Licensing Agreement Basics for Startups
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Licensing Agreement Basics for Startups
What is a licensing agreement?
A licensing agreement is a deal between the owner of a patent, brand, or trademark and someone who wants to use the patented or trademarked goods and services. (Upcounsel)
With a licensing agreement, an inventor (the licensor) develops an invention and then protects that invention through a patent, copyright, trademark, or trade secret, and thus creates intellectual property (IP). The inventor—the owner of the intellectual property—then licenses the invention to a second party (the licensee) whose responsibility is to commercialize the invention. As compensation for allowing another party to use its intellectual property, the licensor will receive a royalty.
There are many types of licensing agreements: trademark licensing, copyright licensing, patent licensing, software licensing and merchandise licensing. Intellectual property licensors use three main types of licensing agreements: exclusive license, non-exclusive license and sole license. (Read about each type on Upcounsel)
The Main Benefits of a Licensing Agreement
Globalization has made licensing agreements a very popular option for businesses and inventors. Often, licensing is a strategic way of entering international markets. A foreign company will obtain rights to produce and/or sell another company’s product in its home country.
Below is a list of the top benefits of licensing your invention/IP.
Overall, licensing agreements minimize risk for both parties involved. The licensor doesn’t have to setup a business and incur those additional expenses and the licensee doesn’t have to spend time on product development and testing.
Suggestions for Securing a Licensing Agreement
Read our Case Study that details how our team worked on turning a consumer product idea into a manufacturable product for licensing to a large international retailer.
Have additional questions about licensing agreements for inventors? Please send us an email at info@3d-innovations.com
Articles Referenced:
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How can a product development firm help me?
Product Development Firm | A Partner from Idea to Commercialization
A product development firm should be by your side from idea to store shelves. Having a single team in place throughout the entire product development process means that there is less room for error and that you can count on consistency. A full-service product development firm is invested in the success of your product and wants to see it on in the hands of your customers just as much as you do.
Intellectual Property
Intellectual property is no longer a “should have”, in today’s globalized world it is a “must have”. A product development firm will be able to help you navigate the world of patents, trademarks and copyrights along with your IP attorney.
Line drawings are necessary for design and utility patents, and your product development partner can produce these for your patent application. Since product development firms work with a range of IP attorneys, they will also be able to help you connect with one that fits your specific product needs.
Licensing
When it comes to licensing, your product development partner will be able to provide the technical aspects of the design to interested partners as well as their manufacturers. Licensing a product requires strategy and know-how, and this is exactly what a firm will be able to provide.
Manufacturing
Manufacturing your hardware product is no small task. Whether you decide to manufacture at home or abroad, there are certain unavoidable challenges. A product development partner will help you navigate the manufacturing process and connect you with potential manufacturing partners.
With the assistance of a product development firm, you will be guided by knowledgeable experts throughout the entire development process. You can ask questions, share ideas and collaborate on all aspects of the product development process. A skilled product development firm will be able to guide you from design to manufacturing and beyond.
Now it’s time to get out there and meet potential product development partners. In this blog post we discuss what you can expect during your first product development meeting.
Have additional questions about product development? Send us an email at info@3d-innovations.com.
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Marketing a New Hardware Product
Plan the perfect prototype.
While a minimum viable product (MVP) will allow you to talk about features and show aesthetics, a functional prototype will clearly convey what your product is all about. Once you have a prototype, you then want to get it to the hands of your target market.
Host a diverse focus group.
A focus group will let you gauge reactions and gather feedback about your hardware product. You can ask this group questions, they can share their initial reactions and then you can go back and apply any changes.
Utilize the feedback.
It can be hard hearing that your product isn’t perfect, but that is the beauty of feedback. With feedback early on, you can modify your design so that it better suits the needs of your target demographic. Ultimately, you want to build a product that is going to sell.
Test in real-life.
Provide your product to a small test market to have them try your product in their daily lives. Follow this up with questions/interviews to gather feedback on how your product fares.
Gauge interest with pre-order sales.
Crowdfunding has made this very popular, but you don’t need to have a crowdfunding campaign to start taking pre-order sales. Setup an area on your website for pre-orders to see how the market is reacting to your new hardware product.
As you can see, marketing and product testing are closely related early-on in product development. While marketing looks different when you start early, it is effective at building a group of loyal followers. The people that you have testing your product, providing feedback and taking pre-order sales—are going to not only be your first customers, but they are going to want to share your product with their network.
