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Let's Make a Deal

Licensing your idea to a bigger company can mean fewer hassles--and a lot more money in your pocket.

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This story appears in the June 2003 issue of Start Up.

Would you like to profit from your idea without having to start your own company, worry about manufacturing or handle the expenses of marketing your product? Consider licensing.

Licensing means the owner of intellectual property (a patent, trademark, copyright or trade secret) gives someone else permission to produce the product related to that property. In return, the inventor is paid a royalty (typically 2 to 8 percent of sales). One company I worked with signed a licensing agreement with the inventor of a vibrating dental scaler. Over 10 years, the inventor's 8 percent royalty amounted to more than $30 million. Not bad for an investment of $15,000 for a patent and a rough prototype.

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