In the past several weeks, a number of inventRight graduates who are currently negotiating licensing deals have approached me for advice. The phrase “the art of the deal” exists for a reason – negotiating a contract with a potential licensee can be painful, or it can be productive. Here’s the advice I believe is most important.
First, approach the negotiation with the right attitude. You’re not preparing for battle. Believe, “We can figure this out, and we’re going to do so by working together.”
Understand that some things can be worked out through e-mail, but other issues need to be addressed over the phone or in person. It’s important that you build a working relationship with your potential licensee.
Pick your battles – do not fight over every single issue. And furthermore, hammer out the details over larger issues before smaller ones. What’s a large issue you need to address immediately? The performance clause.
In order to create a realistic performance clause, you will need to know both the (closely estimated) wholesale price of your product and projected number of sales for your product. The company may be reluctant to release this information, for whatever reason. Maybe they don’t know either. Explain to them why you need a performance clause. You want to protect by having the right to free yourself from your contract in the event that your product does not meet sales quotas.
Understand that it is possible to estimate these numbers on your own, as well. Ask how many stores your product will be sold in and calculate sales totals (for example, if each store sells one item a week). This method isn’t perfect, but it will help you come up realistic numbers.
Understand that the company may be new to creating licensing agreements – you may need to walk them through the steps and carefully explain them. Be patient.
Negotiating a contract is like dancing. Don’t step on your partner’s toes. And keep it upbeat!
Stephen Key is a successful award-winning inventor who has licensed
over 20 products in the past 25 years. Along with business partner
Andrew Krauss, Stephen runs inventRight, a company dedicated to educating inventors about selling their ideas and the skills needed to succeed. You can ask questions and get advice on the inventRight forum, check out the resource center, and listen to the weekly radio show on inventing. Get In The News, list your invention to have media outlets find you for news stories.