licensing business plan

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Why business licensing is important and how to license your business

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For small business owners, determining how to license a brand might seem like a foreign realm. How do you know who to work with and when it’s the right time? And most importantly, how do you navigate the business licensing process so you scale your business while still protecting all that you’ve built? Your brand is your baby. You’ve spent years of your life and a significant investment developing it. Once you reach success, it might be hard to give the reins over to another organization that you know nothing about.

All of these questions and feelings are completely natural and understandable. But business licensing can be a strategic step in growing your brand to new heights without putting the operational load on yourself. Read on to understand the foundation of business licensing, the benefits you can expect, and the steps to do it right.

Disclaimer: This content should not be construed as legal or financial advice. Always consult an attorney or financial advisor regarding your specific legal or financial situation.  

What is a brand license?

According to the experts at UpCounsel , “This type of license usually allows a licensee to use a product, line, or certain business item. Licensing simply means the leasing or renting of an intangible asset.”

For example, as a business owner, you have a unique idea, service or product that’s specific to your brand. If you want to expand your business by creating more goods under your brand name or increasing the availability of your products through another distributor, you could license your brand.

First, you’d trademark the product, idea or item (protecting it so no other entity can illegally use or copy it or misrepresent your business). Then, you’d work with a partner organization that would create, distribute, market or sell items under your brand name.

The tricky part is that a brand license can protect trademarked tangible and intangible assets, such as a brand name (for instance, “Nike”), as well as product lines or specific business items.

Using our Nike analogy (check out their long list of trademarks here ), here are commonly trademarked items:

• Logo: the swoosh
• Tagline: “ Just do it ”
• Brand name(s): Nike Air, Nike Town, NikeFactoryStore
• Brand signature: Air Force 1, Air Jordan, Flyknit, Dri-Fit

Related: Trademark vs. copyright: Which one does your business need?

Know the business licensing lingo

As you embark upon this undertaking, it’s essential to understand the terminology and key definitions involved with the process. (Especially when you’re in the research phase trying to unravel the ins and outs of the process). Use this cheat sheet:

• Licensor: You, the business and brand owner who wants to rent/lease your brand name, logo, tagline or a form of your brand signature to another business.
• Licensee: Your future partner, the business or organization that rents/leases the rights to your brand.
• Contractual Agreement: Formal, official document that outlines the relationship between licensor and licensee, including payment terms.
• Royalty: Licensor’s (your) payment, often representing a percentage of all sales past a certain minimum.
• Trademark: Legal protection for your brand to prevent others from using it. This can cover a “phrase, symbol, design, or a combination of these things that identifies your goods or services. It’s how customers recognize you in the marketplace and distinguish you from your competitors.”
• Intellectual Property: Intangible items created by your brand that you need to legally protect. This refers to “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.”

Understand the possibilities of business licensing

With business licensing, you can increase your brand’s reach without worrying about the manufacturing, production, and often even marketing (depending on the agreement). It’s the equivalent of outsourcing business growth, where the licensee takes on the operational duties.

The best part is that you’re not just growing your bottom line via royalties but also growing brand awareness.

In a perfect world, both parties benefit. You, the licensor, get to expand your brand to new markets, increasing reach and finding new audiences. The licensee creates and distributes a product with existing recognition and reputation. In other words, they can skip the brand development and R&D stage and forgo that initial investment. Your licensed products can also bring new business to the licensee’s organization if you already have brand loyalty with your existing audience. When sales grow, you both see a profit. It’s a symbiotic relationship.

Hire a legal expert

No one knows how to license a business or brand better than a licensing, trademark or intellectual property lawyer. Read articles to acquaint yourself with the process, do your initial research, talk to those in your community with experience. But, when it’s time to start the process, you need to engage a professional.

And when it comes to determining how to license a business and how to do it properly, you can’t simply consult a lawyer. Instead, you need to consistently work with one to ensure you’re taking the proper steps in brand expansion. For example, each new company you work with could likely have a different licensing contract with new terms.

To ensure you’re appropriately protecting your business interests, you should retain a lawyer you trust to review any new contract or agreement and discuss any related matters.

Do the proper research

Even with a lawyer in your corner, you still need to do your due diligence before licensing your brand. The order of research vs. hiring a lawyer can be a little bit of a “chicken or egg” scenario. Some lawyers may ask if you’ve done proper research before considering licensing opportunities. Others may be able to help with the process. Regardless, you want to do your own analysis to ensure this is a sound business decision for your specific brand, product and market. Your lawyer can then help with the nuts and bolts and guide you to make sound decisions.

Assess the landscape

When deciding if it’s time to license your brand, you need to first assess the overall market, aka your industry or niche, as well as your current business status. Do you have enough brand recognition that a third-party business would want to produce and distribute products under your name? Does your brand clearly resonate with your target demographic?

You may need to expand your initial business plan.

When approaching potential business partners for licensing opportunities, they need to understand your unique selling points. What makes your brand different from the rest? Is there enough demand within your target demographic as well as growth potential? Organizations may approach you, or vice versa, but either way, you need to position yourself as an established business to ensure the best brand licensing opportunities. Part of that is pitching your business as a good partner for them.

