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Frequently Asked Questions
Lynn and Michael want you to know as much about the toy\game industry as we do. Knowing the following special terms and definitions will help in understanding the process of licensing your new idea.
INTELLECTUAL PROPERTY or IP:
The ownership of ideas or intangible property (inventions, concepts, written materials, sketches, etc.), that is the result of creativity which "may" or “may not” be covered by patents and\or trademarks and\or copyrights.
LICENSEE:
The Company (Licensee) who acquires the right to manufacture an Inventor's (the Licensor) Intellectual Property (the invention).
LICENSING:
To authorize or grant permission or give a "license" to a company (the Licensee) to commercially produce, market and sell your idea (Intellectual Property). This permission is given in the form of a Licensing Agreement (see below).
MDA's definition of LICENSING:
Having a company "pay for your dream" by taking on ALL the cost of further development, manufacturing, advertising and distribution of your idea AND pay you a royalty for the "luxury" of risking their money.
LICENSING AGREEMENT:
A legally binding contract between the Licensor (inventor or agent) and Licensee (the manufacturing\marketing company) granting the Licensee (the manufacturing/marketing company) permission to commercialize the Licensor’s (inventor or agent) Intellectual Property (your invention) under specific, terms and conditions while paying YOU a royalty fee.
LICENSOR:
The person (the Licensor) who owns or has rights to the Intellectual Property (the invention) and gives permission to a Company (the Licensee) to commercially manufacture, distribute and market the product idea (Intellectual Property).
MARKETING:
Marketing is the function of promoting and selling products via TV, Radio, Print Ads and\or Internet that encourages the "end user" (typically the consumer), to purchase their Company's product over the competitors.
All products are marketable, NOT all ideas are licensable!
ROYALTIES:
A sum of money the Licensee’s (the manufacturing\marketing company) pays to the Licensor (the inventor or agent), for the right to commercially market the invention (Intellectual Property). Royalty Rates are usually stated as a percentage of the wholesale price of the produced product. Sometimes royalties are a fixed dollar amount per product sold.
Special Terms To Know
Do I need a patent, trademark, or copyright to protect my idea?
We at MDA are not attorneys; hence, we cannot provide any legal advice. Below is some practical information as it pertains to the toy industry.
Toy\Game Companies are interested in your idea's commercial innovative and unique advantage over their competitors. So Toy\Game Companies do not require having a patent or copyright or trademark for them to enter a licensing agreement and pay you royalties. If the idea is patentable, many times the Company (the Licensee) will pay for all or some of the patent costs in the inventor's name.
For legal advice, MDA recommends contacting a patent/trademark/copyright attorney.
Do I need a patent, trademark, or copyright BEFORE working with MDA?
No need to patent, copyright, or trademark first, as MDA provides you with a CONFIDENTIALITY AGREEMENT that allows us to work together "in confidence". We will never disclose your idea to anyone outside of our company without your written permission, nor will we modify or use any part of your idea.
Do I need a working prototype to submit my idea for an Evaluation?
Prototypes are not required for MDA to complete your Evaluation. You can send us any of the following materials you have available at this time that highlight your idea's unique functions and features:
Written Descriptions Sketches or Renderings
    Photographs     CD's, DVD's or VHS Video Tapes
        Flash Drive         Flash Memory Cards
For game submissions send a copy of the board layout (does not have to be professionally drawn) and a clear set of rules.
Completing your Evaluation prior to creating a prototype is a significant advantage financially, creatively and helps avoid costly patent mistakes. Acquiring MDA's Competitive Product Evaluation results first, during early development will identify how your idea stacks up against its competitors, which is considered prior art for patent purposes. This valuable information allows you to incorporate and make creative changes before investing significant money in a prototype and\or applying for patents should your Evaluation prove positive.
Will I receive any up-front money and how much money can I earn from licensing my idea?
Yes, MDA negotiates an ADVANCE ROYALTY sum. This amount is an advance payment against future royalties received upon signing a Licensing Agreement. The advance amount is deducted from future royalties until royalty sums exceed the initial advance payment. Advances range from a few thousand to tens of thousands of dollars.
Predicting how much you will make in royalties is impossible due to several unknown facts when first signing a Licensing Agreement.
Calculating Royalty Income is simple using this formula:
Royalty Rate (%) x Wholesale Price ($) x Units sold (Qty.) = Royalty Income
For example:
If we license your idea to a Toy\Game Company for a 5% royalty and they decide the wholesale price (price toy company sells to retailers like Wal-Mart) is $25.00 and they ship 500,000 units to retailers. The royalty calculation is:
5% (royalty rate) x $25.00 (wholesale price) x 500,000 (units sold) = $625,000 total royalty income.
How often will I receive royalties and for how long?
Toy\Game companies pay out royalties each calendar quarter, i.e., 4 times a year. Royalty Income continues so long the product is commercially profitable for the Toy\Game Company (Licensee).
How does MDA make money?
Since MDA acts as your agent for Free, when we successful license your idea to a Toy\Game Company, the royalty income is shared, 60% to you the inventor and we receive 40%. Should your idea not license, you owe us nothing and receive all your materials back with no further obligation to MDA.
We ONLY earn money if you are earning money!
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