You have come up with a fantastic new idea. Now you need to figure out how to make money from the idea. If this is your situation, read on as we will discuss how you can profit from your innovative idea.
As a patent attorney with over 20 years of experience, I have worked with clients in their quests to monetize their grand ideas. I have used the following ways to monetize inventions and found the following pathways to help inventors and founders in profiting from their ideas. Here is a summary of how you can monetize your inventions:
- Licensing: You can license your invention to a company or individual in exchange for a royalty fee or a one-time payment.
- Manufacturing and selling: You can manufacture and sell your invention yourself or through a manufacturer.
- Starting a business: You can start a business around your invention, such as a product or a service.
- Crowdfunding: You can use platforms like Kickstarter or Indiegogo to raise funds for your invention.
- Patent: You can patent your invention to prevent others from making, using, or selling it without your permission.
It’s important to note that the most effective way to monetize an invention will depend on the specific invention and the market for it. It is also important to protect your invention through patents, trademarks, or copyrights and seek legal advice.
Patent licenses allow someone to commercially make, use and sell your invention within a certain time period. Licensing agreements involve payment for the license and depending on what has been agreed between the licensee and the licensor, the licensor may receive either a one-time payment or ongoing payments called royalty.
When you license your invention, you (the licensor) are essentially giving a company or individual (the licensee), the rights to use, manufacture and market your invention for a fixed period of time. In return, you are paid an agreed sum of money for the period within which the invention is being used.
Overview of Patent Licensing
Patent licenses are an irrevocable agreement between patent owners and licensees that transfers patent rights to the licensee.
Patent licensees have the exclusive rights to use the intellectual property protected by a brevet without the fear of legal retribution from the original patent holder or the inventor. This is a good option for licensors as it reduces the risks and costs associated with marketing and developing an invention
There are three main approaches to patent licensing happens. These are:
- Exclusive Licensing – The patent rights are solely and exclusively given to the licensee and the licensor cannot share the patent rights with a different licensee or exploit their intellectual property rights in the invention.
- Non-Exclusive Licensing – This means that a patent license can be granted to multiple entities. Under this regime, a licensee can exploit the invention but others may also be eligible for equal exploitation. The intellectual property is also available to the licensor.
- Co-Exclusive Licensing – This is when the licensor grants licenses to more than one licensee, but only to a specified group or number of licensees usually identified by name, description or by numbers
Licensing your invention is a good idea especially if you have no money to invest in the development of your invention or if your invention could be more impactful when used as part of a product that is already in wide circulation in the market. In addition to eliminating the costs involved in developing an invention, licensing can also mitigate the risk that a patent owner may have to deal with since patent ownership during the licensing period can be insured.
For example as of December 2022, Ericsson has arrived at a patent licensing agreement with Apple in which Ericsson’s technology is being used in products developed by Apple such as the iPhone. The deal is a multi-year global cross-license deal relating to patented cellular standard-essential technologies and certain other patent rights. It is expected that the licensing agreement will promote technology and business collaboration, interoperability and standards development between the two companies.
Other examples are Qualcomm and IBM, tech giants that have their own licensing programs inviting businesses to license their patents. Qualcomm has over 140,000 patents and generates an average of 1 million dollars per quarter in licensing revenue.
Determine whether your Invention is licensable
Although not every invention can be licensed, some do and can offer you a more effective way of achieving your goal. To determine whether your invention is licensable, you will need to consider how it differs from the existing technology in the industry. Inventors often analyze their ideas against the prior art that is available in the marketplace. This includes products already on the market, as well as processes and ideas used in industry. This is called a “market analysis.” A market analysis usually involves looking at the entire market to see which products are most in demand. Therefore if the product does not have any obvious differences from existing products, it may not be worth bringing to market.
However if the invention differs from existing technology in the industry, the next step is to identify the potential licensees for your invention. These can be individuals or companies that may be interested in utilizing your technology. You must choose a firm or individual that is willing to take the time to understand your idea and work with you to bring it to market. This can be done through conferences, presentations, web postings, and other means. You can also explore various avenues of reaching out and making contacts with them and if you are not ready to talk to them directly, you can send a short presentation of your invention to potential partners.
Find Retailers and Distributors For Your Invention
Approaching retailers and distributors with your invention can be a challenging task, but there are several steps you can take to increase your chances of success:
- Research your market: Understand the market for your invention, including the target customer, competitors, and industry trends.