Moreover, you need to evaluate the competitive landscape. Is your niche already saturated with other large, well-received brands, or is there room for your brand to succeed, grow and disrupt? No matter what, you’re going to compete for shelf space (or digital space in ecommerce) and consumer attention, but competitive research will ensure your brand can stand on its own.

Develop a brand license strategy

As we’ve mentioned, your brand is your baby. You want to be protective of it and not only make sure you’re working with the right people but also using the right tactics to reach intentional outcomes. That’s why developing a strategy can help you outline your goals and make sure you stay true to your brand narrative and story.

For example, say part of your brand story includes individually made products by female creators. A reason your customers love your organization is that you focus on sustainable practices and working with these individual creatives. If that’s a hallmark of your narrative, you likely don’t want to license your brand to a big box store that will mass-produce products under your name. You’ll lose brand loyalty by not staying true to your organization’s principles and values.

Developing a foundation that outlines your short- and long-term goals will ensure that as you expand, you’re doing so on your terms, and you’re not getting sidetracked with irrelevant opportunities.

Find the right business partner

Another arm of being protective of your business, brand and interests is finding the right licensee. Going into business with someone is a serious decision, and you want to make sure it’s a fit for both sides.

For your purposes, you want to find a partner with experience in your market, appropriate resources and distribution channels, and financial stability. If applicable, test their merchandise and confirm its suitable quality. In addition, seek out an entity that will share and perpetuate your brand values and vision.

There’s nothing like testimonials from their other current licensors. Ask for references or to speak to their current partners to get a sense of their process. Seek the counsel of your attorney as well to vet potential partners.

There’s always risk involved in entering a new business partnership, so above all, make sure you’re comfortable with any organization and its representatives before you enter into a contract.

Take advantage of brand licensing opportunities

While we’ve already established the foundational reasons why brand licensing is beneficial, there are other more specific advantages for small business owners. Once you settle on a business licensing agreement, you can expect the following perks:

• Test new markets : By licensing your brand to a third-party organization, you can test the success of new locations and markets without too much upfront cost.
• Control your brand story: With a trademark and a licensing agreement in place, you retain control of your intellectual property and creations, plus how your brand is perceived to your expanded audience.
• Outpace the competition: Once you understand the competitive landscape and secure a business licensing agreement, it’s easier to gain an advantage against your smaller competitors via expanding product availability and presence.
• Gain new business partners and knowledge: When working with a licensee, you develop a business relationship with a well-established and successful organization. As such, you have a front-row seat to how they market and distribute your branded products, gaining invaluable new insights and expertise.

How to license your business the right way 

When licensing your brand, your business’s reputation is at stake, and there’s a lot to consider. Use this guide to perform the right research and lay the foundation of business licensing.

Remember, expansion for expansion’s sake won’t yield results.

First, you need to build your brand and create a loyal community of supporters. Then you need to dive into a fair amount of research to ensure you’re in a good position to grow your brand via licensing. Finally, before you partner with another organization, have the correct legal protections in place, a retained lawyer to help you through the journey and a clearly outlined plan for your business goals and objectives.

Where did the License business model pattern originate from?

The concept of licensing can be traced back to the Middle Ages, when the Pope granted licenses to local tax collectors to allow them to be officially affiliated with the Catholic Church. The practice of transferring rights in exchange for a license fee has continued throughout history, with examples including two English ladies of nobility allowing a cosmetics manufacturer to brand a range of products with their names in exchange for a share of the profits.

Historical case 1: Anheuser-Busch and licensing

Anheuser-Busch is an American brewing company founded in 1852 by German businessmen Adolphus Busch and Eberhard Anheuser. The company is best known for producing Budweiser beer. In order to establish a strong brand identity and encourage customers to buy Anheuser-Busch products, the company licensed out its name to manufacturers of various products, such as calendars, bottle openers, knives, and corkscrews. While Anheuser-Busch only received limited revenue from these licensing fees, the wide distribution of products bearing its name helped to establish a strong brand and had a positive impact on revenue and profits.

Historical case 2: Mickey Mouse and licensing

One of the most well-known examples of licensing is the cartoon character Mickey Mouse, created by Walt Disney in 1928. In 1930, Disney licensed the rights to a company which produced Mickey Mouse schoolbags. This was followed by a range of films, video games, and other merchandise featuring the character. Through this licensing model, Walt Disney was able to build a strong brand and earn immense profits from his creation.

Applying the License business model

The licensing business model is particularly well-suited for knowledge- and technology-intensive contexts. It provides a way to monetize products and technologies that are not central to a company’s core business. Rather than letting these products and technologies go to waste, a licensing model can create a consistent source of revenue for the company. It’s worth noting, however, that strong patents are a necessary prerequisite for successful licensing. In addition to generating revenue, licensing can also be used to increase product or brand awareness and accelerate global distribution.

Before licensing can be utilized as a business model, certain prerequisites must be met.

• The intellectual property in question must be protected through a patent, copyright, trademark, or trade secret in order to prevent others from using it.
• The licensee must have a need for the intellectual property in order to solve a specific problem.

The Licensing business model offers a number of benefits for the owner of the intellectual property.

