STEP #2 DEVELOP A WRITTEN AGREEMENT
In this step, we try
to put into writing the plan under which we agree to operate in the future.
From information obtained in our discussions, we draft a list of specific
topics that need to be discussed and included in our agreement. Then we
discuss each topic and place it in a "plain English" non-binding letter
of intent. If we reach an understanding, we will submit our non-binding
letter of intent for legal drafting for final approval by both parties.
Each party should have the agreement reviewed by their attorney. Discussions
in this step can be in-person or by telephone, depending upon the distance
to be traveled. If both parties agree, we proceed to STEP #3
NOTES:
*The possibility of an outright sale of the invention is always a consideration
provided a minimum sale price is placed in our agreement. **If a reasonable
proposal by a third party is made which is not covered by the agreement
or granted to the licensee, it will be presented to the inventor for possible
mutual acceptance. ***The written agreement is made to protect both parties,
beginning as early as possible. During the schedule of events (Steps 5
through 10), some unforeseen situation often occurs that requires changes,
modification, and additions to be made to the agreement. This can be done,
but only upon mutual written agreement.
TERMS OF OUR AGREEMENT AND THE LATER SUB-LICENSING AGREEMENT MUST ENTICE OTHERS TO SPEND MONEY AND TIME ON MARKETING YOUR INVENTION
Since we operate on
a performance basis, require no fee, and pay all our (and our employees')
expenses, we want to be in full agreement with the Inventor before proceeding.
We have been successfully launching new products for over twenty years
and only enter situations where the "deal" is good for all parties involved.
The written Agreement is a vital working tool or reference guide to work
from during steps 5 through 10.
We recognize that the inventor has usually spent countless "un-paid" hours and invested many dollars in his invention and should be sure he has written evidence documenting his rewards if or when his invention has become a financial success. There is one portion of the agreement that we and the Inventor sometimes differ (at first only). This is the area that involves "up front" money and/or minimum royalties.
We usually deal with inventions that have been: a) Licensed once and failed, b) manufactured by the inventor with little or no success, or c) presented for license for several years with no company acting on the offer. We then license the invention with the intention to sub-licenses, after we develop a history of sales and profit. Since the product has not previously had success, the inventor should realize that, in addition to experience on our part, a considerable amount of time and money must be spent before a profit is realized. Until it happens, neither we (nor anyone else) knows exactly how much money it will take, how long it will take, or even if any profit will ever be made. The sub-licensing company has exactly the same problem-with the exception that they may require more time to make decisions and may require a greater profit justification to their stockholders (such as a proven historical track record) before allocating large investment dollars or precious man-hours to maximize the return on your invention.
"Up front" money takes away from developmental and promotional money your invention desperately needs. High minimum royalty payments only limit the time allowed for a company to properly "gear up" for your invention. And we need time to develop a track record to entice the sub-licensee. There are other terms of agreement, than the requirement of up-front money, that can be put in the agreement, to prevent your product from being tied up or "shelved" and not getting to the market. In other words, we do not pay "up-front" money to the inventor nor do we ask for "up-front" money from the sub-licensor. We do offer and require the development of sales tools, trade show exposure, direct mailing coverage and minimum royalties payable.
