After spending so much time and mental energy coming up with a novel invention, you of course will want to make money from it. There are three ways you can make a profit from your invention. The two most common ways are assigning or licensing your invention. Entrepreneurial inventors also may start a new business to make, market, and sell the invention, although this is not common.
Licensing Your Patent
Licensing is the most common way to earn money from a patent. When a patent owner licenses his idea to another, he or she grants permission the licensee to perform certain activities that the patent owner has rights to control such as sell or make the patented invention. The license may be an exclusive license where the patent owner agrees to only license one party, or it may be non-exclusive where the patent owner makes no promise to not license anyone else to his patented technology. In some cases, an exclusive license within an industry may be used. A license agreement usually entails an upfront payment and then royalty payments, generally in the range of 3-5% of profits but varying by industry.
Assigning Your Patent Rights to Another Entity
Rather than licensing, a patent owner might attempt to outright sell, or assign, their patent rights. By doing this, the patent owner avoids any future costs that owning the patent might incur, such as patent maintenance fees to the patent office and litigation. Typically, a sale involves more money up front than licensing, but the tradeoff is that no royalties are paid out. There is significantly less risk with assigning a patent’s rights, but if the invention becomes wildly profitable the inventor will have no claim to the profits.
Selling the Invention Yourself
There are many hurdles involved with getting an invention to market. If a patent owner decides to market and sell the product themselves, he or she has many obstacles to overcome. The first obstacle is to ensure there is a market for the invention and identify the competing products. How much the competitor’s products cost and how their patent owner’s product differs from those products are two major factors in the success of the invention. In addition, the product will have to be manufactured at a competitive price. If your product is three times the price of similar products, retailers aren’t going to buy it – even if it is an improvement on their current products. A working prototype can help to identify the manufacturability of the product and demonstrate the functionality behind the concept of the invention, which can be helpful with securing funding for larger scale production.
Seeking Profits for Your Patent? Get Professional Help
Finding a way to monetize your invention can be quite stressful for the reasons listed above. If you need help putting together a marketing or prototyping strategy for your invention, contact us today.