Firstly, the owner does not have to finance the commercialization process. This frees them up to focus on their next innovation and avoid the need to create and operate a company. The innovation is also likely to reach the market more quickly due to the experience of the licensee, and may reach more markets if the licensee is a large, well-funded enterprise. The owner also avoids the need to build and manage a commercialization team and bears less execution risk. Additionally, if the licensing agreement is properly written, the owner is protected from product liability issues and retains ownership of the intellectual property.

While licensing may seem like an attractive option, it is important to carefully evaluate whether to grant an exclusive or non-exclusive license, the level of technical support needed, and the desired royalty rate. It is also important to carefully review the terms of the licensing agreement to ensure that the rights and responsibilities of all parties are clearly defined.

Trigger Questions

• Will your invention function as only one element of a complete product?
• Is your competitive advantage in developing intellectual property over manufacturing and sales?
• Which products or solutions that are not central to our business could potentially be licensed to other companies?
• Are our patents robust enough to prevent partners from developing their own solutions?
• Would licensing our products to partners enhance our product or brand awareness?

With a 50+ brand portfolio, including AEG and Zanussi, licensed appliances range from solar power to consumer electronics.

Driven by its hit films and television programs, Disney is one of the top global licensors to retail sales.

The company licenses its intellectual property, particularly technologies that cannot be directly applied to new products in-house. generating around $1.1 billion in revenues from Licensing, strong and rigorous patenting is crucial for the success of Licensing, which is why IBM places great importance on patenting strategies.

Carl Zeiss Vision

Rather than producing lenses at its own large manufacturing sites, the company licenses the technology to small laboratories to enable individualized lens production.

BASF is the world’s leading chemical company, offering a range of products including chemicals, plastics, performance products, crop protection products, and oil and gas.

Related plays

• Ingredient Branding
• Layer Player
• Business Model Navigator by Karolin Frankenberger and Oliver Gassmann
• licensing May be the Best Business Model for You by Jimmy Lewin, Akira Hirai
• The Top Global Licensors Report 2022 by License Global

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Should You Add Licensing To Your Business Plan?

Talking Points for Negotiating with a Third-Party Order Fulfillment Facility

Tips for Setting Up a Successful Pop-Up Shop

Licensing is a practice that has been used in the fashion industry for decades. In particular, its been a popular way for apparel brands to branch out into accessories or housewares. Many of the most renown fashion houses have expanded their brands and made substantial revenues from such agreements. If you are thinking about using licensing to introduce new products into your brand, here is a quick introduction to this legal concept.

This post is meant to be taken as general information, not legal advice. If you are considering licensing your brand, contact an attorney to help you draft a licensing agreement.

What is licensing?

Licensing consists in an owner (the licenser) giving another party (the licensee) the right to use a certain aspect of his company’s intellectual property (a trademark, for instance) for a certain amount of time and in accordance with certain conditions, in exchange for a set fee or royalties on sold products, and without any transfer of ownership. Some of the most common licensing agreements in the fashion industry consist in agreeing to another company manufacturing, selling and distributing products under someone else’s trademark. Licensing agreements are usually quite specific and therefore involve a determined duration, precise categories of goods, and a constricted territory.

What are the benefits of licensing?

There are many positive aspects to licensing deals. Allowing another company to use or name or logo is a very efficient way to expand your brand onto other product categories, especially if your goal is to venture into merchandise from more specialized industries, such as perfume, cosmetics or eyewear. Doing so on your own is very costly and requires a lot of expertise. Licensing in this case might just be the more time-efficient solution to tap into in these industries.

Such agreements also broaden your exposure to new markets, whether that would be customers of a specific industry or a new territory, without having to invest as much into the operations required to get to a bigger brand recognition. Not only does this lead to extra revenues without putting in a massive investment, but it also prevents you from having to take care of the different formalities that might be involved with exporting your products in other countries (local regulations and laws that might be different from what you are currently dealing with in your place of business, label translation, etc.)

What should you be careful about?

Of course, signing a licensing agreement does not completely protect you from possible mishaps. For instance, many brands have previously run into quality issues with the products their licensee was manufacturing and selling. Such problems, if not taken care of as early as possible, could be very damageable to your brand’s reputation, especially if part of your success relies upon the quality of your products. Another problem you could possibly run into is over-using licensing. These types of agreements should not solely be seen as easy and fast ways to expand for the sake of having more products associated to your brand. Such a reasoning could easily lead to your brand eventually becoming generic. Moderation and thoughtful deals are key here.

A few elements to keep in mind before licensing your brand:

1. Make sure your agreement is complete and precise Do not leave out any details. Make sure the duration, the royalties or set fees, the territory, product category, and of course, the intellectual property right you are planning on letting your future licensee use, are all present in your agreement. Discuss who will be taking charge of the different aspects involved in making the product and bringing it to the customer.

2. Choose your partners well Remember that getting into business with individuals who have different standards than you do could be very damaging to your brand. If expanding your brand through licensing is something you are seriously considering, take enough time to discuss your ideas and your vision with your potential licensees. Inquire about the products they are currently manufacturing for other brands. Give your licensee clear instructions regarding the quality of the merchandise you will be working on and plan regular quality control checks to make sure the quality stays constant throughout the duration of your agreement.