- Create a professional presentation: Develop a clear and compelling presentation that highlights the key features and benefits of your invention.
- Identify potential retailers and distributors: Research and create a list of potential retailers and distributors that are a good fit for your invention.
- Create a professional package: Create a professional package that includes your invention, a brochure, a press release, and any other relevant materials.
- Contact potential retailers and distributors: Reach out to potential retailers and distributors via email or phone, and be prepared to answer any questions they may have.
- Follow up: Follow up with potential retailers and distributors to ensure they received your package, and to answer any additional questions they may have.
- Be persistent: Be persistent and don’t give up if you get rejected. Keep in mind that many retailers and distributors receive many pitches, so it may take time to find the right fit.
It’s also important to prepare yourself for possible rejection and not to take it personally.
Negotiating the terms of the License
A patent license can be a valuable business asset, allowing a company to legally commercialize its intellectual property (IP). Negotiating the terms of a license can be difficult and time-consuming. For help in licensing negotiations, consult a certified patent attorney.
Do your research and assess the potential market for the technology before you begin the negotiation process. Also, evaluate its financial value and match it with your business goals. This will help you decide if negotiating for licenses is worth it. For large companies, hiring licensed patent attorneys to assist with negotiations may prove beneficial. This will ensure that all members of your team work towards the same goal and the same objectives throughout the entire process. Negotiation is possible, even though legal issues can seem daunting. When discussing the use of your patent and who will ultimately own it, be specific.
You should also consider how long your license will stay active and when it will need to be renewed. It is ideal that you don’t have to renew your license for a prolonged period. This gives your business greater flexibility to adapt to changing market or industry demands.
The royalty rate is another important factor to consider when licensing licenses. The company’s industry and commercialization plan will determine the royalty rate. In general, higher royalties are a better deal for inventors in return for their technology. As the licensee increases production of products that incorporate your technology, it is advisable to seek a step-down royalty rate. This will motivate them to quickly commercialize their invention.
It is important to make sure your patent license doesn’t extend to other inventions that are based on your technology. This helps protect your rights and prevents others from suing you for the use of your patent without your permission.
A patent license is a valuable asset for any business. It not only facilitates relationships with other companies, but also contributes to the overall success of your industry. You must, however, negotiate license terms carefully so you get the best return on your investment.
Advertising your Invention
One of the first things you need to do when you are thinking about bringing a patented invention to market is decide how you will license it. There are several options available for you, and it is important to understand the ones that will allow you to get the most money. If you are an inventor, you may be interested in the various ways to promote your patented invention. In fact, many famous names have plied their trade in the field. However, the challenge has always been getting your wares noticed by the general public.
The best way to market your patented wares is to get your name out there. Typically, the best place to start is your local inventors club. These organizations often have networking events, and you might even find a contact who has a product or service you’re interested in. To that end, you’ll need a fax machine and business cards which you can easily and freely distribute to gain the attention you would need. Additionally, the United States Patent and Trademark Office (USPTO) can publish, in its official gazette, a notice about your patent invention’s availability for licensing at a fee.
You’ll also be surprised to learn that there are various other ways to advertise your patented product. If you want to maximize your efforts, you might consider making the move to the internet. This is particularly through social media advertising which allows you to reach a high number of people at minimal cost. In addition, you can make use of the services of an experienced marketing consultant. The consultant will help you curate your content to reach as many people as possible. Of course the cost will vary depending on how much your product is worth and this is why it is recommended that you do your homework before signing on the dotted line.
Some inventors however prefer to sell their wares to well-established companies. This can be an advantageous proposition for many reasons. One of these is that you will have a better chance of negotiating a favorable licensing agreement. It is also a means of bringing your to market without the costs and risks associated with selling it independently. Nevertheless, the process is not for the faint of heart. The key is to be smart about it. You must remember that not all big companies are created equal. To succeed in this endeavor, you need to do some homework.
As a standard measure, to market your invention, you will need to come up with a budget. Ideally, you’ll need to be ready to spend at least a few thousand dollars in order to get the job done. Of course, your marketing costs will depend on the method you choose, but if you do it right, you could soon be the toast of the town.
List your Patents on IP Marketplaces
Working with patent brokers or IP marketplaces can be a good way to monetize your patents and help you navigate the complex process of licensing or selling your intellectual property (IP). Here are a few benefits of working with a patent broker or IP marketplace:
- Expertise: Patent brokers and IP marketplaces specialize in the buying and selling of patents and other forms of IP. They can help you understand the value of your patents and the best ways to monetize them.
