Licensing looks like the low-risk way to earn from a product, the serial entrepreneur and product inventor says. The clauses most inventors skim are the ones that determine whether it pays anything at all.
An inventor with a working product and no appetite for building a company has an obvious option. Someone else already has the factory, the distribution, and the sales team. Hand them the rights, collect a percentage, and let them do the difficult part.
Steven Capuano does not argue against licensing. He argues that the version inventors imagine and the version the agreement describes are frequently different businesses, and that the difference lives in four or five clauses nobody reads closely because the headline royalty number has already done its work.
“The percentage is the part everybody negotiates,” Capuano said. “It is also the part that matters least, because a good percentage of nothing is nothing. What decides the outcome is everything around it.”
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What The License Actually Covers
The first clause he sends inventors back to is scope. A license grants rights to a defined thing, in a defined market, for a defined period. Each of those definitions is negotiable, and each one is usually drafted by the licensee.
Broad scope written loosely can hand over categories the inventor never intended to include, including applications that do not exist yet. Narrow scope written carelessly can leave the inventor unable to license adjacent uses to anyone else, because the language is ambiguous enough that no second licensee wants the risk.
Exclusivity compounds it. An exclusive license is worth more, and it should be, because the inventor has given up the ability to go anywhere else. What Capuano wants inventors to notice is that exclusivity is a promise made in advance about a partner whose performance is still unknown.
“An exclusive license without performance minimums is a contract where one side has obligations and the other side has options.”
The Invention That Goes On A Shelf
The failure Capuano describes most often is not theft or underpayment. It is silence. A company takes an exclusive license, pays a modest advance, and then does nothing. Priorities change, the champion leaves, the category gets deprioritized, and the product never ships.
The inventor cannot license it to anyone else, because the rights are committed. The royalty is a percentage of sales that are not happening. Nothing has been breached, because nothing in the document required the licensee to do anything in particular.
The fix is unglamorous and specific. Minimum annual royalties that must be paid whether or not the product sells. Milestone dates for launch. A defined right to convert the license from exclusive to non-exclusive, or to terminate outright, if those milestones are missed. Each of those turns a hope into an obligation.
“You are not asking them to promise success,” he said. “You are asking them to promise effort, in writing, with a date attached. A partner who intends to work will sign that without much argument. A partner who is parking your product will negotiate hard against it, and that tells you what you needed to know before you signed anything.”
How You Find Out What You Are Owed
Royalty payments are calculated by the party paying them, from records the inventor does not hold. Capuano treats that as the structural weakness of every license agreement, and audit rights as the only correction available.
A workable clause defines what counts as net sales and which deductions are permitted, requires reporting on a fixed schedule with enough detail to be checked, grants the right to inspect the underlying records, and shifts the cost of that inspection to the licensee when an audit finds a shortfall beyond a stated threshold. Without the last provision, the right to audit exists but is rarely worth exercising.
Underreporting, Capuano notes, is more often a definitional dispute than a deliberate act. Two parties read the same clause differently on what is deductible, and the gap accumulates quietly for years. When that argument reaches a court, it is decided on the language in the agreement and the documents each side kept, not on what either party believed the arrangement to be.
What Comes Back When It Ends
The last section Capuano flags is termination, because it governs the state the inventor is left in. A license that ends should return the rights cleanly, but the surrounding assets often do not follow automatically.
Regulatory filings, testing data, tooling, packaging artwork, customer lists, and any improvements the licensee developed can all end up outside the inventor’s control unless the agreement says otherwise. An inventor who gets the rights back without the records that make them usable has recovered a claim, not a product.
Improvements deserve their own attention. If a licensee refines the design during the term, the agreement should establish who owns that work and whether the inventor can use it afterward. Silence on the point tends to be resolved in favor of whoever holds the documentation.
The Unromantic Part Of Inventing
None of this is why people invent things. Capuano is direct about that. The satisfaction is in the problem and the solution, not in negotiating audit thresholds and reversion clauses.
His argument is that the agreement is where the invention either becomes income or becomes a story about what almost happened. Two inventors can license comparable products to comparable companies in the same year. One of them gets paid for a decade. The other one waits.
“The difference is almost never the product,” he said. “It is what was in the document.”
Steven Capuano is a serial entrepreneur and product inventor with more than two decades of experience building businesses across consumer products, health and wellness, and innovation-driven markets. He writes and speaks on entrepreneurship, product development, and intellectual property. More at stevencapuano.com.
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