Tip Sheet

From pigs to pic­tures, you can rent in­tel­lec­tual prop­erty. But be­ware the de­tails

Inc. (USA) - - DEPARTMENTS -

Don’t trip over li­cens­ing

IN 1994, BEV­ERLY HILLS TEDDY BEAR, in Los Angeles, was an un­der­the-radar plush-toy man­u­fac­turer. Then Babe, porcine star of the epony­mous film re­leased the fol­low­ing year, brought home the prover­bial ba­con. David Socha, the com­pany’s co-founder and CEO, who had pre­vi­ously worked for a li­cens­ing firm, knew that a Babe plush toy could gen­er­ate huge sales. The three-year li­cense he se­cured with Uni­ver­sal Stu­dios al­lowed his com­pany to make a “char­ac­ter cor­rect” pig­gie and use the movie’s logo on the prod­uct’s hang tag. Socha’s in­stincts were on the money. Re­tail­ers pounced. “Get­ting that li­cense put us on the in­dus­try map in­stantly and in a big way,” he says. Bev­erly Hills Teddy Bear sold 500,000 Babes in 40 coun­tries that first year, about $2 mil­lion worth. Not a bad ROI on roy­alty pay­ments of $200,000. Not sur­pris­ingly, the com­pany be­came a li­censee avidly pur­sued by li­censers. To­day, more than 60 per­cent of its more than 500 prod­ucts, sold glob­ally, are li­censedriven. In early 2017, it launched a line of mer­maid-buddy plush toys, the re­sult of a li­cens­ing agree­ment with En­chan­tails, known for its mer­maid-shaped slum­ber bags and books for girls. “A li­cense that’s a nat­u­ral fit with your prod­uct can be a fast track to growth,” says Socha. “When sales sky­rocket, as­so­ci­ated ex­penses are worth ev­ery penny.” Keep this in mind if you want to start li­cens­ing. —COELI CARR

COST

Sur­prise is of­ten the re­ac­tion from first-time li­censees when they see the fees, says Jack Mor­row, pres­i­dent of Out of the Box, an agency in Los Angeles that rep­re­sents both li­censees and IP own­ers. Roy­al­ties typ­i­cally range from 3 to 14 per­cent for ev­ery li­cense-em­bla­zoned item you sell, and a min­i­mum an­nual roy­alty pay­ment, part of which is due upon sign­ing, of­ten must be guar­an­teed. In other words, you’d bet­ter be con­fi­dent you’ve got cus­tomers lined up.

BRAND ALIGNMENT

Just be­cause you’ve li­censed a pop­u­lar im­age or logo and slapped it onto a hat, con­sumers won’t nec­es­sar­ily play along. “There’s a good chance they might con­sider the pair­ing mis­matched and ir­rel­e­vant,” says David A. Owens, pro­fes­sor of man­age­ment and in­no­va­tion at Van­der­bilt Univer­sity and au­thor of Cre­ative Peo­ple Must Be Stopped: 6 Ways We Kill In­no­va­tion (With­out Even Try­ing). An­other mis­con­cep­tion is that any­thing iconic—be it a name or an im­age—is cer­tain to be a brand en­hancer. The most im­por­tant ques­tion you should ask is whether the li­cense makes sense for your brand or ser­vice.

A LI­CENSE AS A BRAND

Some­times, the li­censed item pretty much is the brand. Dee and Mark Wanger are co­founders and co-own­ers of Ride­kick In­ter­na­tional, in Fort Collins, Colorado, which makes a power trailer that adds a 20 mph boost to bi­cy­cles and adult trikes. Ride­kick is the ex­clu­sive li­censee, pay­ing a roy­alty to the in­ven­tor, who didn’t want to cre­ate a busi­ness him­self. “This li­cens­ing op­por­tu­nity was the con­duit that helped us launch our own com­pany,” says Mark Wanger. Aj­mal “AJ” Saleem, owner and

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