How To License Your Product Idea To A Company in 10 Steps (with or without a patent) 2018 — PART 1

How To License Your Product Idea To A Company in 10 Steps (with or without a patent) 2018 — PART 1


What’s up world this is Sef from MFSEF
studio where it’s all about making ideas happen by licensing them out to
companies and getting paid for them in royalties if you haven’t it like or
subscribed please do and if you have any questions or comments please write them
down below and I’ll get to them as soon as I can
now I’ve been talking a lot about licensing but I never really went into
depth on how or taking the steps into licensing a product idea so I’m gonna
take time in this video and go through each step and this is the same steps
that I use for my process of bringing my ideas out to the store shelves. Now you
guys are probably familiar with licensing if you’re a subscriber to this
channel and if you’re not what licensing is in a simple layman’s term is renting
your ideas out to a company and that company will do all the heavy lifting.
For example manufacturing it distributing it, marketing and customer
service. And every time they sell it you get a royalty or a certain percentage of
that sale and they sent it to you in royalties every quarter so have you guys
ever had that moment where you’re doing something or you’re you’re just kind of
maybe even taking a shower or walking around and you come up with a pretty
cool idea invention idea or product idea and we think to yourself. huh I wonder if
it exists maybe somebody should make this, I should make this and get this on
to Shark Tank well with that is not a bad way to go about it and give a lot of
respect to people that do. But that is kind of the traditional method of
bringing products out to market and usually you’d have to go through a lot
of steps so you have to manufacture on your own
we have to distribute it on your own and do all the customer service and one big
key factor is getting investment or a little bit of capital behind it to fund
the project. And what people do is sometimes they sell it and they need a
little bit more money and they somehow get onto shark tank and pitch their idea
and I’ve had a little or not had a little observation as I would watch some
of the pitches on shark tank that some of the deals end up being just licensing
deals. And I thought to myself well why go through all that trouble when the
licensing deal are the Sharks and goals why don’t we just go into licensing
ourselves. And that is a thing that I kind of want to hope well I hope to
teach people that it’s there’s another method rather than starting up a company
to bring your product idea to life. Now if we think about the traditional method
of startups and bringing your own product idea out into the world, there’s
three key factors that need to come in to play when we want to make sure that
it survives and does well. One, is going to be an investment of time and it’s
gonna be a lot of time and I believe the average is that it’s three to four years
until you actually see profits coming in and that’s with grinding hard on the
weekends, holidays and it’s gonna require a lot of investment and time and people
like to take out loans and borrow money from investors and it’s gonna take a lot
of energy and you’re gonna have to be wearing a lot of different hats and
assemble a team and make sure that you get a well automated
machine to make sure that you have a successful product. Now last I heard it’s
there’s a fail rate of 90 percent for startups and that’s just way too much
time money and energy for a 90 percent set of fail rate and my thought is
nobody got time for that. So that’s where licensing comes into play. It is
something that is very low risk and that comes into money you don’t have to have
investments or pull out loans or borrow money from other people a minimum of
sixty five dollars if you want to file a PPA and it could be up to three hundred
dollars if you are outsourcing your design work for example of them
rendering and craning sell sheet and so all that stuff is low risk compared to
starting up on your own. And but there’s high rewards if you partner up with the
company that has all those systems and processes in place because they do all
that heavy lifting and they will go and pay you back in royalties and all of
that would just be profit and it’s more money for you to make more ideas with
and license more ideas out. So, who is licensing for you some of you guys may
think that well I’m not an inventor or designer or creative but the thing is
that we all have ideas and those ideas can be licensed if it’s a good enough
idea and if it doesn’t exist and if you’re able to just connect the dots
with the right companies. And that enters the era of open innovation for over the
last decade Procter & Gamble has been coming out with products ever since 2008
actually outside of the company doors and that’s
open innovation they opened the doors to the world so they could have innovative
ideas coming in and not relying just on their own internal R&D or research and
development department and they spend a lot of money if they do it that way on
trying to get ideas that are gold why not just have people out in the world
that come up with the depth of these ideas and submitted to them so they
could constantly be the leader and come with new ideas and if you’re not getting
getting new ideas you’re failing especially as a large company now I do
have to give a little hat tip over to the gentleman on the left here his name
is Steven Key and he wrote a book called One Simple Idea and I picked it up while
in school a few years ago and I was like this is brilliant he does a great job of
breaking down the steps of Licensing and it’s safe to say that he wrote the book
on licensing and if you haven’t read it or heard of the book yet please check it
out because it does a good job of getting into how the licensing model
works. So these ten steps are actually a slight modification I modified it
towards how I do it so it’s not going to be word-for-word or exactly the same
steps but they’re pretty similar it’s just a slight variation on it. Now with
Steven Key he’s built a massively successful career from licensing and
this is one idea that he talks about in his book and in his interviews and I
love this idea it’s one of these ideas where I wish I thought of first and the
story goes like this if I remember correctly he was in his office and he
was coming up with ideas and he was playing with this little basketball hoop
the nerf basketball hoop you know the ones that you put on your doors and
you could do it on the indoors and he was concept in or coming up with ideas
to license and right next to it was a picture of this guy Michael Jordan so we
thought huh what if I put Michael Jordan on the backboard of this little
basketball hoop. So he got a picture of Michael Jordan cut him out and he just
taped him onto the backboard and he found a company called Ohio art. Ohio
art they loved it so they decided to start putting together a licensing deal