Have additional questions about product development? We are happy to help. Please send us an email at info@3d-innovations.com
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Hardware Startups: Knowing Your Market Segment
Established Market
Entering an established market means that the competition is strong. Often the best way for a hardware startup to make a splash in this market segment is by offering a premium product. “Companies succeed by building premium brands, having sustainably better technology, or being close to their costs of production. The headphone market is a great example here: Think Beats (premium brand) vs. Bose (better tech) vs AmazonBasics (closest to costs of production).” (Bolt)
New Market
Some of the most creative products of today started in a completely new market—think Apple iPod & iPhone. While competition is low, failure rate is high. When you are the first in a new market segment you have to pioneer new distribution channels, find your customer base, work hard to establish product/market fit and educate the market. According to “The Startup Owner’s Manual”, startups in this market won’t spend heavily on marketing and sales since you are not yet sure that a customer base exists yet.
You hear the term “pivot” quite a bit regarding startups, and that is what many startups find themselves doing when entering a completely new market. Your product is very likely to change to meet consumer demands.
Re-segmented Market
This is the most common market segment for startups to launch a product into. Your product will either re-segment via low cost or re-segment via niche. If you are aiming for low-cost you have a product that has less frills yet still adequately meets customer demands but at a lower price point. “In other hardware markets, startups work in product categories that users already understand, but focus on a niche that really appeals to a small subset of users.” (Bolt) With a niche product, you are aiming to launch a product that is intriguing enough for brand loyalists to switch over to your product.
When it comes to the re-segmented market, you do not have to completely educate the market since your competition has spent time doing that. However, you do have to adequately educate them as to why your product is not only different, but why they need it.
Startups that have a clear idea on the type of market segment they are entering will be in a better position when it comes time to launch their product.
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Market Validation: Test Your Product Idea Early
Below are three ways to quickly complete the first phases of market validation to test your new product idea:
Look for Competitors
Successful competitors offer proof that demand exists. While it can often be daunting to first-time entrepreneurs, competitors validate that there is a market for your product.
When you are the first to market, you are faced with the challenge of not only selling your product, but educating your target market about the major problem as well. Established competitors have already educated the market and conducted market validation, now you get to come in and offer a new solution.
You can offer the product in a new location, market it to a new group of people, or differentiate based on features or price to carve out market share. (Entrepreneurs Handbook).
Talk with Your Target Market
While your friends and family might find your idea cool, are they your target market? Will they be making a purchasing decision for your product? If the answer is “no” you need to reach out to your actual target market—the people you want to buy your product.
If your product is challenging to explain in a clear and concise manner, a visual prototype can really help you convey your idea. Depending on the size of your product, 3D printing technology allows you to design and print a visual prototype quickly.
The feedback from your target market is going to help you build the product customers will buy, so the design of your product will most likely change a bit to accommodate customer needs.
Research Search Traffic
Google is a powerful tool and can give you a glimpse into the collective mindset of your target audience. See how frequently people are searching for the product solution you want to launch.
It will be up to you to interpret the data, but this market validation strategy is a way to see what people are looking for and the words they use to describe it.
Early Market Validation is Key to Success
Due diligence is crucial in entrepreneurship because it helps you avoid losing time, money, relationship capital, and confidence on a bad idea. (Entrepreneurs Handbook). These three tests are a quick way to start the market validation process, test your idea and ultimately help your startup succeed quickly.
Do you have additional product development questions? Send us an email at info@3d-innovations.com
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Is 3D Printing Right for Your Project?
Are you building a prototype?
3D printing is an excellent option for initial prototypes. You can get a physical prototype in hours, refine the design and print again. It will take a few iterations to get it just how you are imagining it. Startups all over the globe are now turning towards additive manufacturing technology at various stages of product development—low cost and quick turnaround times make it ideal for budget conscious hardware startups.
Eventually you will want to build a functional prototype for design validation and testing, and additive manufacturing can help with this as well.
Do you have a complex design?
One of the primary advantages of 3D printing is that you can break traditional manufacturing barriers with your product design. With 3D printing technology, complex geometries, internal features and built-in interlocking objects with no assembly required are all possible. With these additional design capabilities, additive manufacturing creates new product design opportunities.
Do you need customer feedback?
Gathering customer feedback during the product development process is always a good idea. Show potential customers your product design, let them hold it, test it and then incorporate their feedback. Remember that the feedback is going to help you build the product customers want, so the design will most likely change a bit to accommodate customer needs. Additive manufacturing allows you to quickly print a visual prototype that you can show to your target market for feedback. You can quickly incorporate their feedback and print another prototype.
