1. IP Asset Assessment

1. Ask the user what intellectual property they're licensing—patents, software, content, brand, methodology, or designs.
   • Example: "What IP are you licensing—technology/patents, software/code, content/media, brand/trademark, business process, or creative work?"
2. Ask the user about the IP's market value—proven demand, uniqueness, defensibility, and existing revenue.
   • Example: "What makes this IP valuable—customer demand, competitive advantage, proven results, uniqueness, or revenue it currently generates?"
3. Ask the user about potential licensees—who would benefit from licensing this, and what's their ability to pay?
   • Example: "Who's your ideal licensee—large corporations, small businesses, individuals, specific industries? What's their typical budget?"
4. Ask the user about their goals—maximize revenue, expand reach, strategic partnerships, or passive income.
   • Example: "What's your primary goal—highest royalty income, market penetration, brand visibility, or building partnerships?"

2. Licensing Model Options

Exclusive License:

• One licensee gets sole rights in defined territory/market
• Pros: Higher royalty rates, stronger commitment from licensee
• Cons: Limits your reach, puts eggs in one basket
• When: Strong licensee with good distribution, premium pricing opportunity

Non-Exclusive License:

• Multiple licensees can use the IP simultaneously
• Pros: Diversified revenue, broader market reach, less risk
• Cons: Lower per-licensee rates, potential market saturation
• When: Scalable IP, mass market opportunity, less risk tolerance

Sole License:

• You and one licensee can use it (you retain rights too)
• Pros: Balance between exclusive and non-exclusive
• Cons: May confuse market positioning
• When: You want to keep using IP while partnering with one player

Territory-Based Exclusive:

• Different licensees for different regions
• Pros: Global reach with local expertise per market
• Cons: Coordination complexity
• When: Geographic markets are distinct, need local presence

3. Royalty Structure Design

Percentage of Revenue:

• Licensee pays X% of gross or net sales

Typical Rates by Industry:

• Software/Tech: 5-15%
• Pharmaceutical/Biotech: 3-7%
• Consumer Products: 3-10%
• Entertainment/Media: 8-20%
• Manufacturing: 2-5%

Gross vs. Net Revenue:

• Gross: % of total sales (cleaner, but licensee may resist)
• Net: % after costs deducted (licensee prefers, but harder to audit)

Example:

"Licensee shall pay Licensor a royalty of 8% of Net Revenue (defined as gross sales minus returns, discounts, and sales tax) from all Licensed Products sold during the term."

Tiered Royalty Rates:

• Incentivize higher volume

Example:

• 0-$100K revenue: 10%
• $100K-$500K: 8%
• $500K+: 6%

Minimum Royalty Guarantee:

• Licensee must pay minimum amount regardless of sales
• Protects you if licensee underperforms
• Example: "$25K minimum annual royalty, paid quarterly"

Upfront License Fee + Ongoing Royalties:

• One-time payment to secure rights
• Plus ongoing percentage of revenue
• Example: "$50K upfront + 5% ongoing royalties"

Fixed Fee Per Unit:

• $X per item sold (instead of percentage)
• Easier to track for physical products
• Example: "$2 per unit sold"

Hybrid Models:

• Combine upfront, minimum, and percentage
• Example: "$100K upfront + $50K minimum annual royalty or 7% of revenue, whichever is greater"

4. Key Deal Terms

Grant of Rights:

"Licensor grants Licensee a [exclusive/non-exclusive] license to [manufacture, market, distribute, sell] the Licensed IP in the [Territory] for the purpose of [specific use cases]."

Territory & Field of Use:

• Geographic scope: Worldwide, North America, specific countries
• Field restrictions: Only in [industry/application]
• Example: "Exclusive rights to medical devices in Europe"

Term & Renewal:

• Initial term: [3-5] years typical
• Renewal options: Automatic unless terminated, or requires opt-in
• Example: "5-year initial term, auto-renews for 3-year periods unless either party provides 90 days notice"

Performance Requirements:

• Minimum sales targets or launch milestones
• "Use it or lose it" provisions
• Example: "Licensee must achieve $250K in Year 1 sales, $500K in Year 2, or license converts to non-exclusive"

Reporting & Auditing:

"Licensee shall provide quarterly sales reports within 30 days of quarter end, detailing units sold, revenue, and royalties owed. Licensor may audit Licensee's books annually with 30 days notice."

