Help needed licensing tech...

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shobley
 
Posts: 184
Joined: Fri Sep 07, 2007 5:16 pm

Help needed licensing tech...

Post by shobley »

Does anyone know what the guidelines are for working out a license fee on tech?

I was recently approached by a third party looking to market a product based on my design. There are no patents involved and I would prefer it if things could stay that way.
Are there rules on calculating a license fee?

These products will be custom built as required - could sell in the $1500-2000 mark. It's a niche market, but I've been contacted by about 30 people this year looking to have one built.

Any help would be greatly appreciated.

Steve

dmcole
 
Posts: 37
Joined: Thu Dec 25, 2008 3:36 pm

Re: Help needed licensing tech...

Post by dmcole »

shobley wrote:Are there rules on calculating a license fee?
Easy answer: Yes. It's 15 percent.

Not-so-easy answer: No, no rules. You should probably work closely with the manufacturer to determine his/her costs: Are they going to have to purchase/create tooling (could be PCBs, could be a sheet metal brake, could be a CNC, could be a plywood jig) to build this widget? How many units should the tooling be amortized across? A year's worth? Two years? What are the out-of-pocket costs of material (should the PCBs go here?)? Is the maker doing this as a hobby or is he/she in business to feed children and pay taxes? Should they charge an hourly rate for construction? Should the construction costs be figured as a fixed portion of the price and then the maker's profit computed on top of that?

A middle ground might be to ask for a sliding scale: a smaller percentage on the first x units (10 percent on the first 10?) and a larger percentage on a greater number of units (12 percent for the second 10, 15 percent thereafter?).

You want to hit a sweet spot with the maker where they don't feel like you're ripping them off while you don't feel like they're ripping you off.

Easiest answer: Give them a two-year, exclusive license for a fixed amount (a 1x, 2x or 3x multiple of the gross price). It's two years so that if the thing takes off, you can switch to a percentage of the gross; it's fixed so that you don't have to audit their books. Put the money in a 24-month CD; when it matures, you either spend it on a lawyer to cook you up a better deal (if it floats) or you buy yourself a nifty toy (if it sinks).

Standard disclaimer: I'm not a lawyer, don't even play one on TV, this should not be construed as either legal or business advice. Hell, I'm just a guy on the Internet with a project I don't want to work on on a Sunday afternoon and typed here instead.

\dmc

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