With innovation driving the industry, there are many companies continually looking out for new and original ideas. While there will always be a need for major manufacturers to have in-house designers, it is more likely that ‘off-the-wall’ inventions will come by strange and unusual routes to market.
Many people confuse character licensing with product licensing. Product licensing grants a right to exploit a unique and original concept. Character licensing is the application of a character logo or brand which has public awareness and is applied to a product in order to increase sales.
A new toy idea can itself develop into a character licensing opportunity as a result of its easy recognition and heritage. Sometimes a manufacturer uses a product licence together with a character license to give it instant recognition and bolster initial sales.
How it Works
1. Most toy and game companies have a person or team whose job it is to look at new ideas. These people evaluate hundreds of new ideas every year.
2. Professional inventors usually make presentations in person. Amateurs have to be content with sending a submission by post. Some companies will not deal with amateur inventors directly. This is often due to bad previous legal and technical experiences which come about through lack of understanding of the peculiarities of the toy and game business. It is common, therefore, for amateurs (and some professionals) to use agencies. They take a proportion of the royalties but take care of the development costs, protection, licensing and royalty collection.
3. While companies are always on the search for new products, evaluation usually takes place from November to April. The decisions for the new line need to be made by April to June in order to get the product completed for toy fairs in the following year.
4. Evaluating a product is not a science. The gut-feeling of a particular toy executive plays an important role. However, there are key questions such as:
– Is the product exciting to the target market group?
– Is the product good value for money?
– Is the product safe?
– Is the product easy to advertise or promote?
– Is the product revenue going to justify the initial investment?
– Is the product unique?
– Is the product protectable?
5. Most product licensing agreements should be concluded by July in order to give toy companies time to develop and finalise the product for launching at the following January Toy Fair.
Protecting your idea
The most comprehensive protection of an idea is a patent. Many solicitors advise this form of protection. This can be arranged through a patent agent. However, it is usually impractical to patent ideas for two main reasons:
1. The fees and costs in pursuing a patent are considerable. Even for professional inventors, the ratio of ideas to successes is such that it is economically not justifiable to take out patents on their ideas.
2. The time taken for a patent to be granted and enforced is usually much longer than the lifecycle of the product. There are very few items of longevity in the toy world. Most companies change at least one third to one half of their line every year. Although court action can be retrospective, the damage has often been done.
Patents can be taken out for the United Kingdom and elsewhere in Europe or in individual countries throughout the world.
The next most comprehensive form of protection is design registration. Any graphic material can be registered (provided it is original) for a few hundred pounds at the Design Registration Office. This protects against all similar designs, even if those designs were conceived seperately and are coincidental.
Photographs or drawings with an aesthetic content (not industrial product engineering). Again, this is expensive if registration is done speculatively.
This form of protection applies to United Kingdom only.
Alternatively you can investigate the new right to protection under the Unregistered Designs Directive.
A good and much used form of protection is copyright. Any graphic or textual material can be copyrighted by putting a ‘c’ in a circle followed by the name of the person or company who owns the copyright and the date, (for extra security, a copy of the work may be deposited with a solicitor or at a bank to prove date of copyright). Copyright gives good protection for games and for items which can be manufactured and/or made up into three dimensions from drawings without further investigation.
However, there are disadvantages:
1. It is difficult and expensive to detail a design or mechanism comprehensively.
2. Small deviations from the original material may invalidate a copyright infringement.
3. In order to make a claim, it is necessary to prove that the infringing party has copied directly the original material. Coincidental similarity is not covered.
This protection applies to the United Kingdom only.
Some solicitors advise that inventors should get companies to sign a non-disclosure letter or confidentiality form before they see the new idea.
This gives protection specific to the relationship between the inventor and person or company to whom the idea is submitted.
However, because this type of document is legally biased in favour of the inventor and is constrictive, most companies will not sign. In order to evaluate a product it is difficult to treat it confidentially and a company may unwittingly be liable to the inventor in the future.
Whatever form of protection an inventor has, it is important to keep an accurate record of what was shown and submitted to be signed by both parties. Litigation is rarely successful financially.
The simplest and most effective protection is reputation, and it is suggested that anyone wishing to submit an idea should call or write for references. The UK toy and game industry is small enough for word to get around very rapidly of any unethical business behaviour.
Once an idea has been licensed it is usually up to the licensee to protect the product. They have the expertise and, more importantly, the money to do so.
Once the inventor and the manufacturer/marketing company (the licensee) have reached an agreement, a contract needs to be negotiated. The main points to be found in a licensing contract are:
1. The parties- details of the identity of the licensor (or his agent) and the licensee.
2. The product- the subject matter of the agreement.
3. Financial commitments- royalty rates, the basis of calculation, the timing of payments and details of any advances and minimum guarantees.
4. The territory- the geographical area in which the licensee will be permitted to exercise this/her rights.
Royalty rates are generally 3-8% of the licensee’s net sale price. Rates vary due to certain factors- for example, lower rates for items to go with a character license, higher rates if the item is a proven success in another territory.
Advances are an up-front payment in advance of royalties.
Minimum guarantees are also frequently a part of license agreements. A minimum guarantee is the absolute minimum payment that will have to be made to the licensee, regardless of the success or failure of his/her use of the product. This also ensures that the licensee does not hold onto an idea indefinitely without making payments.
Once the contract has been signed, the inventor’s work is usually done. It is common for the inventor to be excluded from the development programme and have no moral rights i.e. no right to approve or disapprove of the final samples etc. However, in certain cases where relationships have been established, the inventors are invited (or paid) to be part of (or even control) the development programme. This of course applies almost exclusively to professional inventors or agents.
This section has been contributed by David Kremer, Managing Director of Seven Towns Ltd.
Seven Towns has been a supplier of original toys and games to the toy industry for 30 years. They have licensed products to almost all the major toy companies throughout the world and have brought to the market over 300 toys and games. Most of these products are created and developed in-house though they act as agents on behalf of amateur and other professional inventors.
Seven Towns’ biggest success has been the Rubik’s Cube. Other toys and games in the UK include: Doh- Nutters, Impact and Captain Bones Gold.