Tips for Inventors B
On Negotiating Licenses
by Richard C. Levy, president, Richard C. Levy & Associates LLC
usiness is about relationships, not transactions. Getting what you want does not have to be at another person’s expense. You can get what you want and still let your licensee come out ahead. Hopefully, you are entering into a long and mutually beneficial relationship. As our political process demonstrates, societies thrive best not on triumph in domestic debates, but on reconciliation. Compromise is OK. Unfortunately, not everyone you meet at the negotiating table believes in fairness and flexibility. Unless I am totally comfortable with the management and company, I walk. A bad deal is not worth it under any circumstances. Prior to discussing an agreement, I want to know: • Does the company license product? If so, I want to know which items and from whom. I will typically reach out to the inventors. If there is no inventor product, I need to find out why. Some companies appear to welcome submissions just to see what is available. If I am told an inventor list is confidential, I am out of there. • Is the company willing to pay a non-refundable advance and a fair royalty on net sales? There should be no problem informing you about the range of advances, royalties, and guarantees (if any). Many inventors suffer from “sellitus.” They will license to anyone that shows interest and under any terms. Not me. No amount of advance, royalty, or guarantee is worth making a deal with a company if I am not 100 percent confident in its honesty, stability, and ability to deliver. At the end of the day, contracts are only as good as the people that sign them. After negotiating licenses for 37 years, I have developed some guidelines; among them: 1. Negotiate yourself. No one will do it better. No one has more to gain or to lose. Have a lawyer as an advisor. 2. Thou shalt not committee: Any simple problem can be made insoluble if enough people opine. 3. Negotiate with executives: Try to negotiate with a decision-maker.
SPECIALTY TOYS & GIFTS
Lawyers do not make business decisions. They see themselves as protecting executives from themselves. 4. Two plus two is never four: Exceptions always outnumber rules. Established exceptions have exceptions. By the time one learns the exceptions, no one remembers the rules to which they apply. 5. If it ain’t on the page, it ain’t on the stage: Confirm conversations with a memo to eliminate misunderstandings about who agreed to what and with whom. Save your emails. 6. When in doubt, ask: Asking dumb questions is easier than correcting dumb mistakes. 7. Keep agreements short and to the point: The length of a contract is inversely proportional to the amount of business. 8. Do not accept standard contracts: Treat boilerplate language as variable. Nothing is as temporary as that which is called permanent. 9. Think ahead: Not until a contract has been in force for six months will its most harmful terms be discovered. 10. Have fun: The moment I stop enjoying a negotiation, I pick up my marbles and go home. A license is a form of marriage. Both parties must be compatible for the relationship to succeed. It is the relationship that will sustain the partnership, not the contract. But falling in love and getting to the altar for the “I do” moment are two different things. ● Richard C. Levy, president, Richard C. Levy & Associates LLC, specializes in collaborative invention, product development, design, and licensing. In business for more than 35 years, Levy’s licensed products include one of the best-known and successful toys of all time, Furby (Hasbro). Levy and co-author Ron Weingartner have updated their critically acclaimed, seminal work, The Toy and Game Inventor’s Handbook as an e-Book for Amazon’s Kindle.
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MAY/JUNE 2014