Typically, once an inventor or artist has created a product that is ready to be brought to market, he or she is left with a very important decision. Should they sell the licensing rights to a company to produce and sell the product so that the creator can collect royalties from the sales, or should they sell the IP rights to the company, or try to produce and sell the item through their own business. This is not an easy decision to make and can be dependent on numerous other factors that need to be weighed.
Many creative folks are most interested in profiting from their creation and moving on to another project. When patents are involved, these folks are sometimes called inventor-for-royalties. Others with a more entrepreneurial sense – as well as finances to back up and support production, marketing and sales – may want to bring the product to market themselves.
For many involved with creative endeavors, licensing your product might be the way to go. When you license your product, you are essentially loaning the creative rights to someone else who can then produce and sell the product. The licensor is the person who is the owner of the product and is selling the rights to a licensee.
If this agreement is made, the licensee assumes all risks that go along with putting a product up to market for sale, but will also reap a bulk of the rewards if the product becomes a best seller. The licensor on the other hand will either receive a one-time payment for the rights, or perhaps royalties on sales. These will be determined in the contract. If you are unfamiliar or uncertain how to proceed with your creative work, you may want to speak with a legal professional for advice and guidance.
Source: Forbes, “Should You License Or Produce Your Invention?” By Jack Lander, Accessed April 24, 2017