Are you looking for small batch manufacturing?
3D printing isn’t quite at the mass manufacturing scale yet, but it can certainly help with small batch manufacturing. If you need just a few parts or pieces for a project, 3D printing can certainly be of assistance.
Do you need a customized part?
Customization is the “sweet spot” for additive manufacturing. The automobile, aerospace and dental industries have been utilizing 3D printing’s customization ability for years now. If you need a one-off customized part, 3D printing will most likely provide you with the quickest turnaround and best cost efficiency—depending on size of course.
Additive manufacturing is constantly evolving and so are its capabilities. As design software advances and material selection increases, 3D printing will continue to shift the manufacturing landscape and prove that it is a very useful tool for professionals and makers alike.
Are you still not sure if 3D printing is right for your project? Go ahead and send us an email, info@3d-innovations.com so we can talk further about your design and manufacturing needs.
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Innovation and Patent Protection for Startups
“A patent for an invention is the grant of a property right to the inventor, issued by the United States Patent and Trademark Office. Generally, the term of a new patent is 20 years from the date on which the application for the patent was filed in the United States or, in special cases, from the date an earlier related application was filed, subject to the payment of maintenance fees.”
“The right conferred by the patent grant is, in the language of the statute and of the grant itself, “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or ‘importing’ the invention into the United States. What is granted is not the right to make, use, offer for sale, sell or import, but the right to exclude others from making, using, offering for sale, selling or importing the invention.”
Make: Magazine recently published an article, “Patent Pandas: How One Maker Is Turning Her Horrible Experience Into a Force for Good”. It is a real and very telling story of how a person, actually a crowdfunding backer, stole an idea from a crowdfunding website and later tried to sell the invalid patent back to the original inventor. Unfortunately, stealing and patenting ideas that are not your own has become big business.
Patent law is complicated, and it is always best to consult with an attorney. However, we have compiled a list of resources below to get you started as you begin looking into the process of patent protection.
Crowdfunding Backer Patented My Project (Patent Panda)
General Information Concerning Patents (USPTO)
Navigating IP on the Path to Commercialization
IP Watchdog
How to Prepare for Your First Patent Attorney Meeting
Our team works closely with the Hawaii State Bar Association and understands the importance of patent protection for startups. If you have a question related to patent protection, we are happy to help. Please send us an email with your questions, info@3d-innovations.com.
Additional Intellectual Property Articles from 3D Innovations
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The Importance of 3D Design for (Efficient) Manufacturing
3D Design Saves Time
Making sure that the manufacturer has the most detailed information possible about your product helps ensure that you are receiving an accurate quote and that there are fewer potential manufacturing issues down the road.
“Not only does a CAD file help save time when figuring out all the finer details of a part by looking at the 3D model, but it also allows a model to be magnified and even rotate on any axis to get a full three-dimensional concept of the part, which allows the manufacturer a greater sense of the product. It can even reveal internal features of a part if it cannot be seen clearly on a manufacturing drawing. Aside from these benefits, using CAD makes it possible to simulate the movement of a part through production processes.” (Vista Industrial)
3D Design Reduces Material Waste
“CAD files enables the manufacturer to check tool paths before any material is cut. The ability to run a simulation and so verify the complete machining process in a virtual environment is critical for keeping waste and scrap to a minimum. This may be crucial on some jobs, such as those using expensive alloys, large material-intensive components, or for those with complex geometry. Other verification advantages that result from less scrap include less energy consumption and reduced tool wear.
CAD simulations also enable you and the manufacturer to identify how long the production run time will take. Clearly this is useful for scheduling, as well as the planning of throughput, material supply and delivery. As the 3D model is the source of the manufacturing data, the design intent is preserved, and the dimensional accuracy is retained.” (Advice Manufacturing)
3D Design Allows for Ongoing Communication
If your product design needs to be adjusted to meet design or manufacturing needs, this can easily be accomplished within a digital CAD file. Since the CAD files are transferred electronically, you are assured that both you, your product design team and the manufacturer all have the same information moving forward.
“CAD systems also facilitate communication among those involved in design, manufacturing, and other processes. This is of particular importance when one firm contracts another to either design or produce a component.” (Inc.)
