Wednesday, September 24, 2008

Standard Advance

The standard advance in a licensing deal is an advance against future royalties. Most contracts are written this way so that they licensee is not paying up front and then again (read as "more") as sales start and increase.

My thoughts on this are if you can give your licensee a good reason to pay you up front without it being contingent on future sales, then you're already ahead of the game. Some of the thoughts I've bounced off my attorney are an up front payment to cease negotiations with other possible licensees (usually a competitor), or payment for valuable contacts already made by me to market and sell the product (QVC and national television publicity). Both of these examples work best in an exclusive license scenario, but if you spend some time thinking about this, you can come up with many ideas that build value in you and your product, make your licensee look good, and basically put and keep more of the money you're intending to make in your bank account.

One more note on this subject, my experience has shown that the potential licensees I've spoken with have been very happy that Dave and I want to work with them on the research (much of which I did before I called them), development, and marketing. All three that I've been in negotiations with have come right out and told me that the everyday inventors they speak with would love nothing more than to drop an idea at their door step and collect a paycheck. It's as if an idea with a provisional patent is a winning lottery ticket. Now let's be honest, we all secretly think this way and wish it were so. We've heard the story of the lady who had this idea, made it at her kitchen table, wore it out in public where someone with influence saw it, loved it, bought it, and made this lady millions. Just like Hollywood, this is not real life.

Large companies love people who are willing to work and do their share to earn their keep. Offer up your services and be willing to follow through. If they want to do it all and pay you, beware; if you're not there, you might be missing out.

Think of ways you can get some good faith consideration up front without it being an advance and remember, anythings possible! Take that for what it's worth and roll up your sleeves, it's time to get to work!

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