Intellectual Property Part 2

Even though we speak of selling intellectual property products like ebooks and videos, what we’re really doing is licensing them. The information within isn’t actually being sold since no transfer of rights occurs. What’s being sold is a license to use that information, and often the license is limited to a specific purpose. You might also sell the physical media that stores the information, like a CD or DVD.

Licensing is more obvious with software which often includes a license agreement. You may have to agree to its terms in order to use the software.

In a broader sense, you can license your intellectual property to other entities, who can then exploit it to generate revenue, and depending on how you structure the deal, you can earn a cut of that revenue stream. This is what happens when you sign a publishing deal with a book publisher. They sell the book, and you receive royalties from the sales.

Some companies make millions from licensing their intellectual property for various uses. Look at the thousands of products with Disney characters on them, for instance. Disney earns a bundle in licensing fees for those products. Could you create the next Mickey Mouse?

Here are some more examples of what you can do with intellectual property:

  • Design a t-shirt, and license your design to a t-shirt company in exchange for a small cut of the sales
  • Take some scenic photographs, and license them to a postcard publisher
  • Record some relaxing music, and license it to people who sell meditation audio programs
  • Write a new iPad or iPhone app, and sell it through iTunes
  • Write an ebook, and sell it through Amazon.com
  • Invent a cartoon character, and license it to a toy company to create stuffed animals

I have a friend who is an artist, and many years ago she licensed the artwork from some of her paintings to a greeting card company. She earned royalties from the sales of those greeting cards.

Don’t let the word licensing scare you. Licensing simply means “giving permission.” Normally when you license work you created, you and the other party will sign a contract to spell out the terms. You can have a lawyer draft one for you, find boilerplate agreements online, or create your own.

Licensing Agreements

I paid lawyers to draft my first few licensing agreements, and once I became familiar with the key terms, I could easily write my own agreements, using what the lawyers created as a reference. Depending on the complexity of the agreement, it would cost me anywhere from several hundred dollars to a few thousand dollars to have a lawyer draft it for me. I would only do this if the deal was likely to generate more than enough income to cover the legal fees.

If I have a complicated licensing deal to negotiate, or if there are contract terms I’m not familiar with, then I’ll consult with a lawyer to handle the tricky bits. I used a lawyer to help out with my book deal in 2007, which cost me $2000. She helped me negotiate for better terms in some parts of the agreement, which I feel more than made up for the cost of her services.

Legal bills can add up quickly, but for deals where a lot of money is involved, the professional help can be well worth the expense.

Often you don’t have to draft a licensing agreement yourself since they other party may provide one. Publishers do this as a matter of course. Then you only have to review it and suggest changes. I’ve rarely signed a licensing agreement without asking for something to be changed.

If you’re broke or want to learn how to draft licensing agreements on your own, a good source for info is Nolo Press. They sell many quality books, software, and do-it-yourself legal kits.

Re-Licensing

If you create some intellectual property that can be licensed, you can even grant someone else the right to license your creation for you, usually by giving them a share of the revenue streams. For instance, my book was recently published in Polish. I didn’t handle that deal; my publisher Hay House did. I didn’t even know about it until I received two copies of the Polish edition in the mail. Hay House isn’t publishing the book in Polish though. Hay House relicensed my book to a Polish publisher, which paid Hay House for those rights, and then Hay House and I split that money in accordance with our agreement. I gave Hay House the right to relicense my book to other publishers around the globe.

What do you do if you’re a creative type who can create interesting intellectual property, but you aren’t any good at selling or licensing it? Team up with someone who can handle the selling and licensing for you.

If I had retained the global licensing rights for my book, I could have done those foreign deals myself and kept all the money. But would I have done that as well as Hay House has been doing? Maybe… maybe not. They have connections and foreign rights managers and knowledge of different markets to put those deals together. That’s why my book is in so many different languages now. If I tried to do it myself, I might have gotten some results, but it would have been much more time consuming and expensive to do it on my own, and I’m not giving up so much money to have Hay House handle this anyway.

While you ponder that, be sure to check this out.

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