form agreement will usually not be
helpful and potentially prevent the completion of the funding. It is always better to do it right from
the beginning, as the license agreement is often the foundation of a whole
business. If the foundation is not
right, everything that follows may ultimately reflect the initial
foundation problem. Stay away from
forms!
- Form Confidentiality Agreement. Often an investor to save money will
take a form
confidentiality agreement” off the internet or from a book and get it signed by the party who is going to look at his invention. Please note! These are important agreements, and should not be taken lightly as these agreements improperly prepared will open the door to the theft of the invention or the idea. In some situations where the invention is going to be used in conjunction with another product, the owner of the other product may wish the inventor to sign a confidentiality agreement protecting his product, so there are cross-confidentiality agreements. READ THE AGREEMENT BEFORE SIGNING! In the other parties agreement you may give up control over your own invention for the term (sometime a long term) of the confidentiality agreement. Get confidentiality agreements before the meeting, so that you can look at them before you have the meeting to discuss the invention and its application.
Negotiating The
Licensing Agreement
- Negotiating the licensing agreement is as
important as creating the Licensing Agreement. Successful negotiation of a license
agreement is largely a matter of experience. Successful negotiations will (a) achieve
the clients personal and monetary goals, (b) make sure that the client in
actually paid with cash money in his/her bank account, and (c) place the
client in the most advantageous position in the event there are dispute
problems. I have successfully
negotiated many types of licensing agreements.
- I have lectured in “Negotiation” and I’m
presently writing a book on the subject.
Not only do I have extensive experience in negotiating domestic
license agreements, but also because of my international law experience in
33 countries of the world I have global negotiating skills that I am able
to utilize on behalf of the client. The negotiation culture of each
country is different, and that sometimes-critical fact must be taken into
consideration. At last note, a
successful negotiation should make the parties want to do business with
each other more than they wanted to before the negotiation began.
Funding Through
Licensing
- The creation of a license can often be the
genesis for funding of the manufacturing or the marketing of a product or
service as the funding force of an entire project.
- Because of his over 20 years of international
experience, I am often capable of generating strategic alliances and
foreign licensees for many situations. I will often assist the client in
utilizing the licensing process as a source of funding for the client’s
distribution of the licensed product. For example, one may arrange the
licensing for a foreign territory that provides sufficient capitalization
for the client to distribute in the
Contacts May Be
The Key
- Often the key to getting a product to market is
having the right contacts. Because
of my experience, this is where I may be able to help you. Also, lawyers who know what they are
doing have a special avenue they follow in generating the required
contacts. There is no getting
around the fact that it is usually an absolute necessity in the real world
to generate these contacts, and this can be done…both domestically and
internationally. Experience and
perseverance are essential!
Advice
on Licensing and Royalties
·
Contact:
- Law
Offices of
Hampshire House
11944 Mayfield,
- Voice (310) 207-0180
- Fax (310) 388-5690
- SKYPE ADDRESS: boblama
- E-mail: bob@townsend.net
Main
Web Site: Law Offices of Robert Townsend Here is information on the law practice.
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