3. Register your trademarks If it is not already done, take the time to protect your trademarks (logos, names, etc.) by registering them before allowing anyone else to use them.

4. Keep track of the licenses you grant As your business expands into more niche or specialized products, you might have to sign agreements with different companies who manufacture a multitude of items to fulfill your needs. Make sure the different deals you sign do not overlap, as that will cause many problems.

As with all Law on the Runway posts, please use this as general information, not as legal advice. If you have any questions, you may email [email protected].

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Advantages and Disadvantages of Licensing

Licensing advantages and disadvantages both are offered when it comes to generating revenue from your product, idea, or service. On one hand, it represents a highly passive and potentially lucrative income stream, making it an enticing option for entrepreneurs seeking to monetize their creations. In fact, it has the potential to be one of the fastest routes to amassing significant wealth.

Advantages of Licensing

Disadvantages of licensing, the purpose of licensing, licensing advantages and disadvantages. faqs:.

License agreements allow a licensee to use a product that the licensor already owns. Licensing agreements can include a number of items, including trademarks, patents, and even branding. In the license agreement, the licensee’s rights are fully outlined, such as the ability to sell items, use a trademark, or exploit a particular brand message.

Licensees are allowed to keep the profits they earn through the use of licensed items. The licensor receives an agreed-upon royalty from these profits for the continued use of their items. A one-time upfront payment is usually required to gain access to the desired items in most licensing agreements.

There are licensing advantages and disadvantages for both parties to consider before finalizing their agreement.

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The following are some of the advantages of licensing.

1. It creates an opportunity for passive income

If you own intellectual property, licensing can create a passive income stream for you. You don’t even have to do anything to generate revenue. Once you develop the IP, you just need to sell licenses. If the licensees are making money, then you will too, so you don’t have to worry about losing your ownership rights. These payments could last for several years without interruption.

2. It creates new business opportunities

Such an arrangement can be beneficial to licensees since it requires less money from them to start a business . Instead of outright ownership, they can purchase a business license and start making money immediately. Licenses cost less than outright ownership. Licensees who can improve upon a product can make even more money from their venture. The new business benefits from the reputation and consumer awareness of the trademark name or brand name, even if it is a trademark or brand name.

3. It reduces risks for both parties

A business license is designed to reduce the risks involved in doing business for everyone. A licensee faces fewer risks in product development, market testing, manufacturing, and distribution. Selling and servicing what is offered entails fewer risks from the perspective of the licensor. It is a win-win situation for everyone involved since neither party has to invest their own money to earn profits.

4. It creates an easier entry into foreign markets

A licensing agreement allows the licensor to get their product into new markets much more easily than if they were doing the work on their own. It is much easier to enter foreign markets this way, as the license allows the intellectual property to cross borders. Because a domestic company uses the IP, just as the licensor might use it domestically, tariff barriers can be avoided.

5. It creates self-employment opportunities

Getting a business license allows people to start their own businesses. While they enjoy the advantages of self-employment, such as setting their own hours, you enjoy the benefits of having someone invested in your IP. Licensees have the possibility of gaining a monopoly over a product or service in a specific territory at a lower investment rate than going it alone. Personal IP also carries advantages from the licensor’s perspective.

Licensing can be advantageous, but there are some risks to be aware of.

1. It increases opportunities for IP theft

Licensing your intellectual property and products exposes you to higher levels of exposure. As you don’t control how the licensee conducts its business, there will be more opportunities for theft, piracy, and misuse. You can police the use of your IP to some extent, but you cannot see everything that is being done. It only takes one slip-up for your items to be distributed illegally, which means you don’t see the profits on your items.

2. It creates a dependency upon the licensor

Licensing agreements involve the licensee taking on all the risks involved in the arrangement. To make their own profit, they are dependent on the quality of the IP. If they are successful and earn a lot of money, they may be asked for a renewal that is more expensive than the original license. In addition, there is no guarantee of exclusivity with many licenses, meaning multiple businesses could compete in the same marketplace, using the same tools and products, to generate revenues.

3. It creates added competition in the marketplace

Many licensors find that their licensees eventually become competitors in their own markets. This creates a difficult situation since one company or the other stands to lose if IP is sold in exactly the same way. To protect against a needlessly competitive market, many licenses include geographic restrictions. The growth of internet access around the world, however, makes it easy to become competitive without intending to.

4. It is offered for a limited time

Most licenses are only available for a limited period of time. Although that time period maybe five to ten years, the licensee must consider an expiration date. Is it worthwhile to invest time, effort, and money in marketing goods and services that may not be available to them at the end of the licensing period? Is there a guaranteed renewal rate for the license, especially if it expires within five years? Royalties and revenues must be balanced in a way that makes sense for everyone involved.

5. It could damage the reputation of both parties

Licensing is one of the elements of a relationship that can be mismanaged, resulting in a loss of brand reputation. If multiple licenses are offered, the reputation may suffer globally, affecting several businesses not involved in the situation. Good quality management practices are the only way to resolve this potential management issue. This is why many license agreements include a series of best practices to follow, creating consistency within the brand across all license agreements.

