Starting a business is a significant undertaking. Licensing your technology idea might make good sense if you’re more interested in having your research or invention commercialized for use than in creating a startup.
A startup may also consider licensing a technology or a right to use a technology in a specific field or geographic area to obtain funding for its core product.
Life science companies, particularly those developing therapeutic products, generally use licensing as a sales and marketing strategy for their products due to the very significant costs of development and clinical trials, as well as the eventual marketing, sale and distribution of the product.
Licensing a technology may also be used as way to create an exit for a business, if it becomes clear that the business cannot fund the marketing, sales and distribution of the product from existing resources and additional financing is not available.
Sometimes, shareholders will request that management or a third party attempt to license or sell the technology to provide some return on investment to shareholders in “stalled or failed” technology businesses that have been backed with equity investment.
Licensing proceeds usually involve a fee paid upfront to the inventor through a signed licensing agreement between the parties. These agreements may also include milestone payments that come due as the technology or innovation is commercialized, and/or a royalty fee set at a percentage of the revenue or earnings from the eventual sale of products or services.
The amount of the fee upfront, milestone payments and royalties are negotiated between the parties and generally reflect the effort and stage of commercialization. In other words, the more developed a product or service, the higher the proceeds tend to be.
There exist a number of organizations interested in licensing innovative technology and inventions that complement their existing products and services for a specific purpose or market. The organization that licenses the technology usually assumes all responsibility for subsequent costs of developing, marketing, selling and distributing the product or service.
If licensing is the preferred choice for financing your idea, research who the interested partners are likely to be and seek guidance from (or engage) one of the organizations above to assist you with the process.
Federal Partners in Technology Transfer (Government of Canada). Retrieved April 22, 2009, from .
Technology Transfer Tactics. Retrieved April 22, 2009, from http://www.technologytransfertactics.com/.
The Association of University Technology Managers. Retrieved April 22, 2009, from .
The Licensing Executives Society. Retrieved April 22, 2009, from http://www.usa-canada.les.org/.
Canadian Healthcare Licensing Association. Retrieved April 22, 2009, from http://www.chlassoc.com/.
CASTLE Worldwide. Certified Licensing Professionals Registry Search. Retrieved April 22, 2009, from http://www.castleworldwide.com/clp_cms/asp/registry_search.asp.
Pharmalicensing.com. Retrieved April 22, 2009, from http://pharmalicensing.com/.