Using a Two-Step Application Process to Help Qualify Licensing Prospects

Updated April 2016

We’ve talked quite a bit about Fuentek’s philosophy of a phased, step-by-step approach to many aspects of technology commercialization. Case in point: we begin by screening whether a technology is fit for commercialization before ramping up for marketing. With this approach, we invest as few resources as necessary in weeding out technologies that are far from ready for commercialization to quickly and cost-efficiently find the golden apples that are ripe for licensing.

Such a phased approach also makes sense for the license application process. Again, Fuentek recommends a two-step process.

Licensing Step 1. Basic Terms of the Offer

Have prospects identify the invention they are interested in licensing and the contact details for their organization. In this step of the process, the most important details to request is the type of license being applied for (exclusive, field of use, etc.) and the initial offer for royalty rate schedule, upfront fees, yearly minimums, and milestones. By collecting the basic offer information in this first step, you can quickly prioritize prospects according to the potential value of their license agreements. Some discussions may be needed, but once you know whether the basic terms are in line with your interests, then you can move on to Step 2, which will require more time and resources to complete.

Licensing Step 2. Development and Marketing Details

Have prospects submit a development/marketing plan with a detailed description of their plans for the invention. This should include anticipated investment capital, information on resources available to fulfill the plan, financial or annual report, an income statement related to the products or services that will utilize the licensed technology, and a timeline.

Taking the licensing application process one step at a time has several advantages, not the least of which is expediting negotiations. Put simply, if you can’t come to agreement on the basic terms, why spend time dealing with the nitty-gritty details?

It also makes the whole process less onerous for the potential licensees. If they are not a viable prospect, you can identify that in Step 1 and avoid them having to submit everything required in Step 2. In fact, it was specifically due to feedback we obtained from a client’s licensees that prompted us to develop and recommend the two-step approach several years ago.

Thus taking a step-by-step tack is very helpful in facilitating the process of qualifying a potential licensee. Consider this Stories from the Field example. The success of being able to change the prospect’s perception of the value of the technology was bolstered by having the license application process separated into two steps. If both steps were done together and then we changed the prospect’s idea of the technology’s value, the company would have had to repeat everything in Step 2—a very time-consuming and inefficient task.

The two-step process helps us weed out low-value licensing prospects early on and without investing too much time and resources in putting together an agreement that might not be worth it. In essence, the process helps us go down a road of evaluating prospects and then recognize when we’ve reached a fork in the road. Down one path we have a potentially lucrative license agreement and proceed to Step 2. Down the other path we can see that the prospect’s valuation of the technology needs to be adjusted or we go back to the beginning to look for higher-value prospects—before time is invested in Step 2.

Helping technology transfer offices (TTOs) establish effective license application processes is part of what we do here at Fuentek. Contact us to discuss how we can help your office achieve its goals for efficient and effective technology licensing.

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Posted by Laura Schoppe

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