Payment Terms:

• Royalty payment schedule: Quarterly or monthly
• Due date: Within [30] days of period end
• Late penalties: [1.5%] per month on overdue amounts

Quality Control:

"Licensee must maintain quality standards consistent with Licensor's brand. Licensor has right to approve marketing materials and product quality. Substandard quality may result in termination."

Sublicensing:

• Can licensee sublicense to others?
• If yes: What's your cut of sublicense revenue?
• Example: "No sublicensing without written consent. Approved sublicenses split royalties 50/50 between Licensor and Licensee."

IP Improvements:

• Who owns enhancements or derivatives licensee creates?
• Example: "Improvements to Licensed IP remain Licensor property. Licensee grants Licensor a license to any derivative works created."

Termination Rights:

You Can Terminate If:

• Breach of contract (cure period: 30 days)
• Bankruptcy or insolvency of licensee
• Failure to meet minimum sales targets
• Quality control violations

They Can Terminate If:

• You breach contract
• Market conditions change significantly
• With notice (typically 90-180 days)

Effect of Termination:

"Upon termination, Licensee must cease all use of Licensed IP, destroy remaining inventory (or pay royalties on sell-through period), and pay all outstanding royalties."

5. Negotiation Strategy

Anchoring Royalty Rates:

• Research industry standards
• Start higher than target (room to negotiate)
• Justify with IP value, market potential, support provided

Protecting Downside:

• Minimum guarantees ensure baseline income
• Upfront fees reduce risk if sales underperform
• Performance requirements ensure they actively exploit IP

Balancing Control vs. Revenue:

• More control (exclusive, strict terms) = higher rates
• Less control (non-exclusive, flexible) = lower rates but diversified

Term Sheet Before Full Contract:

• Agree on key terms in 2-3 page term sheet
• Saves legal costs if deal doesn't work out
• Cleaner negotiation of big picture before details

Key Terms to Negotiate:

• Royalty rate
• Minimum guarantees
• Upfront payment
• Territory scope
• Exclusivity
• Term length
• Performance requirements

Win-Win Elements:

• Joint marketing support
• Training and onboarding assistance
• Regular business reviews
• First right of refusal on new IP
• Performance incentives (lower rate if hits targets)

6. Risk Mitigation

IP Protection:

• Ensure your IP is protected (patents, trademarks, copyrights filed)
• Licensee's infringement defense: Who pays if third party sues?
• Indemnification: Each party covers their own breaches

Escrow for Software/Source Code:

• If licensing software, place source code in escrow
• Licensee gets access if you go out of business
• Protects their investment

Confidentiality:

• Trade secrets and know-how protected
• Non-disclosure obligations
• Survives termination

Non-Compete:

• Prevent licensee from creating competing IP
• Reasonable scope and duration
• Example: "2-year non-compete in the licensed field during term and 1 year after"

Insurance Requirements:

• Licensee maintains liability insurance
• Names you as additional insured
• Protects against product liability claims

7. Deliverables

Licensing Agreement:

• Grant of rights and restrictions
• Royalty structure and payment terms
• Performance requirements
• Quality control provisions
• Reporting and audit rights
• Term, renewal, and termination
• Legal protections

Financial Model:

• Royalty revenue projections
• Multiple scenarios (low/mid/high sales)
• Break-even analysis
• Comparison: Licensing vs. exploiting IP yourself

Term Sheet Template:

• One-page summary of key business terms
• For initial negotiations before full contract
• Non-binding framework

Licensee Evaluation Criteria:

• How to vet potential licensees
• Financial stability, distribution reach, reputation
• Fit with your brand and goals

Negotiation Playbook:

• Target vs. walk-away terms
• Concession strategy
• Deal structure options
• Scripts for common pushback

Legal Disclaimer: "Consult with an IP attorney licensed in relevant jurisdictions to ensure agreement enforceability and compliance with local laws."

Present complete licensing deal framework with royalty structures, protective terms, negotiation strategies, and agreement templates to monetize intellectual property through strategic licensing partnerships.