and they signed an agreement and they created a thing called the Michael
Jordan wall ball they manufactured it they distribute it all to the stores
they make commercials out of it and US market it and started selling it and the
first year Stephen Key received over $100,000 in royalties and was selling it
for the next ten years so that’s not a bad little example of how the licensing
game works he made a prototype just off of a picture and taped it off to
accountable was it Frankensteined it together and it probably doesn’t take
that much time to put together that little prototype and he found a company
that was able to make it and it fits with their product line and they would
be selling it and they’ll be sending him royalty checks every quarter. So it’s a
really cool business model that a lot of people don’t really know about
especially if they’re coming up with all these product ideas. And it’s a great way
to come up with a bunch of ideas and get them licensed and without spending as
much time and energy doing the going down the traditional route like a
start-up. So how does how do like what are the steps to get those ideas license?
These are my 10 steps of licensing your product ideas Step 1
Gotta have an idea now there’s different methods of coming up with ideas one of
them could just be straight-up problem-solving or observations and you
could even get an existing idea that exists I don’t like a product idea that
exists and add on top of it like think about what the next evolution would be
is where there was a small tweak in this current product that would help add an
extra benefit or significant or compelling benefit that is a licensable
idea. Now once you have that idea what you want to do is do product market
research, you want to see if that idea exists already. if it doesn’t great
there’s ways of checking to see if it does exist or not and that’s you could
start easily by hopping on the computer and going a simple Google search and
looking at all the different images and online retail stores or e-commerce
looking on Amazon looking on Google shopping Google’s a great tool and
resource for you to look up all the ideas and you could also look up Google
patent searches and try to dig around that site and other patent websites to
see if a patent exists for that product Now if it does what you can do is before
you completely dismiss or throw away that idea and see what else you can add
on top of it to help bring be its own idea. So don’t give up too easily if your
idea exists already just try to see if you could add on top of it or make it
better or refine it so the next step once you do product market research is
to start creating your hint list of companies and
that could also happen during your research I tend to do two and three
together at the same time oh I forgot to mention you could look at at the
physical retail store so hopping off the computer now going into the stores where
you think your product will belong and going to that store Irish the Shelf
Isles of where your product would be found and seeing what companies are able
to make us your idea and see if it exists already out on the store shelves
now as you’re doing all that you go and you know take note of all the different
companies that make a similar product to your concept and the logic is that they
have the manufacturing process and distribution already set up and it would
be a lot easier for them or to sell them the idea because all that process is set
up. So as you’re creating the hit list of companies we call them they’re also
known as potential licensees if you’re wanting to start learning the vocabulary
within the licensing world. And I use a simple Google spreadsheet and I write
down the company name, their phone number their address, their email and I try to
find key contacts usually through LinkedIn and call them and try to you
know just get as much information that I need but that’s usually all the
components that go into the hit list when I put together these company hit
lists or potential licensee hitters. Next step would be creating a sell sheet. Now
I like to think of sell sheets as a very simple and straightforward print ad and
you’re gonna be taking all the elements of what a good print ad would be and
just put it onto the cell sheet this is an example of a sell sheet that I made a
while back when I was folk the novelty world and let’s deconstruct
what this sell sheet has. All right so we’ve got a pun intended money shot
of the product right there on the side and make it big and juicy and then
you’ve got the headline which tends to be the product name and we’ve got a
little body copy or sub headline and that goes below the headline for me just
because it just groups it all together and it gives a this is a term from
invent right so hat tip to them one-line benefit statement of that product so
people looking at this little quote unquote print ad will be able to know a
little bit more about what’s happening in this image and what this product is
doing. And I like to keep the one-line benefit statement and any copy pretty
short and I like to restrain it towards the same formula as a tweet so I believe
it’s 140 characters you know you don’t want it to be too long and the logic is
that the person that’s looking at all these sell sheets they’re busy they’ve
got a bunch of other stuff that they gotta take care of and looking at ideas
is just they go through a bunch of ideas and they don’t have time to look through
all of them so they go through it quick so you want to make it really easy for
them to look at it and understand what’s happening there so the last part of a
good print ad would be a call to action or a CTA and the CTA usually includes
well there’s a logo the company logo and a company name sometimes the company
name could be the logo itself kind of like a word logo and contact info so you
have your email and your phone number if they ever want to follow up and reach
out to you and if you’ve got a patent pending on your product you could go and
put that on the sell sheet as well. So when it comes to patents, the next step you
so you want to get a little bit of a protection on your idea and filing a patent
is the old way the new way is to file a PPA
or a provisional patent application and what that would do is give you the
ability to put the words patent pending on your product. Now it doesn’t really
give you a full long protection and patents don’t really give you protection
they give you the the ability to attack it’s if somebody infringes on your patent.
Now with patent pending it’s not really so much of a protection but it’s the
perception of ownership of a patent and that gives you a little bit of a
little bit of power I guess to and this is the perception of you owning that
idea and patent pending it’s a lot easier to do than a traditional patent and
it’s a lot cheaper it costs a minimum of sixty-five dollars if you’re classified
as a micro entity which I’m not going to really get into in this video and you