Licensing serves two main purposes. An established company has access to capital, expertise, and experience in an already established market. To produce your own product, you will need to either seek investment from others or put forth your own money as a startup business. The process can take a considerable amount of time and money, and it can also be risky.

Secondly, a larger, profitable company will have the ability to manufacture in larger quantities and market your product to a wider audience – something smaller, independent companies are not able to accomplish.

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Licensing offers several benefits, including expanded market reach through leveraging the licensee’s distribution network, increased brand exposure, and revenue generation through licensing fees or royalties. It allows companies to capitalize on their intellectual property without the need for significant investments in manufacturing and distribution.

Licensing has its challenges, such as the potential loss of control over the licensed product or brand, the risk of poor quality control by the licensee, and the need for careful contract negotiation to protect intellectual property rights. It can also lead to increased competition if multiple licensees operate in the same market.

Licensing enables businesses to enter new markets quickly by partnering with local licensees who have established distribution networks, market knowledge, and customer relationships. This allows companies to leverage the licensee’s expertise to penetrate new markets more efficiently.

Yes, licensing involves a degree of risk for intellectual property owners. The licensee may not uphold quality standards, leading to a negative impact on the licensor’s brand reputation. Additionally, if licensing agreements are not properly structured and monitored, there is a risk of unauthorized use or infringement of intellectual property rights.

To protect their interests, companies should carefully draft licensing agreements, define clear performance and quality standards, establish mechanisms for monitoring and enforcing compliance, and include provisions for termination or renegotiation in case of non-compliance or breach of contract. Legal counsel can provide guidance in structuring robust licensing agreements.

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Product Licensing: Everything you Need to Know

Product licensing is a streamlined way to turn an idea into a product that's ready for sale. 7 min read updated on January 01, 2024

Updated June 24, 2020:

What Is Product Licensing?

Product licensing is a streamlined way to turn an idea into a product that's ready for sale. Here's how to license a product:

• Come up with a great idea.
• Protect your intellectual property through the United States Patent and Trademark Office (USPTO).
• License a company to manufacture and distribute your product.
• Collect royalties.

Product Licensing: What Is It?

Product licensing is one of the easiest ways for inventors to bring their ideas to life. Inventors simply rent, or license, their ideas to a company, which manufactures and distributes the product quickly and easily. This process tends to be faster, more affordable, and more lucrative than other options, such as starting a new company to sell an invention.

You can increase the chances of making product licensing part of your business plan if you cultivate a culture of creativity. Research growing markets and find avenues to develop products where there's established demand.

Why Is Product Licensing Important?

Product licensing offers an ideal balance of risk and reward. This process can enable inventors to earn 20 times their initial investment. It also enables large companies such as Proctor & Gamble to reduce their internal research and development costs while partnering with outside entrepreneurs.

Reasons to Consider Licensing a Product

• You don't have the resources or the business plan to start a new company or to dedicate time to research and development.
• You don't know how to get your product into a retail market, or your company isn't large enough to work with major retailers.
• You have many ideas for inventions but not enough time or savings to produce them.

Reasons to Consider Not Licensing a Product

• You want to start a business to have total control over your product manufacturing, distribution, and sales.
• You think you have a good chance of being selected for a crowdsourcing platform such as Edison Nation.
• You found a company like OXO or Ikea that wants to buy your intellectual property outright. If you can make a reasonable deal, it could be in your best interest to sell instead of license.

Common Mistakes

• Not producing a product that manufacturers want to license. Not every product is ideal for licensing. Fewer than 10 percent of inventors successfully license their products. A licensing deal can require extensive negotiating and effort. Also, you may have to invest some of your own money up front to complete your product and make it worthy of licensing. Try pitching your product to retailers to gauge interest before seeking out licensees.
• Not knowing enough about your market. To license a product , you'll have be persistent and tenacious. You'll have to know your market like the back of your hand, since you'll be working hard to sell it to licensees. You'll also have to understand market demand and know how much risk your product brings. Be prepared to pitch your product and licensing deal professionally, with a multimedia presentation and prototypes if possible.
• Not knowing enough about the licensee. Always do your research to learn as much as possible before pitching to a licensee. One that already has manufacturing and distribution in place for your category of product could be a good fit. If you know enough, you may be able to tell the company how it can make and distribute your product efficiently.
• Wanting to keep control over your invention. When you license an invention, you'll have little control over it. Do your research to make sure the manufacturer is reputable. Also ensure the distribution plan is strong before agreeing to a licensing deal.
• Not protecting your intellectual property. Many inventors seek out a patent before licensing a product, as this gives you the rights to your invention. Many licensees won't work with you if you don't have this level of protection. Take care not to file too early, though. First, find out if you need one. Then complete your idea as much as possible before filing, since you may have to refile if the final version changes the idea too much.
• Taking "no" for an answer. Product licensing requires extensive negotiation. Be ready to compromise. Remember that there is no standard agreement for licensing. If you want to work with a company, try to find an internal champion who will want to sell colleagues on your product and make the deal happen.
• Only approaching one licensee. Many inventors receive numerous negative responses before signing a deal. Pitch to several licensees to increase your chances of finding a worthwhile business partner, even if you have one ideal partner in mind.
• Not having a lawyer review your licensing contract. Like any business contract, licensing deals can be complicated. Have an attorney review or create a licensing agreement to make sure the terms, time frame, and royalties make good business sense. You should also have an attorney review any confidentiality agreements before signing.

