What Is Licensing in Commercialization

Licensing in commercialization is the right to manufacture and sell a product with the technology of another company.  

In return for the right, the licensee pays a royalty fee for each unit sold.

Licensing brings the following advantages to the licensee:

You gain the know-how and experience of the company that created the technology.

It comes at a lower cost than buying the company.

There’s no cost for technology development.

You only pay when you sell something.

It reduces your risk in the event the product doesn’t sell.

You can draw from other markets to benefit your target market.

There are disadvantages:

The license is typically for the life of the technology which can be many years.

There may be a minimum licensing fee.

The license may require some restrictions on its use and target market.

There may be limits on further development of the technology.

Licensing works well in a rapidly changing marketplace in which products are replaced quickly due to new technologies coming into the market.

 

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.