could do it all by yourself online and it’s really quick to get approved I
believe it’s around three weeks or three months we’re in a traditional patent or
a non provisional patent that is going to require a lot of money, time and a
high risk of it’s still not getting approved for a patent. And you’re gonna have
to hire a patent attorney and patent attorneys are not cheap and they’re
gonna have to help you fill out the patent application and you’re gonna have
to get patent illustrations or drawings done and it’s got to be done a certain
way and it’s gonna take around three to four years for it to get approved and
three to four years is a very long time especially when you it’s the person that
gets this product out onto the store shelves first wins so three to four
years down the line you and somebody already comes up with that idea first
you kind of lost so the alternative and better way is to file a PPA and don’t
file a patent, file a PPA. Now I do have to say that most of the ideas probably 90
95% of my ideas that I presented
companies do not have a patent pending on them just because they’re more
novelty or they’re not a straight-up new invention
and I just want to do it real quick you want to get to the store shows quick and
I and I have a bunch of ideas that I make so I don’t really file a PPA on
them but if it’s an idea that’s really good I feel like it’s big I’ll go and
file a PPA and put a patent to patent pending on it but most of the time I
don’t. Now I know you’re asking what if they steal my idea. Let’s take PnG for
example half of their products are coming outside of their walls and you
start a conversation with them you know you’re emailing the sell sheet over
to them and you call an email and you’re you have you pretty much got a little
bit of a daisy chain of your conversation especially if you’re
emailing it and if you see your product all of a sudden on the store shelves but
then you never had a licensing agreement go through you and they stole your idea
you’ve got the power of the world wide web and social media on your side and
again half of their products come from outside their walls so if they get
caught stealing your idea you just have to screenshot your email share it on
every single platform and be like, hey do not submit your ideas to whatever
because they stole my idea and here’s the proof this is a conversation this is
when it happened and this is the idea that’s finally on the store shelves. So
people that have been submitting ideas to them will stop sending or will stop
sending ideas to them and send them to their competitors. And if they want to
stay top dog or be you know they want to do well they gotta accept ideas and
whoever has the most ideas wins and if there
known to steal ideas it’s gonna hurt them real bad. So I wouldn’t really worry
about them stealing your ideas but if they do you got that on your side social
media and the power of people and all that. Next step is to contact and submit
your ideas to companies. You want to go and look at your hit list again and call
them and what I do is I call whatever generic phone number I get and I say hey
um I’m Sef I’m a product developer with MFSEF studios
do you accept outside product submissions. And if they say no you say
thank you and move on to the next person on that list but they say yes they
either tell you the process or they’re like yeah I’ll get to transfer it over
to this guy he handles all new product ideas or email it to this email this
idea over to this and we’ll have somebody take a look at it so you go and
do that which is pretty easy and usually I contact as many of the companies as I
can and a minimum of 30 but I try to shoot for 50 or 60 just because a lot of
them will say no or a lot of them will say they don’t like the idea but a few
of them will be interested in it and just kind of having a lot of them. It
just gives you a higher chance of success. So you can’t contact a bunch of
the companies. Now the next step and it does take some time and you’re gonna
have to be patient with them because they have to show it to their team is
follow up with those companies know they’ll take a few days and might take a
week or two depending how large that company is or
how their processes for reviewing products submissions. But just follow up
with them keep tabs and be you know trying to get updates but don’t be
annoying and pest we want to want to be diligent and persistent but you do not
want to be annoying because the more annoying you are the more likely they’re gonna
kill the deal because they just don’t want to work with you. But follow up and
be consistent and be courteous and just make sure that you know they’re looking
at the ideas rather than having it be sitting off to the side and their email
inbox. Again these are people within companies
that are busy and they’ve got a bunch of other things that they need to take care
of so you want to give them friendly reminders. Now if once they actually get
back to you and say that they’re interested the next step would be to
negotiate a licensing agreement. And within the negotiation you guys are
gonna be talking about one the royalties what’s the royalty percentage and
there’s other topics like patents and another really big one will be minimum
guarantees and minimum guarantees are making sure that they don’t sit on a
product idea they can they continue to move forward and produce the product and
sell it in a certain time frame that way that product idea isn’t going to waste
so that’s all you know talking points within the negotiations and once you
guys have an agreement that both sides of the party are happy with, we go and
sign it. You sign that agreement and you’ve got a successfully signed a
licensing agreement and it’ll take a little bit of time for them to start
manufacturing the products and distributing it or shipping it out from
wherever their manufacturers are which tend to be more often than not in China
and you know that takes a it takes some time and once it starts selling then the
royalty checks will be coming in every quarter and
that’s always a good time I like to call those end of those quarters and loyalty
seasons. And the last step is to repeat it all over again. Licensing is a numbers
game and you’re gonna have to do a lot of it well I don’t know about a lot but
you’re gonna have to do a bunch of them to actually see some real success
whatever that it means for you financial success but you know you’re gonna have
to do a bunch of them because licensing is a numbers game and you just keep on
doing it over and over and over again The great thing is that it doesn’t take
a lot of time it doesn’t take a lot of money and you have the ability to just
make a bunch of ideas and license them out. Not a bad model to bring ideas to
market so I hope you guys enjoyed this ten steps to bringing product ideas to
market and if you have any questions or comments write them down below and if
you haven’t hit like or thumbs up please do and subscribe thank you so much and
I’ll see you guys in the next video