Frequently Asked Questions

• How Much Is a Standard Royalty for a Licensed Product?

Earning 5 percent of gross wholesale sales is typical for inventors. This equals about half of what the licensee earns. But the manufacturer has to manage much more risk and do much more work than the inventor does. Some inventors also earn an advance license fee, or a lump sum paid up front. Others earn equity stake in the licensee's business.

• When Can You Expect to Start Earning Royalties?

The terms of the agreement specify when you'll begin to earn royalties. Most licensing agreements need product development, manufacturing, packaging, and shipping before generating sales. Therefore, more than a year can pass before you earn royalties. If retailers have waiting periods, you may have to wait for two years before receiving royalties.

• How Much Can You Really Make From Product Licensing?

A great selling product priced at $15 could generate $20,000 to $30,000 in royalties a year. However, about 95 percent of the 8,000 new kitchen implements introduced each year fail. Most generate royalties of just $1,000 a year.

• Can You License More Than One Product?

Yes, and many inventors have multiple licensed products on the market at any given time. Since the royalties can be low, licensing several products may be necessary for making your time and resource investment worthwhile.

• Can Product Licensing Agreements Fall Through?

Yes, they may be nullified if retailers don't have enough interest, or licensees choose not to go ahead with research and development. As the licensor, you may be able to obtain a nominal fee if the deal doesn't go through as planned.

• How Is Obtaining a License for a Product Different From Product Licensing?

Getting a license to use the logo of a well-known brand or sports team can make a product much more saleable. Encouraging a big-name brand to sign a licensing agreement can be hard, though. This is what Bob Diee and partner Glenn Luthy did to produce their baseball cap-shaped computer mouse. They attended trade shows and pitched their idea to Major League Baseball teams and universities after NFL and NBA teams passed on the offer. Eventually they signed a licensing agreement and got Champs Sports and Yankee Stadium to carry the product.

Jeff and Maureen Kendall took another approach to licensing brands for their kids apparel line, Little Ruler. They obtained licenses from bands and skateboard brands for their clothing line. But they only sell 20 percent in stores. They sell the rest on their own e-commerce site.

Connect with the International Licensing Industry Merchandisers' Association to learn more and find potential partners. You may need a patent, a distribution plan, a history of selling similar products, or a lucrative royalty offer. Most inventors also have a strong knowledge of their markets or substantial funding in place.

Most products in this category sell for premium prices, as they take royalty payments into account. The brand-name recognition usually justifies the higher price.

• Can Manufacturers Seek Products Available for Licensing?

Yes, most manufacturers start by preparing a company profile with current products made, sales volume, and desired markets. Then reach out to licensing consultants, licensing exhibitions, trade offices and agencies, universities, research and development companies, trade associations, and trade publications to solicit products for licensing. Assess any opportunities you find, and negotiate a licensing agremeent when you're ready to move forward with the process.

• What Are Promotional Materials?

These are licensed products given away for free.

Steps to License a Product

• Invent an original product. Take the time to sketch it out, create prototypes, and document your invention. You can also develop an improvement for an existing product.
• Research your market. Before you patent your invention or search for licensees, make sure there is demand for your product. Develop a business plan to make sure you make a smart business decision.
• Do a patent search . Use the USPTO's online patent database to make sure your idea isn't already patented.
• Consider filing a provisional patent application. If you need to protect your intellectual property but you haven't perfected your product yet, a provisional patent application could be a smart compromise.
• File a patent application. Use the USPTO's EFS-Web service to file a patent application online . Work with the patent examiner until your patent is issued.
• Search for licensees. Seek out licensees in your market and prepare to pitch. You may need to network, place a paid ad, or reach out to several licensees before you find one that's interested. Take the time to build relationships with potential licensees and learn their processes, especially if you intend to license more products in the future.
• Subject Matter: This may be a patent, trademark, copyright , design, or trade secret .
• Granting of Rights: This defines what you're transferring to the licensee.
• Licensor's Obligation: This details any assistance or training the licensor will give.
• Licensee's Obligation: This details financial requirements, guarantees, and confidentiality.
• License Fee: This refers to the sum that the licensee receives upon signing.
• Royalty: This specifies the percentage of the wholesale sales that the licensor will receive. Many agreements include a minimum royalty. Most royalties are paid quarterly.
• Term: This defines the length of the agreement.
• Designated Area: This describes the limits of the manufacturing and marketing area.
• Termination: This describes how either party can end the agreement.
• Guarantees: This includes any warranties or liabilities that the licensee provides.
• Collect royalties. As your product sells, collect royalties for the duration of the agreement.

If you need help with product licensing, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience. They have worked with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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California offers catastrophe plan to draw insurers back to the state. But at what cost?

