Jumping Into a Licence

The problem for most small companies and private inventors is the timing of when to consult legal advisers.  Professional advisers in innovation are a highly skilled, specialised group and this tends to be reflected in their charges.  Consequently there may be some reluctance to seek legal advice until there is some real likelihood that a deal exists which can provide income to meet the various costs of protecting and exploiting a new idea.

 

The first decision to be made is who is going to exploit the new development.  As indicated in some of my previous articles, the problem with innovators is they may not fully appreciate, in the context of intellectual property, the types of IP that are involved and how best to approach its protection and exploitation.  While many of the readers of Inventors World/Inventricity will be devisers of new devices or technical processes, there are many other types of innovation or new business creation being developed by imaginative people.  Therefore new concepts can break down into three types:

 

1. New "literary/artistic" concepts;

 

2. New business plans;

 

3. New technical concepts.

 

Only the last is protectable by patent.  Different ways of exploitation are necessary for each type.

Iain C. Baillie

Related further reading...

Further Reading:

It is also necessary for the innovator to appreciate that, despite the old adage about new mousetraps, the only way to succeed is to invest time and effort both in development to an exploitable form and seeking out possible partners.

 

The next question is whether somebody else must be involved.  If you are an individual with a certain amount of financial resources or even a small company; it may be that you have the necessary capacity both to bring the development to a marketable stage and undertake manufacture and distribution.  In these circumstances the only adviser you will probably need is a Patent Attorney to ensure that the product is adequately protected.  If a new name is involved the Patent Attorney can probably provide the necessary advice on protection although a Trade Mark attorney could be consulted.  This is apart from the need for technical advisers or manufacturing or marketing consultants.  At the most perhaps one might need a lawyer to draft a distribution agreement.

 

On the other hand, if the concept is a business plan which you hope to develop into a franchiseable concept the person to seek out is a franchising consultant.  This should be one of the members of The British Franchise Association.

 

When the proposed business is on its feet and ready to go out to franchise, it may be necessary to consult a franchising lawyer.  Relatively few solicitors, except those who are members of the British Franchise Association, are skilled enough to advise in this area.  At an early stage, a Trade Mark Attorney should be consulted with a view to ensuring that the identifiers of the proposed franchise are adequately cleared of possible conflict and protected.

 

New ideas in the artistic field are somewhat outside the scope of this particular magazine since there are a number of magazines dealing with writers and artistic creators.  However, for example schemes for television shows, which necessarily require assistance in exploitation i.e. publishers, TV companies etc., do require the creator to develop more than just a rudimentary outline.  One must put the effort into developing specific concepts including, for example, very detailed outlines of the proposal so that one can ensure that copyright will attach to what is created.  The submission MUST then be in confidence so that it is protectable by confidential undertakings and by the copyright in the developed idea.  For this type of project one may want to look at a literary agent as well as a solicitor who has some skills in submission in the entertainment industry.  If the main market is likely to be in other countries, for example the USA, then consultation with one of the US Lawyers who practice in London might be appropriate.

If the concept is a technical one, in other words what is sometimes called an invention, the first advice needed is on the question of protection by way of patent or perhaps registered design.  Here again, the more that has been done to characterise the invention including specifying what the inventor knows of the art, preparation of detailed description, drawings, possible prototype etc., the greater the likely saving of Patent Attorney time in preparing a patent application.  The dread of every Patent Attorney is the inventor who wanders in with a scrap of paper, or even a prototype, and no significant written material or idea of the background to the art.  Analysis of any of this must involve a great deal more time than is necessary and consequent cost to the inventor.  Even yet however, an adviser on licensing may not be necessary.  If an inventor has done their homework, they may be in a position to identify potential partners and make the initial approaches.  The main point is to ensure that any submissions are under confidence.  If the innovator is not altogether sure of the adequacy of the confidentiality submission he is using, it is not a difficult document to prepare and usually a Patent Attorney can prepare an appropriate document very quickly.  The main points to bear in mind are that the receiver must return an acknowledgment of confidentiality indicating that it is accepted for evaluation only, and that there will be no disclosure to others or use of the invention without an agreement with the transmitter of the information.

 

In this analysis of the appropriateness of protection it is worthwhile verifying whether in fact, costly patent protection is appropriate.  A particularly good example of this is so-called board games.  Board games are patentable but it is the writer's experience that the investment is rarely worth the effort and cost, since the games companies are primarily interested in a well worked out board plan, set of rules and ancillary materials, the total combination of which is protected by copyright.  Any patent protection should be kept at a minimum and international protection is certainly rarely worth the effort.  This is a clear example of the necessity of careful analysis with regard to the needs of the market place.

