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How to License/Sell an idea to a Company Without a Patent

The thought of someone claiming ownership of your idea can be very frightening for everyone. At the same time, bringing an idea to materialization needs input from other people. Appraisal of a product cannot be avoided and requires the services of an industry expert. You also need to work with a manufacturer to fabricate the product and a distributor to get it across to your customers. This is the reason for applying for a patent.

As helpful as a patent is, applying to get one usually costs a lot of money and takes a lot of time, often years before they are given to the interested party. As an entrepreneur, this is a luxury you cannot afford as there is a need for you to put your product on the market as soon as possible.

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It is good to note that there are ways to prevent your ideas from being stolen without having a patent. This is a list of some of the different approaches you can take to prevent this theft and you will be learning about them below, as well as all you need to know about licensing.

What is licensing?

Licenses are of various forms depending on where they are to be used. Regarding an idea, licensing describes a situation where you choose a prominent, well-funded company and then give this company the right to put your idea into the market while the company pays you royalties. Licensing agreements usually differ from one to the other.

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Royalties are paid four times in a year, and the amount is an agreed percentage usually between 3 to 10 percent which may be paid out per unit sold on the wholesale price. Royalties can add up quickly when you consider the large volume turnover of large companies.

The easiest way to get funding for your idea is to license it to a company with good financial backings. This way you can harness all their resources while also making use of their various production teams, their distribution chains and your idea is also able to cover a wider area depending on the number of outlets the company has.

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Licensing helps to limit the amount you will need to invest in manufacturing processes and facilities or even in establishing stores or business outlets. Licensing will usually give a means by which you can expand your product into more stalls and also give you the opportunity to gain benefits in the form of royalties.

Some benefits of licensing are as follows:

  1. Since you are giving your license to an established company, you reduce the initial risk which is involved in entering into a new market as the company already has the experience required in determining the best way to put the product into the market.
  2. If you agree to receive royalties on the product, depending on the agreement you reach with the company, this royalty can continuously come in over a long period usually years ahead.
  3. It helps to reduce the initial costs you would have incurred while funding the manufacturing, distribution and getting the patent on the idea.
  4. In some situations, the company which you issue the license to may decide to pay a part of the royalty before any sales is made.
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3 Ways to License an idea Without a Patent

The following are some of the ways to license your idea without the need of a patent.

1. Perform basic fact finding operations

Investigating anyone you intend to work with is a good way to prevent any disagreement which may arise during your partnership. Checking online for any criticism of the way they handle their business or a look at their overall record for may help you in deciding on some areas which you may need to ask about as not all information may be accurate.

You can consult a legal practitioner who will help as you also apply these three legal tools:

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a. Non-compete agreement

A Non-compete agreement is usually used when you hire someone on a temporary basis to prevent them from doing anything or setting up any business which can be a threat to yours. You may need to pay a fee for them not to compete for this period. A non-compete agreement will usually define the period over which the agreement is valid, the target market and the geographical area in question.

b. Work-for-hire agreement:

If you surmise that any work you have paid for belongs to you, this is wrong. For a work to be rightfully yours, you will need anybody you are hiring to sign a work-for-hire agreement. The agreement still lets the person be listed as a co-inventor, but they will have no right to any development that they come up with. The agreement may include the project timeframe, a work schedule, payment details, etc.

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c. A non-disclosure agreement (NDA)

This agreement is used in a case where you have given details to an employee whom you require to be kept a secret. This agreement ensures that they are unable to divulge this secret and gives you the right to sue for damages if they do otherwise. You can also get a court order in a situation where the information is to be used which does not benefit you.

2. Visit the U.S. Patent and Trademark Office for help

There are multiple ways to keep your ideas safe while you wait for a patent to be issued. One of them is a provisional patent application. This can be found on the internet or you can make use of the Invent + Patent System. You can also visit any USPTO office or call center which are available along with people to assist you and also answer any question you may have.

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Compared to the cost of a patent which can run into thousands of dollars, getting a Provisional Patent Application usually costs a bit more than a $100. This PPA can offer protection for about one year and it gives you the right to indicate a “patent pending” on your idea. Within this year, it is a good idea to learn more about your idea, the market and other important aspects of your business.

Another good advice is to get a trademark or a logo to use in identifying yourself as the owner of an idea. Although this may lead to costs amounting to hundreds of dollars, it is quite easy to apply for it online. The ease with which an idea can be associated with a name makes it easy to form a close relationship between your product and idea using a trademark.

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3. Establish a mutually beneficial relationship with your competitors

Developing a relationship which will mutually benefit both you and your competitor is a good way to prevent theft of your idea. Most competitors will have little motivation to steal your idea and most likely will not see you as a threat if they are already profiting from the success of your business.

You can maximize the effectiveness of a legal document by consulting a legal practitioner when you need to use it and this combined with the tips given help to protect your idea even without a patent.