Licensing deal

Discussion in 'General Discussion' started by mygadgetlife, Apr 22, 2013.

  1. mygadgetlife
    mygadgetlife Well-Known Member
    Hi guys,

    I've had an approach from a design house asking if I'd like to license my eggbot eggcup design.

    I'd like to hear the community's thoughts on the subject.

  2. First off: Congratulations!

    Second: Be sure you'll not run into legal troubles regarding similarity to any other robot's look. **cough** The Forbidden Planet **cough** Having taken a look at your model, I'd think it'd fall under either the "Nope" or "Fair use" category.
  3. Bathsheba
    Bathsheba Well-Known Member
    Of course, one of the beauties of licensing is that you can make copyright issues the licensee's problem.

    Read the agreement carefully. If you can, get a lawyer to vet it -- if you have one as family or friend, now's the time to ask that favor.

    Make sure an NDA is incorporated, so they do not treat the STL file casually.

    Pay attention to exclusivity -- can you license the design to someone else as well? continue to sell it on Shapeways? have it on your own site? wholesale it to retailers? What if you make something related -- say big 3D prints get cheaper and cantaloupe-bot becomes a great idea -- are you free to market that on your own or do they expect dibs? I once had a licensee try to quash a sculpture that actually predated their deal, because suddenly they felt it looked too much like what I had licensed to them. Of course I didn't oblige, but it damaged the relationship: it would have been better if I had explicitly pointed that design out before signing on and made them decide then whether they were OK with it.

    Pay careful attention to the circumstances under which the design reverts to you. Make sure you can get it back if you need it. You want to avoid the situation where they market your design poorly or wrongly or not at all, and you think you or someone else can do a better job, but you can't regain control of the design.

    Make sure a schedule is specified for the payment of royalties. IME quarterly is usual. A thing that is worth asking for but they might say no, is a deal on buying the product yourself. I.e. if they're going to produce it wholesale, you probably want to be one of their retailers, and it's only common sense that you should get a nice price.

    There's no one right answer to any of these, just to make sure you know what you're signing up for and choose something that works for you.

    All that said, I love licensing. Other people selling my stuff while I'm sleeping? Yes please.

    Luck with it!
  4. UniverseBecoming
    UniverseBecoming Well-Known Member
    Very good points Bathsheba! :eek:

    I'll keep all of this in mind for future reference. :)
  5. Bathsheba
    Bathsheba Well-Known Member
    BTW, your sig is not as funny as you think it is.
  6. mygadgetlife
    mygadgetlife Well-Known Member

    Thanks your input - very informative and valued.

    I haven't moved with this yet, if anything it has opened up a seam of possibility which I intend to explore in due course.

  7. UniverseBecoming
    UniverseBecoming Well-Known Member
    It was mainly an inside joke directed at my girlfriend. :p

    I have a question for you. Given your great success with 3D printed products, including even licensing some of your creations, would you say that the market for them has increased or decreased? Was there ever a time in the past few years when sales spiked and then fell off?
  8. Bathsheba
    Bathsheba Well-Known Member
    Well, clearly the market has increased. The market for low-end art 3D prints was for a while pretty much just me; now I've heard there are few other people in the game.

    I had a weird spike in 2007, when my site went viral as a niche geek thing, i.e. not as part of the larger 3DP wave. But then the bottom dropped out of the US economy and I went back to the woodshed...arguably I peaked too soon.
  9. alienology
    alienology New Member
    Ahhhh licensing.... been thru that couple of times. Not all good news.

    But first... congrats on cool design.

    Second... read that contract / licensing deal VERY carefully. Get an attorney to read it thru... if you can afford one. It is worth.

    Make sure you have an EXIT clause... limit in time period for licensing, or what they call "life of the product" clause. This means if they sell less than X number of products for ,say, two consecutive quarters (or whatever) licensing deal is void. Because they may not do any marketing for your product...., and you may be locked in in lousy deal.

    You don't want to license stuff to anyone forever.... always have clear end date.

    Try not to grand exclusivity (yeah... good luck there)

    In any event, you need to be aware that for your average design object you are very lucky to get more than 5% - 10% of the price as royalty payment. VERY lucky. This is for "ordinary" fabricated product - say, injection molded stuff.

    But wait... of WHAT price? Ahhh.... that's where details is :)
    Price you will mostly deal with is (most of the time) a price they (company licensing from you) sell to retailers. That price (wholesale) is mostly at about 50% of retail price but it can be much lower too. (yeah, walmart) . So you will get like 5% of that price.

    But wait... that's not all... a lot of times they will set a contract so that they will pay you upon MAKING of the object. Right away. This, kind of, sounds good because, you would think like... "well, I get paid even before they sell". However, what that means is that you will get royalty percentage for MAKING price that they pay to make that design. SO it is not retail price, not even wholesale... but it would be MAKING price which is,most of the time, very, very small.

    In theory - one can get sweet money from licensing... but man... unless you sell like 20000 objects in a year you will not pay bills with that. keep you day job... and if you sell more than that.... call me up, will work for you :)

    Igor |

  10. stop4stuff
    stop4stuff Well-Known Member
    Steven, UK yes?

    My wife is a paralegal for a law firm in Southampton, she has good contacts if you need any help.

