Licensing products, process and gain rewards

Edgar's picture


Entrepreneurs who are developing a product (product or process) for commercialization basically have two choices to get their product to the marketplace; manufacture it themselves or license the right to make and distribute to someone else. This process is called licensing out. A license, through a licensing agreement, is a formal granting of the rights to make and sell to another party, who is called a licensing partner. The entrepreneur, or licensor, is usually paid in up-front fees and ongoing royalty payments.

Licensing offers a way to reduce capital investment by selling the rights to those who are in the business of manufacturing, selling and distributing. In addition, an entrepreneur who develops a product may not have the expertise to manufacture and take it to market. Licensing provides a way to develop the product and has experts in these areas do the rest. The chances of success and gaining wealth from the development of a product are greater if you allow experts with manufacturing plants, sales forces, and well developed distribution systems handle taking the product to market.


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