In today’s manufacturing environment, CAD files are a necessity. A 3D design allows you to evaluate the form, fit, and functionality of your product. The design will also verify tolerance, loads, stresses and optimize manufacturability. If you plan on filing for IP rights or patent protection, a CAD file will help clearly communicate the design to your attorney and those reviewing your patent application.
Have additional product development questions? Please send them our way, info@3d-innovations.com
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3D Innovations is a Product Development Company – from the 3D Design to a fully functional 3D Prototype & Product.
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Product Development Strategy: Launching Your Idea
The First Steps of Your Product Development Strategy
Write Your Goal Down
Write your goal down in one or two sentences. Keep it short and concise. Then post your goal somewhere where you will see it every day—whether it is at your office, your bathroom mirror, or as a reminder on your phone. Having it around will be a constant reminder of what you want to accomplish this year.
Find a Mentor
Business mentors are a great resource. You can bounce your product development strategy ideas off them and ask for advice when faced with obstacles. It will be even better if you can schedule a monthly meeting with your mentor to help keep you on track and pushing forward. Having a measurable goal and/or accomplishing a task before your next meeting will keep your startup moving ahead.
Start a Business Plan
There are many great business plan outlines online. Find one that fits your specific startup and start filling it out. Get all of your ideas, goals and ambitions out there on paper. You will see your plan start to solidify, and the plan will show you your strengths as well as your areas of weakness. Keep in mind that entrepreneurs aren’t great at every single aspect of business—and asking for help is normal, and extremely beneficial.
Build a Prototype
By now you have an idea, you have probably sketched the product design out a few times, possibly built a rough version out of items around your home and you are ready to get going on an actual prototype. Great!
Depending on your product, 3D printing is an excellent option for initial prototypes. You can get a physical prototype in hours, refine the design and print again. It will take a few iterations to get it just how you are imaging it. Startups all over the globe are now turning towards 3D printing technology at various stages of product development—low cost and quick turnaround times make it ideal for budget conscious hardware startups.
Eventually you will want to build a functional prototype, especially if you are going to move on to patent protection.
Gather Feedback
Take your prototype and start talking to friends, family and people you know to gather their thoughts on your product. In your business plan, you have outlined your target market, so try to find people that fit in this category. Remember that the feedback is going to help you build the product customers want, so the design will most likely change a bit to accommodate customer needs.
Here at 3D Innovations, no matter the stage of your business, we can help you meet your goals. Our team has a proven track record in all areas of product development and we work side-by-side with you throughout the entire design and manufacturing process. Peek at the Case Studies section of our website to see a few examples of the startups we have previously partnered with, and how they leveraged our design and manufacturing expertise to reduce time to market.
Have additional product development questions? Please send us an email at info@3d-innovations.com
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Top 3D Innovations Blog Posts of 2018
Get Your Product Idea Off the Ground
Coming up with a product idea is exhilarating—knowing that you have an idea that will help not only yourself, but an entire segment of the population, is the very definition of exciting. So now you have an idea, but you aren’t exactly sure what to do next. Here we have gathered helpful advice and insight into the next stages of your product development journey.
The Benefits of Using 3D Printing Technology in Education
As the cost of 3D printers has dropped significantly in recent years, more schools are able to adopt and incorporate the technology into the curriculum. 3D printing technology promotes active learning and has the power to open a world of career possibilities to students. 3D printing inspires creativity and can help encourage students to explore a career in engineering or science.
What to Expect from Your First Product Development Meeting
Many first-time entrepreneurs want to jump right in and get to work building their product, only to realize that they may not have the exact skillset necessary to develop the product all the way. This is where a product development firm is brought in to aid in the process. It can be nerve-wracking sharing your idea with someone else, and we all like to have a general idea of what we can expect in initial meetings.
Building A Hardware Startup Outside of a Major Tech Hub
We are going to start off with the good news, building a hardware startup outside of a major hub (i.e. Silicon Valley, Boston, L.A.) is possible. In fact, in today’s connected world, these major tech hubs are becoming less and less appealing for entrepreneurs just setting out with their startup. It’s no secret that the cost of living in major tech hubs is astronomical and upfront costs to get your business going also come at a premium. So if you are an entrepreneur looking to launch a product and start a business, but have no desire to pick-up and move, here are a few ideas on how you can successfully launch your hardware startup from your home city.
This past year was fantastic as we helped a number of startups launch their idea and assisted others with various product development and manufacturing solutions. We can’t wait to see what 2019 brings!
Cheers!
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3D Innovations is a Product Development Company – from the 3D Design to a fully functional 3D Prototype & Product.
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