31 Comments

  1. Kevin Brownell says:

    Should someone always do a patent search even if your not going to a Patent?
    So If i just want a licensing deal should i still do the patent search and do the company's want you to have the patent search before they will talk to you? Thanks

  2. armin ahmadzadeh says:

    hey man thanks for info im looking forward to seeing more of your videos. btw recording quality is good but there is a noise in the background

  3. armin ahmadzadeh says:

    btw, I wanted to fill out a PPA for my idea but when I searched google patents I realized that this idea already has been patented in 1993. is there any chance I can get PPA?

  4. Health Man says:

    I think the hardest part would be trying not to make a mistake during the contract negotiations, or leaving something out that is essential. Does the book cover most of it, and does it give examples on how to execute your timing for adding things in the contract?

  5. Zack J says:

    You can always put your non provisional patent idea out in the public for as long as you filed it. It’s a risk but it can gain you high rewards

  6. John T says:

    Damn dude u are boring add some pep to your step

  7. Jacob Sheets says:

    Extremely helpful video. Thanks!

  8. Inventitious says:

    Dope

  9. s says:

    Great advice, thanks!

  10. Kinfolk Kinfolk says:

    Great info.. I drew out an idea over 15yrs ago i called the lighter mate. You insert your lighter and clip it to your pants or purse with draw string. Long story short, at the time i had no money or info on what to do. I shared the idea with a guy and never pushed the idea.. Now its on the shelf. "RATS!" i tried another idea.. Workout equipment and sent it to inventhelp. $10,000 later over 9yrs i was took for a ride. Total waste of time and money. Now i have another idea and i don't wanna be ripped off or taken advantage of. Thanks

  11. Nick H says:

    Why all the background noise?

  12. Nick H says:

    Did you record this while driving with the window down?

  13. DacMan 2018 says:

    Do you normally get a prototype made or just get a design of your product made for your sell sheet?

  14. moonbase alpha 2020 says:

    great vid what's your personal email

  15. simgirlone says:

    Can you license a single idea to multiple companies or do you have to stick with the one that gave you a deal? Is licensing typically exclusive?

  16. Joel Marcy says:

    Awesome info! Most of these videos they with act like they are gonna give you some info and you waste all the time watching the video for no real info and they tell you to buy their book. Why would I buy their when they already said they were going to give info and didn't. Thanks for your video. I just subscribed.