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Good morning. It’s Friday, March 29 . Here’s what you need to know to start your day.

California intends to attract insurers back with flexible policies

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The homeowners insurance crisis in California worsened last week when State Farm General Insurance announced that it wouldn’t renew 72,000 property owner policies statewide. Those policies are set to be canceled by summertime.

It’s not just State Farm.

Other insurers, like Allstate and USAA, have rapidly ceased new business in the Golden State, blaming the intensifying risk of insuring homes in the state’s increasingly dry, fuel-rich, fire-prone forests . We could be hurtling toward an “ uninsurable future .”

Weeks ago, the California Department of Insurance, or CDI, proposed a regulation allowing insurers to use catastrophe models — computerized processes that simulate potential catastrophic events — to consider the projected impacts of climate change when requesting rate increases.

California hopes this will help lure insurers back.

If approved, insurers could submit catastrophe models for wildfires, floods and terrorism to the CDI and use predictions from these models to justify rate increases.

The state had already struck a deal in September to allow insurers to pass on the costs of reinsurance policies — which they use to help cover their own losses after major catastrophes — to customers in exchange for insurers returning to high-risk fire zones in California’s hills and canyons. The changes are slated to go into effect by the end of 2024.

Under Proposition 103 , the state’s law governing the insurance industry, companies had been forbidden from passing on reinsurance costs to customers and were required to set rates based only on historical fire data.

The CDI believes changing this policy will provide more stable costs than current regulations, which have led to sudden and steep increases for those at higher risk of wildfire.

But advocates say catastrophe modeling isn’t always fair

Consumer Watchdog, an advocacy group, opposes catastrophe modeling, labeling it a violation of Proposition 103, and argues that the policy seems designed to restrict public access to information about how models affect rates.

“Catastrophe models are notoriously contradictory and unreliable, which is why public review and transparency are key before insurance companies are allowed to use them to raise rates,” the group wrote in a statement .

The regulation proposal is part of Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy , a package of executive actions aimed at improving insurance choices and addressing the long-term sustainability of California’s insurance market.

Gov. Gavin Newsom issued an executive order in September commanding the insurance commissioner to “take prompt regulatory action to strengthen and stabilize California’s marketplace.”

“This issue isn’t just a yellow flag; it’s a waving red flag,” Newsom said at Climate Week NYC in September, speaking of the Legislature’s failure to address the slow-moving collapse of the property insurance market.

Insurers’ leaving the state has placed extra strain on many homeowners’ last-resort option

State Farm — the state’s longtime leading home insurer— had already announced last June that it would stop offering new property policies in the state due to the “rapidly growing catastrophe exposure and a challenging reinsurance market.”

USAA and Allstate also pulled back . Farmers capped the number of new policies written monthly. Travelers and Nationwide imposed new restrictions, making it harder for new customers to qualify for policies.

For the record:

9:20 a.m. March 29, 2024 An earlier version of this article stated that Allstate stopped offering new property policies in California following State Farm’s June 2023 announcement. Allstate stopped offering new policies to California customers in November 2022.

“This could be the beginning of a market collapse that would leave millions stranded without affordable insurance as their homes burned to the ground,” Times reporter Sam Dean wrote last summer .

A scarcity of insurance choices has driven thousands to purchase limited insurance from the Fair Access to Insurance Requirement, or FAIR, Plan, with 350,000 Californians covered as of January 2024. The fund is a last resort insurance pool California requires insurance companies to contribute to based on their statewide market share.

However, a massive leap in enrollment from just under 273,000 two years ago has financially strained the state insurer. The president of the FAIR Plan Assn. warned lawmakers that the organization may be unable to financially survive a catastrophe.

Californians need insurance. Advocates say insurers can afford more.

Insurance remains the safest protection against personal calamities, whether climate-induced or otherwise, Times columnist Anita Chabria wrote last year . The state’s residents need insurers to remain in the market.

But climate change should not be a free pass for gouging consumers, Chabria said. Despite the cited disaster claims, she pointed out that insurance companies are still making money, albeit with worse profit margins than in the past.

During discussions last summer about the forward-looking models, Harvey Rosenfield , founder of Consumer Watchdog, stated: “This has nothing to do with climate change; it’s about the industry’s greed and its 35-year campaign — so far unsuccessful — to escape the requirements of Prop. 103.”

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• Photos: Opening Day 2024 at Dodger Stadium .

Fast food price increases

• Starbucks, Chipotle, McDonald’s: Who’s raising prices in California to pay higher wages .
• With fewer options, South L.A. braces for bigger bills at fast-food restaurants .

