The Unexpected Benefit of Licensing a Product Idea
Partnering with a powerful company will help you fend off me-too products.
I could tout the benefits of licensing product ideas all day long. Sometimes it feels like I do. As a creative, licensing has always been attractive to me. I enjoy improving upon existing products and making people smile. I’m much less interested in the practical realities of running a successful product business, like manufacturing, distribution, and marketing. I know for sure because I once started a guitar pick business in-between licensing deals. It was a wild, exciting, stressful ride. We ended up selling Hot Picks in more than 10,000 stores nationwide as well as winning “Best in Show” at NAMM twice in a row.
Some inventors disagree with me. Their attitude is, “I’m the one that came up with this great idea, but now I’m only getting paid a tiny fraction of each unit that sells?” Coming up with a marketable product idea just isn’t that difficult. I’m happy to outsource the heavy lifting in exchange for passive income. At the end of the day, I think the best way of looking at licensing is as a partnership. One of the most significant benefits of partnering with a powerful licensee is getting your product to market faster, which is crucial in this day and age.
A less frequently discussed benefit of partnering with a licensee is its ability to fend off me-too copycats. When a product is successful, others will try to copy it. It’s that simple. The more successful a product is, the harder others will try. I mean, let’s be real: The most powerful companies in the world aren’t able to prevent knockoffs from popping up. The smartest thing an inventor can do is to have thought about potential workarounds before filing intellectual property. But all the IP in the world isn’t worth much unless someone is willing to enforce it.
Josh Malone knows this reality well. (Disclosure: Malone is speaking at an event I’m helping plan, Make48.) Malone, a father of 8 living in Texas, is the inventor of Bunch o Balloons, an innovation that enables hundreds of water balloons to be filled and tied in minutes. The Kickstarter campaign he ran is one of the most successful of all time, having exceeded its goal by more than $900,000. After the campaign took off and he received a bunch of press, companies began contacting him to license the idea from him. Malone said that at the time, he was hesitant. He had already set so many things in motion, like contracting with a manufacturing facility to fulfill orders, and the product had already received so much attention, he wasn’t sure he needed one.
“Last August, I felt like I could skip the licensing stage,” Malone explained. “I saw the benefit in terms of manufacturing, distribution, and marketing, but I thought I had accomplished the majority of those things already. It almost got to the point where I felt like I didn’t need a partner. It could have gone either way.”
But, he said, the toy company Zuru brought so much to the table that he felt compelled to take the company up on its offer.
“Zuru showed me how it was going to do what I had planned on accomplishing in 3 years in 6 months,” he said. He’s proud of what they’ve achieved together. “We’re making the best product at the right price. It easily could have turned out otherwise.”
But sure enough, just a few months after his campaign ended, a friend spotted a television ad for what Malone says is essentially the same product. Because he had applied for a patent via priority examination the spring before, it had already issued. So together, he and Zuru set out to defend his ownership and protect their interests.
“It can be difficult to enforce your rights. I’ve been blessed with an awesome partner. The company has provided some financing for the suits we have filed,” he said. “It’s also experienced in litigation.” If he were on his own, he feels like his competitors could win simply by outspending and outlasting him. Because Zuru is his licensee, he has the company’s strengths and resources behind him.
When you license your idea, you forge what I believe is pretty close to a darn perfect partnership. You’ve shown the company how to make more money. In exchange, it’s able to bring your product to market by harnessing its myriad of relationships, including those with vendors and retailers. It’s also able to help defend you should problems arise.