I am looking at licensing my product to a company and they want equity in my company, so is this normal?

I have a patent pending on a product and a company wants me to license it to them, but they also want 80% of my company. They said that they need the 80%, since they will be producing, marketing and get my product into stores. My question is, is this normal practice?

  • I have never heard of that but I’m not an expert. Normally the licensor will want to get an “exclusive license” from you – meaning only they can sell the product for X years and you get Y% of the sales in royalty. Then they have no need to own your company. The patent/idea is effectively theirs for that duration of time.

    However you need to be careful that the contract stipulates a minimum royalty or sales or else the exclusivity ends, so they don’t sit on it and do nothing.

    I guess it also depends on where you are. In the US I haven’t heard of such an agreement.

  • No, this is not normal. This is a shark in the water issue. Don’t give anyone 80% of your company: it’s no longer yours and you will lose all control. Negotiate with them in good faith and hold them to 49.9% and make sure you control the rest. Tie their equity into some kind of performance clauses: they get “X” for “Y” performance.

  • Ok, so this company wants to licence your product, but wants 80% share of the company that owns the patents.

    So let’s say they sell your product for $10, with a royalty payment of $1 per item.

    If they own 80% of the company receiving the royalty, they then get 80c of their royalty payment back in their own pockets. You get left with 20c.

    Does that sound normal?

  • Anything over 50% gives them control of the company. They can turn around and transfer the patent to themselves then liquidate your company. Definitely not normal. However it all depends on what is in the contract .

  • Definitely NOT normal. Typical licensing agreements pay you for license and do not own any part of your company. How in hell are you even contemplating an offer brazen enough to just ask for equity but majority equity? Ie for any magazine/newspaper/music subscription you have, do you ask for a piece of the publishing company too?

    Like, do you even logic, bro?!

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