Can you license an idea? Yes. This drives the people who insist that only an invention can be licensed nuts, but there are companies looking for new product ideas that most likely cannot be patented. It all depends on the industry, the company, and the idea itself. For many consumer product goods, speed to market is more powerful than intellectual property.

That said, there are still plenty of companies that would like for you to have filed some intellectual property. A provisional patent application (PPA) is a smart investment, because you and/or your licensee have the option of filing a non-provisional patent application later on.

Here are 10 questions to answer before you start sharing your idea with invention licensing companies.

1. Is your idea new? 

Unfortunately, many people don't bother to answer this question because they are so excited about their idea. But it is of critical importance that you take the time to familiarize yourself with the market landscape. Search for your idea using Google Images and Google Shopping. There's a good chance that it's already been invented. You need to know as soon as possible.

2. Has it been patented?

Search for prior art using Google Patents or the USPTO's database. (Prior art is evidence that your invention isn't new, which is a requirement of patentability.) I highly recommend that you teach yourself how to do a basic prior art search. You can always hire a professional later on to help you expand and refine your search.

3. What is the potential market size?

A significant amount of effort is required to commercialize any new product. If your idea is too niche, you will have difficulty getting a licensee to play ball.

4. Is it easily explained?

Ideas that are very new and different often require educating consumers about how to use them. This is prohibitively expensive, not to mention time-consuming. You might want consider another idea.

5. How will you build a proof-of-concept prototype?

Early on, the best way of sharing your idea with potential licensees is by using one-page advertisement known as a sell sheet. After you receive initial interest, you will most likely need to build a prototype that actually works. Plan ahead.

6. Are you able to capture the big "benefit" of your idea in a short sentence? 

The benefit of your idea answers the questions, why will anyone care? and what are you doing for me? Being able to communicate the benefit of your idea -- whether it's to the end user or the licensee itself -- in a concise and engaging way is absolutely essential to your success. You will use this short phrase on your sell sheet and over and over again to open doors.

If you cannot summarize the benefit of your idea quickly and affectingly, you need to consider whether it is strong enough in the first place.

7. Are there numerous inventor-friendly companies to submit your idea to?

Open innovation has become the most popular form of R&D worldwide, but some industries are much more receptive to hearing your ideas than others. The tech industry is notably unfriendly to independent inventors, for example.

8. Can it be manufactured at a competitive price point?

If your idea cannot compete on price, it won't see the light of day, because everyone involved needs to be able to make money. This is one reason why it's important not to over-design your idea by adding unnecessary bells and whistles. Aim for simplicity instead, and consider manufacturing methods and materials.

9. Are you willing to compromise with your licensee? 

If you want to control every aspect of the product development process and make all final decisions regarding your idea, you should consider venturing instead. The most successful licensee-licensor relationships are partnerships. It's important to respect that your licensee is taking on much more risk than you are and understands their business better than you do.   

10. Do you understand common terms of a licensing agreement? 

Most people assume that licensing negotiations begin when they receive the first draft of a contract, but that's not true. In reality, all of the conversations that lead up to that moment are a form of negotiations in that you are setting expectations and developing the foundation of your future relationship -- whether you realize it or not.

Product licensing is an extremely exciting avenue for creative people who, for whatever reason, do not want to start a business manufacturing, marketing, and distributing their ideas for new products.

Do enough research to adequately answer all of these questions. Generating passive income from royalties requires more than just a new great idea.