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Taking License

Profit from your great idea by setting up a licensing agreement.

Got a great idea??? but don't have the time, energy, experience or resources to manufacture and market it? Don't give up. Another option is to find a manufacturer who will license your idea. This way, you get a royalty without having to do any additional work to promote, manufacture or sell the product. Licensing can be ideal if you're the type who prefers to keep inventing rather than actually run a company.

I'm often asked "How do manufacturers decide what products to license?" There's no one answer to this question; manufacturers license products for a variety of reasons. However, John Lisle, president of Clarinda, Iowa-based Lisle Corp., a manufacturer of specialty automotive products, offers some insights.

Unfortunately, most manufacturers don't actively seek out inventions, nor do they bend over backward to treat inventors fairly. Lisle Corp. takes a different approach: The company actively seeks out inventions, has a formal invention submission program that attracts around 600 to 700 applications per year, and launches six to 10 new licensed products annually. In general, Lisle pays a royalty to inventors on 25 percent to 30 percent of the 300 or so products his company sells.

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This article was originally published in the October 1998 print edition of Entrepreneur with the headline: Taking License.

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