 

Once the innovator has developed the technical concept, identified the market niche and found a potential licensee, then comes the need for a licence.  The first point to watch out for is that in any preliminary discussions it should be made clear to the other party that such discussions are purely for the setting of a letter of intent, and that no legal agreement will exist until such time as a formal licence has been prepared and executed by both parties.  Even this can be risky if negotiating in countries such as Holland so that any negotiations to take place outside Britain should always be preceded by consultation with an appropriate lawyer.

The secret is to concentrate on what is essential.  Thus lengthy discussions as to confidentiality in relation to a mechanical device adequately protected by patent application are probably a waste of time.  Similarly, trying to cover various alternative possibilities tends to lead to a complex agreement and, frequently, ambiguous agreements.  Keep the whole business arrangement simple.  One innovation for one territory for a certain time.  Clear cut definition of any down-payment and clear cut definition of royalties, although one should always watch the problem of the tricky phrase 'net sales'.  Avoid any guarantees by the licensor as to validity, non infringement etc., and let the licensee carry the risks of the costs of enforcement of the rights since they have more to lose if there is an infringement.  While any good lawyer must emphasise that too simple an agreement can result in omitting of certain safeguards nevertheless too elaborate an agreement, with many 'belt and braces' situations, often achieves little by way of extra protection and certainly adds to the cost of preparation.  It is always wise to remember that while there is no such thing as a 'form licence', concentration of the agreement on the essentials of the business will tend to a more easily handleable agreement from a commercial viewpoint.  Two mistakes that newcomers to licensing always tend to make are:

 

1. Excessive greed as to downpayments and royalties

 

Downpayments these days tend to be small since the developer has all the costs of development and is not likely to accept the additional risk of a large payment to the innovator until commercial success becomes more certain.  Small mechanical devices tend to achieve a royalty in the region of 5% and elaborate methods of calculation usually tend to end up with this figure.

 

2. Excess of suspicion

 

Unfortunately creativity seems to go with paranoia.  Certainly safeguards are necessary, and that is the whole reason for a licence agreement, but the more safeguards built into the agreement the more complex and costly it becomes.  Usually with little or no added value in real commercial protection.  Much more important is to deal with a reputable company.

Summary

 

* Inventory - make sure you have properly identified what it is you are developing and how it is likely to be protectable.

 

* Specificity - make sure that the new idea is in as concrete and detailed a form as possible before making any consultation.

 

* Orderly approach - secure the advice on protection before you rush-off trying to licence the idea.

 

* Horses for Courses - select the type of adviser appropriate to the stage in, and nature of, your development and ensure that they do have the background and skills you need.

 

* Practicality - although all inventors tend to be like parents - overly proud of their children - do avoid trying to get too much return too quickly and do not over- estimate the value of your idea.  Pay attention to your adviser who may be more sceptical than you like, but does have the advantage of impartiality.

Who to consult

 

For technology a good starting point is, of course, the Patent Attorney who was originally consulted since most Chartered Patent Attorneys have some experience in licensing.  Lists of Patent Agents can be secured through The Chartered Institute of Patent Agents – www.cipa.org.uk

 

Mention has already been made, in relation to business plans, of help from organisations such as the British Franchise Association -http://www.thebfa.org/

 

A Patent Agent can also assist in advising on protection by way of copyright, in the field of design copyright and registered designs (i.e. shapes of articles) and can also help with advising on protection solely by way of confidential information documentation.  However, for example, protection by way of copyright in the field of entertainment, and in the confidentiality area in general, one should wish to consult a lawyer.  Lists of solicitors can be obtained from The Law Society - http://www.lawsociety.org.uk/ - or, contact The Licensing Executives Society - https://www.lesi.org/

 

In view of the number of solicitors, personal recommendation is probably more appropriate.  There are also certain foreign law firms practising in the UK (particularly for US development).

 

For assistance in merchandising concepts, e.g. characters, there is no fixed group but some of the Directories of Licensing can provide help.

 

As with all advisers, do not be afraid to demand evidence that they have some licensing skill in your field of interest, as distinct from the mere protection of intellectual property or knowledge of other areas of the law.  A local solicitor with a good knowledge of real estate and probate, however sound, may not be the best person to help with development of a new technical idea or a franchise.

 

Even if you are devoted to the concept of self-help beware of trying to draft your own agreement using sophisticated legal textbooks.