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Inventors often don’t have the resources to bring their products to market. Many times inventors turn to licensing to try to avoid spending too much money. But inventors lose control of their product in a licensing arrangement. There are other approaches inventors can take to maintain control and still get investments to launch their product in a big way. Those approaches include strategic agreements or partnerships with other companies. There are many types of deals inventors and their interested parties can strike. The following are some that you might propose to interested companies.
1. An exclusive agreement with a manufacturer where you agree to only use that manufacturer to produce your product for a period of time in return for the manufacturer offering no cost or discounted fees for product design help, prototype production, mold creations and initial production set-up cost.
2. An exclusive agreement with a marketer that commits you to sell only to that one marketer in return for an investment from the marketer, or in return for a down payment on future orders. Inventors might first strike a deal with a marketer as that creates the likelihood of future sales that will encourage manufacturers to give you a manufacturing deal. You don’t need to do exclusive agreements with both manufacturers and marketers, but often doing both creates a synergy to both parties that helps land both deals.
3. Private label agreement, in which you package the product with the private label marketing company’s name on it rather than your own, with the private label marketer guaranteeing to take a certain volume over a one to two year period. . Inventors often need to sell the product at a discount of 50 to 60 % or more from the suggested retail price, but inventors get in return guaranteed sales and low marketing costs.
4. Joint ventures, where one or more of the partners will own part of the company in return for their investment. You are best off doing this with only one partner as it will help you maintain some control. Among all the approaches discussed in this article, inventors have the most trouble maintaining control in a joint venture. A joint venture is also the most difficult agreement to negotiate so use this approach as last resort.
5. Taking a marketing commission, of maybe 15% 25% in return for the manufacturer picking up all the marketing and production costs.. This is an approach to take when
inventors don’t have any money to offer towards product introduction but where inventors have made industry contacts to help market and sell the product. This is often the best approach for inventors who know their industry and know how to sell. Manufacturers, especially contract manufacturers, who are companies who only make products for others, don’t have any sales expertise and are desperate for new product opportunities.
Tips for Success
1. Try to find inside support in target companies. When you are targeting a company or distributor, you need someone within the company to help promote your idea. You can meet contacts at your target company at trade shows, or by just contacting the company and finding the salesperson that covers your area. Salespeople, regional sales managers, and marketing personnel all can be the right one to push your product and deal concept with company management.
2. How to approach a target company. The best approach is to simply approach the company and tell them you have an idea that has received very positive consumer reviews in your market research. Explain that you can’t afford to introduce the product on your own, but that you feel the product could be a success if you and the company collaborate. Mention you have two or innovative approaches you’d like to discuss with the company to see if there is any interest.
3. How to decide on patent protection Inventors don’t really need a patent to strike a joint-venture or alliance agreement, but it does improve their negotiating position. It also helps ensure that the product’s intellectual property rights belong to the inventor. In some cases, the inventor might apply for a provisional or design patent so he or she can say that a patent is applied for. You are better off applying for a utility patent and be able to show that when a potential partner asks to your patent application.