by Richard Stim, 1998, 500 pages, $39.95 (paperback), ISBN 0-97337-407-X, Published by Nolo Press
If you have a patented or a patentable invention and have decided not to manufacture or market it yourself, but wish to license a company to do so, this book is for you. In fact, it is a must read. The book covers not only the licensing of inventions but the licensing of trade secrets and copyrights.
As the author points out, manufacturing your invention yourself (venturing) is often not the wisest course. Few inventors have the funds or the experience to run a successful business venture. Also the cost of fighting infringers can be financially devastating for a new enterprise.
Perhaps the greatest strength of this book is its ability to explain legal terms and legal fine points in down to earth, everyday, language. An example of the practical approach this book takes is when the author comments: "Sad as it may seem, you may be better off with no license at all than a licensee that has a reputation for acting unethically".
He further notes that finding the right partner for a license can be harder than inventing and patenting. The author points out how some common agreements you as an inventor may make may have an impact your ability to license. He cites ten examples. One is a representation (rep) agreement that may require paying the rep a percentage of your license even though the rep was not involved in negotiating it!
How commercial is your invention? A list of 33 areas and factors to check is given. When you consider that only two or three out of a 100 new inventions succeed, it is well worth your time to go over this list early on. The book notes even brilliant inventions may be ignored by the public if the price is too high.
While many inventors worry about infringers, you should also be aware of the fact that "Many patent owners use their patents to earn more money stopping infringers than from selling the invention". An area that inventors seldom worry about is how their spouse may affect their license. Under various state laws, not only can spouses share ordinary property, but they can share intellectual property as well. Their signature on an assignment may be required.
Similar to this is the vital importance of spelling out the rights involved in a joint ownership agreement. A three page form for doing this is given in the book. A convenient feature of this book is that copies of forms appear alongside the subject under discussion. The forms also appear in the appendix and on a floppy disk located on the inside back cover of the book. (17 forms are provided.)
Several pages are devoted to the subject of invention marketing scams and on how to recognize a phony marketing company. Despite the best efforts of state and federal law agencies, scams take American inventors for hundreds of millions of dollars every year. If you do nothing else, read these pages.
For various reasons, companies fear and resist ideas from an outside source. The author offers suggestions for overcoming the "kooky loner" image that Hollywood has foisted on the public with regard to inventors. On the other hand, there are some companies that steal ideas and it behooves the inventor to check out their reputations before disclosing anything without an agreement.
The author discusses the very important topics of GMAR (guaranteed minimum annual royalty), how "net sales" figures can be modified by nine types of deductions, and he examines twelve factors affecting royalties.
A twelve page license agreement is presented and a thorough point by point discussion is made. Here and elsewhere in the book "legalese" is avoided and when it cannot be avoided a plain and simple explanation is given. For example, attorneys use a method called "redline/strikeout" to revise agreements. The author reduces this to plain English.
An eight page checklist for reviewing your license agreement is provided. It tells you what keywords, what phrases, and what terms need to be analyzed. It also refers you to the proper chapter for more information. Regarding "legalese", the author gives a fundamental bit of advice: "If a lawyer can't explain your situation clearly to you, he probably won't be able to explain it clearly to a judge or jury".
This is the first edition of this book. This reviewer suspects it will join David Pressman's Patent It Yourself (now in its seventh edition) as an absolute must read for inventors.