  17. TonesBalones says:

    Watch in 2x Speed you're welcome

  18. Dre Long says:

    Does one need to have their own business and business name for producing a "sellsheet"?

  19. MISS V. says:

    Hi Sef. I know that most inventions should solve a problem, but what if you have a novelty product. I know you have licensed products in this area and I thought you could give me some advice. I seem to be having a probem in this field. I am a subscriber to your channel, enjoy the topics and appreciate the information you provide. Thank you for keeping inventors informed.

  20. WordupknowJesus says:

    Hi Sef, so your saying contact 30 or more companies at the same time and send them all that say ok to send a sales sheet? So you could be dealing with ten or more at the same time for your product ? If the answer is yes, this is going to be pretty complicated and how would you do that ? Tell them your talking to several companies ?

  21. Mark A. Rameau says:

    Hi thanks for the info this is a helpful video. I have one question? Can u provide me the web for PMG, i did a search but i want to make sure that I'm on the site

  22. Hiba Ali says:

    My God, I have so many many ideas, in fact three or four ideas a month, I have registered more than four patents in my country, but the conditions in my country are very bad for selling ideas or producing them.

    Now I'm working on the idea will be revolution in the world of graphics, correspond to the company Adobe, but I hesitate to send them this video removed this fear I will go with PPA and send my ideas .. thanks to u 🙂
    Question
    If I really believe in my idea but I can not find a buyer what do I do?

  23. Hiba Ali says:

    My God, I have so many many ideas, in fact three or four ideas a month, I have registered more than four patents in my country, but the conditions in my country are very bad for selling ideas or producing them.

    Now I'm working on the idea will be revolution in the world of graphics, correspond to the company Adobe, but I hesitate to send them this video removed this fear I will go with PPA and send my ideas .. thanks to u 🙂
    Question
    If I really believe in my idea but I can not find a buyer what do I do?

  24. Valentin Nicoara says:

    Hi Sef! Great video. I actually tried the old way of getting a product to market, made prototypes, videos, launched a Kickstarter, failed, improved the product, launched again, raised $140k, got scammed by the manufacturer, delayed by a year, manufactured, shipped internationally, hardly pulled it through. Now I have $20k worth of inventory I can't sell.
    I decided to go the licensing way instead.

    Quick question: do you make the companies sign an NDA before showing them the products?

  25. Carlotta Jackson says:

    Thanks so much for sharing I really appreciate the information! I'm going through the process & there is so much to learn & since this is my 1st of hopefully many I retained an intellectual properties attorney plus I didn't know any better honestly ☺. I've a patent pending product that doesn't really fit in a specfic industry per se therefore I'm kind of getting stuck on the market research component. It wouldn't be considered a novelty item it is almost feminine hygeine. May you please tell me how I can resolve this very frustrating aspect. This also hinders me when I attempt to find trade shows or research professional associations like most of the videos suggest that we consider. I wish to license or sell I don't wish to manufacture myself.  Any advise that you can provide would be greatly appreciate. Much success on your future endeavors. C.J.

  26. John Stirling says:

    I can use some help I have an invention for a whole brand of a product line please help 6314156426

  27. Daniel Blake says:

    Why would a company pay you for an idea? I’m confused, couldn’t they just run with ur idea?

  28. yingyang0122 says:

    So can I license one idea to multiple companies at once?

  29. KC Boon says:

    How is it that no one is going to steal your idea if you license without Patent?

  30. Anthony Duck says:

    On point! Got my PPA filed over a month ago. Still just a guy with ideas inventions. Unless you already have money or operating a business it's counter intuitive to try and do everything yourself. I realized I needed to stop being childish. The stories of MS and Facebook are few and far between. It takes time, money and alot of energy from start to finish to actually get a product to market. It's impossible if your working a job and trying to pay the bills. Smartest advice to anyone is to liscense. I've already wasted a month.💯

  31. Kenn Tollens says:

    Thanks for the info. Awesome!
    1. 10:07 Have an Idea
    2. 10:49 Product Market Research
    3. 12:26 Create hit list of companies (potential licensees)
    4. 13:46 Create a sell sheet
    5. 16:09 File a PPA (Provisional Patent)
    6. 20:42 Contact & Submit ideas to companies
    7. 21:58 Follow-up with Companies
    8. 22:58 Negotiate a licensing agreement
    9. 23:44 Sign agreement & Collect Royalties
    10. 24:22 Repeat the process with other ideas

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