More big stories

• At least 14 hurt as MTA bus is part of multi-vehicle ‘rollover collision’ in South L.A.
• Hay grown for cattle consumes nearly half the water drawn from Colorado River , a study finds.
• Former top LAPD official accused of tracking woman with AirTag alleges cronyism by ex-chief.
• A former Cal State Northridge official was gunned down at L.A. Live. Two have been arrested.
• California proposal would change how power bills are calculated , aiming to relieve summer spikes.
• The U.S. changes how it categorizes people by race and ethnicity , its first revision in 27 years.
• The Broad expansion : What you need to know about the $100-million project.
• San Francisco just canceled its 420 fest . Marijuana fans thought it had gotten too commercial anyway.
• Rattlesnakes on Santa Catalina Island have learned that it pays to be unusually aggressive.
• AMC Theatres shares plummet as the theater chain reels from box office struggles.
• Easter weekend storm dousing plans in L.A.: When will it rain? What’s been canceled?
• Cesar Chavez’s family wants nothing to do with Robert F. Kennedy Jr.’s presidential campaign .
• LAX’s long-promised rail link, the People Mover, likely delayed until late 2025 .
• Scientists say these killer whales are distinct species . It could save them.
• Blue jellyfish-like critters arrive in Bay Area. When will they show up on SoCal beaches?
• Homeless deaths in L.A. dropped, but many are dying from drugs .
• Louis Gossett Jr. , ‘An Officer and a Gentleman’ star who broke barriers in Hollywood, dies.

Get unlimited access to the Los Angeles Times. Subscribe here .

Commentary and opinions

• Editorial: Bring buttons and dials back to new cars . Touch screens distract drivers.
• Jackie Calmes: Is this the worst Congress ever? Let’s count the ways.
• Erika D. Smith: What if Bruce’s Beach was just the start? Why more stolen land is about be returned.
• Editorial: At long last, women finally have a real shot at California’s top job .

Today’s great reads

Fisker had big dreams to compete with Tesla. What went wrong with this Manhattan Beach company? Multiple factors contributed to the company’s fall, analysts said, including the challenges of starting an auto company from scratch, fierce competition in the EV market and production difficulties with its flagship Ocean SUV.

Other great reads

• They escaped a world of fast fashion to teach L.A. how to give old clothes new life.
• When Martin Luther King Jr. came to L.A., only one white politician was willing to greet him .
• A final night at the Conga Room.

How can we make this newsletter more useful? Send comments to [email protected] .

For your downtime

• 🍸 Nineteen best late-night hangouts in Koreatown to keep the party going.
• 🦍 ‘Godzilla x Kong: The New Empire’ — in theaters Friday — is monster math that becomes a headache.
• 📺 In Hulu’s ‘We Were the Lucky Ones,’ an engrossing family drama with the Holocaust as backdrop.
• 🧑‍🍳 Here’s a recipe for Roman-style chickpea and tomato soup with bulgur .
• ✏️ Get our free daily crossword puzzle, sudoku, word search and arcade games .

And finally ... a powerful photo

Show us your favorite place in California! We’re running low on submissions. Send us photos that scream California and we may feature them in an edition of Essential California.

Today’s powerful photo is from Times photographer Marcus Yam from the West Bank, where the olive harvest has suffered with the expansion of Israeli settlements.

Have a great day, from the Essential California team Anthony De Leon, reporting fellow Kevinisha Walker, multiplatform editor Karim Doumar, head of newsletters

Check our top stories , topics and the latest articles on latimes.com .

Anthony De Leon is a 2023-24 reporting fellow at the Los Angeles Times. Born in Fresno to a Chicano family, he pursued his higher education in his hometown, earning an associate‘s degree in journalism from Fresno City College and then completing a bachelor’s in media, communications and journalism at Fresno State. He went on to complete his master’s in media innovation at the University of Nevada, Reno.

More From the Los Angeles Times

A South L.A. teen died after a fight at school. Officials ruled the death an accident. What comes next?

March 30, 2024

San Bernardino County deputies seen on video punching, kneeing suspect in the head during arrest

March 29, 2024

A Compton couple fixed neighborhood potholes. The city has ordered them to stop

Days before Easter, Newsom announces dozens of pardons and commutations

Find the right Microsoft Teams for your needs

Stay connected and share content any time to learn, plan, and innovate—together. Get more with Teams Essentials or get Teams online as part of Microsoft 365.

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What is the right plan for my business.

Teams Essentials is designed for a small business in need of an affordable, professional, easy-to-use meeting solution with video and audio calling. Meet all day up to 30 hours, host up to 300 participants, and get 10 GB of cloud storage with Teams Essentials.

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Access premium benefits for Teams with the purchase of Microsoft 365 Personal, Microsoft 365 Family, any Office 365 and Microsoft 365 Business or Enterprise suite, or with a standalone offering of Teams Essentials for small and medium-sized business customers.

How do I manage my Teams Essentials subscription and invite others to join? Would a small or medium-sized business need to purchase multiple accounts for its employees?

Teams Essentials allows you to pay on behalf of up to 50 users. In the Microsoft 365 admin center, select Invite people to Microsoft 365. Add each person’s first name, last name, and email addresses and choose Send. The people you added will receive an invitation email to add their user account information to Microsoft 365.

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Get started with Microsoft Teams today

• [1] Cancellation policies for paid subscriptions may vary based on factors such as your customer status, your product, and your domain selections on Microsoft. You may cancel your subscription at any time in the Microsoft 365 admin center. Certain subscriptions may incur a cancellation fee. Learn how to cancel your Microsoft 365 subscription . When a subscription is canceled, all associated data will be deleted. Learn more about data retention, deletion, and destruction in Microsoft 365 .
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