  11. UniverseBecoming
    UniverseBecoming Well-Known Member
    Thanks Bathsheba for sharing. :)
  12. isohedral
    isohedral New Member
    I went through this experience recently with the Rocket Espresso Cup (in stores now! the perfect stocking stuffer! other hype!). I'm reasonably comfortable reading contract language, so I didn't consult a lawyer, though I agree with the sentiment that doing so isn't a bad idea if you have any doubts. It would also be a good idea if you plan to make this your livelihood (good luck!); I already have a day job, so I was willing in some sense to be screwed over in the worst case.

    My contract roughly fit the pattern that Bathsheba and Igor describe (hi, Bathsheba!). I get an advance, and a percentage of sales (somewhere between 5 and 10 percent, can't remember exactly) paid quarterly. The contract includes some reversion conditions, which I think includes my ability to terminate the relationship at my discretion. But I don't think there was a fixed sunset date. I also get a set of samples.

    Exclusivity was a sticky point. I really wanted to allow the cup to remain for sale here, and didn't really see any conflict -- the people who will pay $40 for a single cup aren't the same as those who will pay $20 for two. Actually, my initial phone conversations with the manufacturer left me quite optimistic -- he didn't seem to have any problem with this arrangement. But in the end he sent me a stock contract to sign that required exclusivity. To be clear, I interpret this as an oversight, and not malicious. Anyway, in my eagerness to see where the commercialization process would lead, I decided to move ahead rather than send the contract back and wait for months while lawyers added clauses to it. I suppose that if I cared enough, I could go back to the manufacturer and ask about renegotiating the contract. Maybe I'll get around to that some day.

    Hope that's useful.
  13. UniverseBecoming
    UniverseBecoming Well-Known Member
    I wonder how long before Shapeways comes out with there own licensing deals? :D
  14. alienology
    alienology New Member
    This is great to hear, all the comments.

    But... I am thinking we should have a little conversation as to how licensing deals will work as related to 3d printing specifically... meaning... for objects that are made only by 3D printing. (Most of my objects here on Shapeways can only be made via 3D printing).Licensing out design which can only be made by 3D printing - that's entirely different thing. You (the designer) are doing most of work there.

    Reason I ask for you attention and maybe some time to talk (Skype? G+ Hangout... whatever.. new thread here may work too) is because I had some relatively bad experiences as far as that goes.

    First... I was lucky enough to license few of my designs which are made by "ordinary" means (if I can call it that)... so... injection molding, laser cutting, casting.
    For these... yes... there you deal with 5 - 10% royalty. Things went OK... Most rights are back in my hands now and now I am making them in numbers myself.... with a new company we set up in HK / China.

    However... then there was a possibility of licensing deal with major 3Dprinting company with a design branch (Not Shapeways - no names mentioned here, you go figure :)... who offered me something not much better than that "usual" percentage (it was like 7%)..... At which point I declined. And since then... I see that such contracts are not really getting any better.

    It is one thing to license thing to manufacturer who will spend months to re-work the design so it can be made, most likely, in China... for fraction of a cost. Such (re-work) (and marketing they can provide) can be well worth giving up 95% or profit. That is lot of work.(in my case they worked for about 4 months for each product)

    But in case of 3D printed objects that are specifically meant to be made that way (and can only be made that way)... this "manufacturer" will get 100% OK STL file from me (I make sure my stuff works for real)... and, you know... print it.... using exactly same machines.
    So then... they have to do much less (or no work at all) to get it "manufactured". Marketing they can provide is still worth quite a decent chunk of profits... but not 93% of it. Not anymore. But, I am seeing such contracts are being given to inexperienced designers.

    As 3Dpriting develops, more people will have this opportunity.
    Us, designers, need to have discussion about this, and protect ourselves. I think this calls for fundamentally different deal. My question to you all, and discussion I would like to have is... what is fair amount percentage-wise? Is licensing even good thing to do in that case? What do you think? Some kind of iTunes model comes to mind... but keep in mind that Design industry is really entrenched in how things are done business-wise and Marketing wise. iTunes-like shop will give you zero visibility without dedicated marketers.

    It's uncharted territory.

    Igor |

  15. AmLachDesigns
    AmLachDesigns Well-Known Member
    An interesting discussion you propose.

    If you license your design, you get a percentage of some price that the licensee charges others for the product, be they other businesses or end consumers. The licensee:

    - Manufactures or arranges for manufacture of the product;
    - Performs post-processing, if any;
    - Markets the product;
    - Packages the product;
    - Ships the product;
    - Handles legal issues with the product (safety, materials, conformity to local laws), packaging (think statutory notices);
    - Deals with problems/returns;
    - Possibly holds stock;

    The reworking that they used to have to do (for traditional manufacture) may be reduced for 3D printing but by how much, and more importantly what proportion of their overall costs did it comprise? If redesign costs were 5% of their total cost and that goes to zero you cannot expect an increase of more than that, for example. If you take on the role of seller, how much time will it it take, do you have the skills/ required?

    The bottom line is that each designer must make their own calculations: if you do it yourself what would it cost and what would the return be, and how does the deal on the table stack up?

    I congratulate you on:
    a) Getting your designs licensed, good for you.
    b) Having the wherewithal to decide that the offers are not good enough and going it alone.

    Last edited: May 1, 2013