licensing designs?

A topic that came up peripherally at IDSA western conference last weekend was licensing designs. Many have been talking about crowd-sourcing, angel investors and other ways of funding your own projects using “other people’s money”, which is all fine and good - I think most of us are on board with that concept… but the topic of licensing designs seems to be in the background, even though it seems to be an ideal way for a designer to operate. At conference Dario touched on it before moving on to the crowd-sourcing stuff, and Robson Splane seems to be working on something of a “bible” for designing the way you want based on licensing as a principal source of funding. (his “DreamProjX”)

Several folks I talked to at conference recognized licensing as the “secret handshake” of the design world. People have done it with great success, but no one seems to be willing to talk about how. (probably for fear of losing future opportunities by giving away the “secret”) So, my question here is, is anyone willing to discuss the methods/process of licensing a design?

I’ve been ruminating about it a bit. There must be some kind of “agent” for brokering these designs. I would guess that these may likely be people involved in IP law since whatever you’re shopping needs to be protected. (I have at least learned to get a provisional patent before shopping an idea)

Anyone know anything about this process? Anyone willing to talk about it?

The first thing to clarify is the idea of licensing ‘design’ versus licensing ‘IP’. Generally, one can only protect the styling of an object with design patents…and those are difficult to protect [you may have heard of the 10% rule]. ‘IP’ is a more generic term for something substantial that creates a result that is measurable - As an example, think about a pairing of gears that work in a unique way to turn a handle - did people get turned on by the styling mentioned above? who knows…but did the handle get turned by the gears mentioned above? - yes. There is a ton of information out there but if you think you have something unique, there’s probably a factor of Intellectual Property involved, then it’s up to you to take a number of actions to determine its potential value. Licensing ‘IP’ can certainly be profitable, but not blindly. Instead, it’s better to run a good idea through a process of ‘valuation’.

If an idea has value, it’s relatively easy to attempt to protect it - ultimate results may be unknown for up to 3 years but you’ll get a pretty good idea within the first year if the effort will likely succeed. We’ve found ourselves to be the best ‘agents’ for proposing licensing deals, and only after a complete valuation process and patent application process are well underway. The likely targets of a deal are the individuals / companies who have the most power in a given market category, as they are the easiest agents of change and most beneficial recipients to control market disruption.

These are long winded ways of saying;

  1. determine if your idea has legs by understanding and valuing its market potential,
  2. protect your idea with patent/copyright law, turning it into registered IP,
  3. determine the best targets to license your IP,
  4. get face time with those targets and make sure you can present a compelling reason for them to listen to your scenario.

There are a million little steps in between those I list above, relationships to build, nuances of each target to learn about and leverage, etc. I don’t recommend the average designer attempt these steps by themselves. Most would end up spending 15-50K and not getting much out of it on the back end. The ‘secret handshakes’ are almost gone these days, it’s become a contract & market driven world of jostling and convincing and negotiating. I know of several inventors who still approach big companies with no IP, just ideas, and most have been burned far more often than they have been compensated but relationships help.

We do this with some of our own internal projects and some we develop in partnership with inventors but it is not a science, it’s a creative process and each one has a unique path to potential success.

Absolutely right Scott, I neglected to mention the design vs IP thing. Those things seem to have a tendency to get tangled up for me.

For the purpose of this post, I’m talking about licensing design, not IP. The impetus for this is that in Dario’s talk, he mentioned licensing bar chair designs. To paraphrase, he started licensing in school and kept it as a side business. After a couple of years post graduation in the field, his licensing royalty checks were bigger than his paycheck. Imagine all the fun/passion projects you could take on if you didn’t have to work a day job! The process with IP type ideas seems huge, bulky, expensive and for most designers, not what we’re into.

I asked my entrepreneurship instructor about this yesterday. He doesn’t know much about ID, but his recommendation was to go to trade shows for the type of product you’re trying to license, and show it off to all the reps. Even though they aren’t the gatekeepers for this type of business transaction, they may be your advocate within the business if they like your design and think it will move units for them.

Even if the above worked out, I’d still need some kind of specialist to broker the deal and check the contract. I guess these are really the two pieces of information I’m looking for here - 1. ways of going about getting the licensing deal 2. who are the professionals that deal in the paperwork.

…or am I totally off my rocker in going down this path? With whats been presented to me, this seems like a real thing that designers do. I am open to the idea that I’m taking it wrong, or maybe it’s been misrepresented to me.

In my experience, unless you have a brand name and/or a very solid industry relationship in the specific product category, there will be knockoffs within a year of whatever styled idea you show in public.

So, for your #1 (ways to get a licensing deal); rather than show something in public - and if a tradeshow circuit sounds like fun, I would recommend finding a brand or business to which you think you could add value with design and then approach them head on (not at the tradeshows since less than 2% of true decision makers are at those boothes anyway - contact them at their headquarters and attempt to get facetime).

And for your #2 (who brokers/negotiates/handles the paperwork); there are quite a many attorneys who specialize in IP licensing - they are the folks to go to when you’ve been the recipient of licensing interest. And a way for you to save $$ with the attorneys is to ask the interested party to draft a contract for you and your attorney to review (ask for it in Word and offer to track changes - forces them to start the ball rolling AND saves you attorney time of having to craft a contract).

Probably the majority of furniture available at retail is licensed from independent designers. Virtually none of it is design patented, and virtually none of it contains anything innovative enough to get a utility patent. If you come in too hot and heavy with the legal stuff, you probably won’t get in the door.

great info guys! thank you!

Scott B - it sounds like you have some experience in this area. do you have any other suggestions for getting the idea to the companies who might license it?

All I can really speak to is furniture, might be a totally different deal for housewares or consumer products. The furniture trade shows (High Point, Vegas, ICFF) are actually a pretty good time to talk to someone, and the person you need to talk to is usually there. I would identify a group of companies to talk to, put together some sample designs you can take around to show, and try to setup some appointments in advance if you can. If you can’t, get there toward the end of the show when it’s usually quiet- you’re not going to get much time if you show up at the same time as customers.

The really big companies tend to have in house design departments (you can probably find and eliminate these with some Linkedin searches), but the rest will have a few independent designers they work with regularly. Everyone is always looking for the next thing, so it won’t be too hard to get 5 minutes of someone’s time to show some renderings. When you’re showing initial concepts, I wouldn’t worry too much about requiring NDAs, etc. Just stay away from the bottom feeders and you’ll be fine. Most people are basically honest. Obviously don’t hand over CAD without a signed contract. Companies will have a pretty standard royalty arrangement for this stuff, anywhere from 1-5% depending on their size. Usually paid monthly based on previous months’ invoiced sales.

If your product ends up being a success in the market, it will get knocked off. A few companies will go after them, but most don’t. The legal costs typically outweigh the payoff, and it’s rare that a knockoff will take that much away from you anyway. The company being knocked off usually has considerable branding, quality, marketing, and distribution advantages.

Thanks Scott! Exactly the info I was looking for!