Debunking Product Licensing Myths and Hoaxs

Confused between licensing fact and fiction?

If you have a brilliant idea don’t sell yourself short by skipping the product licensing stage. Most people have some pretty misguided ideas about the process which can lead to many entrepreneurs shunning it altogether. However, at the end of the day, incorporating licensing into your business plan could mean the difference between a burgeoning bank account and financial ruin. To help clear up the confusion we’ve put together this ultra-useful guide that debunks some of the most commonly held product licensing myths.

Myth 1 – You need to be a large scale company

The belief that product licensing is reserved exclusively for large companies is one of the most absurd myths out there. Regardless of company size all new products are eligible for licensing. Of course, all products are different which means that enlisting the help of an expert branding and product launch consultancy will help you create bespoke licensing agreements tailored to your unique product. Kelvyn Gardner, Managing Director at licensing trade body LIMA UK maintains that SMEs are not making the most of licensing opportunities and that “there are many routes into licensing for small firms.”

Myth 2 – Product licensing is not worth the money

Again, this myth is simply not true! Licensing plays a key role in brand development and is what will ultimately drive your product to commercial success. It will also protect your venture against commercial infringement and generate potential income from the licensing of patent rights. When you license a product to a manufacturer you’ll also enjoy access to resources, capital and industry experience that you simply cannot attain independently. Most of the world’s leading brands have integrated licensing into their strategic development frameworks, from Cadbury and Coca-Cola to Hasbro and Fisher Price.

Myth 3 – Companies lose control

Many businesses are under the impression that licensing a product translates into a direct loss of control. While this may be the case with some manufacturers, trusted product licensees will work with you every step of the way. A dedicated team will upkeep a clear communications channel and make sure you’re involved with every decision.

Myth 4 – I’ll lose too much of my profits

Yes, product licensing does incur royalty payments but when compared to the benefits it’s a small price to pay. Typical royalty fees sit at around 2 – 10% depending on the licensee, market environment and potential profitability.

Myth 5 – It’s too risky to share my idea with an external party

False! With a watertight NDA and product license agreement you can completely safeguard your unique product against the risk of infringement. The licensee will be bound by an impermeable contract that ensures only they can manufacture the product in question.

For more information please see the Licensing section on the BrandRefinery website

A good toy store at Crossroad Mall” by “Nicholas Wang” licensed under CC 2.0 BV