After teaching myself how, I've spent the past 15 years helping other people license their ideas. Open innovation is a beautiful thing. Really, it's a partnership. When companies open their doors, they expose themselves to an unlimited stream of ideas, upping the likelihood they'll hit it big. At the same time, they lower their research and development costs. Unlike venturing, licensing enables creative people to focus on what they do best as well as earn passive income.
But inventors are fearful. Some are dubious. They ask me, "If I show my idea to a company, what's going to stop them from ripping me off?" A lot! This is business! This is your opportunity to play the most exciting game in the world. The truth? I don't think companies steal ideas. I do know they work around them. Every day, in every industry, companies try to design around their competition without stepping on any toes. That's how they stay current. They think critically about how to make their products better. They find something their competitors have missed -- and capitalize on it. Is a potential licensee going to do the same to you? No. Not if you make it easier for them to work with you.
Put another way: Don't give companies a reason to try to work around you.
Some inventors are unreasonable. They ask for too much money upfront. They demand creative control. They're difficult to work with. If you're difficult to work with, you put yourself at risk.
Here are five things to do to protect your product idea when licensing to a company.
1. Be professional. Learn about their industry. Have a professional signature on your email. Have a dedicated phone line where they can reach you. Be accessible. Be transparent. Provide them with the information they require. Understand the language of licensing so you can speak to one another fluently. Keep things confidential. Don't make demands. Don't let yourself get emotional. You may think of your product as your baby, but they don't!
2. Establish perceived ownership. I recommend filing a provisional patent application. You need to become the expert of your idea, which is easier than you might think. Start by looking for prior art. Do a Google Images Search to see if there's anything like your idea. Dig through old patents that are similar. What is your uniqueness? How is your idea different than products on the market and/or prior patents? Think about how you would steal your idea from yourself, aka variations. Make it difficult for someone to come up with a variation you haven't thought of. Include as many drawings as you can. What you might miss in your description can most likely be covered in a drawing. They don't need to be fancy; stick to line-drawn. Anyone who works with you should sign a work-for-hire agreement.
3. Be prudent. If they ask for your intellectual property, such as a copy of your provisional patent application and you're not comfortable, be professional and ask for a non-disclosure agreement. Make sure to read it carefully. Do not send them your filing number. That's personal, not to be shared with anyone.
3. Be reasonable. Understand: They're risking their time and money, not you. Your goal is to reduce perceived risk. There are a lot of ways to do that. Understanding manufacturing questions and costs is a great start. Producing a prototype -- even better. Do not ask for tons of money upfront. That's called top loading the deal. Of course you would like to recoup the money you've already spent. But there's a wiser move. Ask them to pay for your patents (past or future) instead. Doing so makes good business sense for both parties. Make sure to use your attorney when managing any of your intellectual property.
4. Be patient. Don't call them daily or even weekly. Give them time to do a good evaluation. That could take a while. So ask them about their process. How long it will take?
5. Keep the ball moving forward. After every interaction, recount your conversation and ask for next steps.
Overall, having a great attitude is the number one thing companies will value. They will love that you're reasonable, you're educated, and you're willing to work with them to bring your wonderful idea to market. Everyone wins.