Inventing New Products/Inventions/Licensing terms for cosmetic ingredients
What are the typical terms for exclusively licensing a patented ingredient to a skin care or cosmetics company in terms of up-front payments and ongoing royalty fees (%), and are the latter typically based on manufacturing costs, gross sales, or net sales?
In terms of licensing language, the sky is the limit based on your ability or whomever represents you to negotiate.
Exclusivity license: I don’t have enough time to sit, type and mentally list the laundry list of clauses possible.
Up-front Payments: will your potential licensee say they’ll deduct anything agreed to out of future royalties or will they just give them to you (doubtful)?
Will a patent have issued because if it doesn’t or if issues NOT as originally submitted (Claims) any agreement will likely have a clause dependant on it issuing. If it fails to issue generally one would have to pay back any royalty payments contingent on a patent’s issuance.
As to what they might agree to pay in royalties, part of it has to do with the size of the buying and reordering market; numbers of competitors; do they have or can they afford (Licensee) shelf space and, might you have to expend your money to pay 50% of any advertising.
In terms of mfging costs, gross sales or net sales as relates to royalties, the sky is the limit too. Maybe it will be based on a markup formula and none of the above?
The thing is, you’re asking questions that have a variety of answers based on negotiation. There is no cookie-cutter “set” solution based on one, two, or three variables. There might be scores of them. Skill comes into play by hiring someone with a background in cosmetic licensing whom doors open to if your hope is wide distribution.
Hopefully you know if it’s going to require FDA approval or are the ingredients already approved?
Licensing terminology is a series of negotiated points so there’s nothing “typical” other than legal basics found in licensing agreements. As to proprietary specifics that’s another matter which may depend on the breathe and language in patent claims of what one can ask for.
What I would do is to search the web for a skilled cosmetic negotiator or a cosmetic chemist with a flare for negotiating. And look for sample Licensing agreements in the field of cosmetics. They may be old but they’ll give you an idea of variables in cosmetic clauses.