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4 Tips for Negotiating a Licensing Agreement

by on Category: blog

Once you have a well-developed idea, you may decide that licensing it is your best option. This means you’ll have to negotiate a licensing agreement, which can be a long process with many ups and downs.

Licensing agreements are complex documents that outline every aspect that could go right or wrong with the agreement. If you’ve never negotiated a contract before, consider asking a professional to help.

Here are four tips for negotiating licensing agreements:

Know Who You’re Negotiating With

Find out all you can about your licensee’s business — strengths, weaknesses, what products they sell, and where they sell. Most likely, there will be things that you both like and dislike about the company, just make sure the good outweighs the bad. The more you know, the stronger your bargaining position will be.

What’s most important is that the licensee is a good fit for your product or idea.

Know What You Want

At all times, you need to have a good grasp of what you want from the agreement, including where you can be flexible and where you will stand firm. Keep in mind that the licensee also has a position and has certain needs, wants, and expectations for the agreement.

A good place to start is with a term sheet that outlines exclusivity, royalties, sales, scalability, quality control, and payments. If you and the licensee can agree on the overall big picture, you will likely be able to work through the contract’s intricacies.

Always Agree to the Terms

It may seem obvious, but don’t agree to anything until you feel comfortable with all of the terms. But, try to be flexible when you can. Neither side will get everything they want, but don’t give up too much too early. Hold something back initially so you don’t have to sacrifice too much.

Patience truly is a virtue in contract negotiations, which can take a long time. Often, there are so many aspects to consider that they can’t all be addressed at once, so multiple discussions are held. No matter how long it takes, never give in to pressure to sign a contract before you’re ready. 

Stay Positive

Even though it may feel like negotiations are taking forever, always keep a positive attitude and help set the tone early on that you’re a team player and committed to coming up with an agreement that works for both sides.

Also, keep the lines of communication open. If you have questions or concerns about any aspect of the contract, be sure to discuss it with the licensee.

Negotiating a licensing agreement can seem overwhelming to newcomers. A professional can help you understand some of the complex language in the contract and navigate the entire process to ensure that your best interests are protected.

If you have an idea that you’re ready to license, let us help. Call us 24 hours a day, 7 days a week on the inventor’s hotline at 888.864.1760 or email us