- Network: Patent brokers and IP marketplaces have a wide network of potential buyers and licensees, which can increase the chances of finding a buyer or licensee for your patents.
- Negotiations: Patent brokers and IP marketplaces can handle negotiations on your behalf, which can save you time and help you get the best deal for your patents.
- Legal and administrative tasks: Patent brokers and IP marketplaces can take care of the legal and administrative tasks involved in licensing or selling your patents, such as drafting and reviewing legal agreements.
- Anonymous sale: Some IP marketplaces allow anonymous sales of patents, which can be beneficial if the inventor wants to keep the identity confidential.
It’s important to note that working with a patent broker or IP marketplace can come with a cost, either a percentage of the transaction or a flat fee. It’s important to do your due diligence and research the reputation of the broker or marketplace before working with them.
Determine the payment scheme
If you are a patent owner, you have several options to choose from when it comes to licensing your patented invention. You can go the exclusive route, or you can license your invention to a third party. In either case, you will need to decide on a payment scheme. The safest way to do this is to speak with a licensing lawyer. They can advise you on the most important aspects of the licensing process, including the types of payments that are available and the best deals for your patent.
The payment scheme is an important factor in deciding whether your invention will be profitable or a lost cause. If you choose the wrong partner, you could end up paying more for the privilege of using your invention than you would have had you chosen a different company. You may also be infringing on another person’s patent, or worse, you could be accused of having a bogus patent in the first place.
The most effective scheme involves a large advance payment before the manufacturing and marketing of your patented invention can begin. This is the most cost-effective option for you, if you can manage to sell your patented invention in time. When you’re ready to sign the dotted line, be sure to talk with a seasoned licensing attorney for advice.
The other thing to consider is the marketability of your invention. You may want to consider licensing your patented invention with an existing manufacturer or firm. This could increase your chances of sales, but it could also create complications if you decide to sell your product before you have signed a licensing agreement. This could entail a lawsuit, or even a loss of the patented innovation. In any event, a licensed invention is a valuable asset, so you want to choose your partner wisely.
Get royalties on sales
If you have a patented invention, you may want to consider getting royalties on its sales. A royalty is a percentage of net sales generated from the patented invention. This allows you to receive a larger percentage of the value of your invention.
The most common way to get royalties on your patented invention is through a licensing agreement. This is a legal document that sets out the terms and conditions of your patent’s commercial use. The agreement defines how much your patent will be paid and how long it will be used. The agreement also lays out the payment schedule and should clearly state the scope of rights that you are licensing. You retain more rights and can license them to others if the license’s scope is smaller.
It’s important to know how much royalties will be before entering a license agreement. The best way to determine this is to estimate the number of units you’ll sell. Then multiply this figure by your gross profit per unit. A typical royalty rate for licensing a patent is two to twenty percent of net revenues. This is a reasonable sized fee, given that you are selling the rights to your patented invention.
A company will generally want to pay less than 25% of your gross profit. This is because the company will need to cover its manufacturing and distribution costs. This can negate your net profit. In general, it’s best to choose a royalty percentage based on your market’s size and your gross profit per unit. In addition, you’ll want to give your licensee a volume discount. This is a type of compensation that encourages them to sell more.
There are a variety of ways to calculate royalties. Some companies will use a fixed payment amount while others will allow you to set a percentage of your gross profits. If your patented invention is taxable, you should also expect a deduction for shipping and returns. Additionally, you should expect a deduction for commissions, uncollectable accounts, and bad debts. If your product is defective, you should limit your deductions to good faith returns.
If you’re considering a license agreement, you should take your time. Research your licensee and ask about their distribution and marketing methods. You’ll need to know how they will present your product at trade shows.
Can I Sell Or License My Invention Before It Is Patented?
Patenting an invention is a smart move to protect your rights and prevent others from using it. If you are unsure whether you should get a patent for your invention, licensing it can be a good option.
For inventors who want to quickly recover their investment, licensing your invention can be a lucrative option. It may not suit everyone. It all depends on personal preference and business acumen.
This allows you to make income, without having to spend a lot of time or resources on manufacturing it. This approach allows inventors to make money from their ideas without having to invest heavily in production.
You can also license your invention to increase your marketability. You can make your invention stand out from the rest by offering something unique and different from other products in the market. This will increase interest in your invention.
One important thing to think about when licensing your invention is its potential profitability. You will be able to determine what terms should be included in a licensing agreement by understanding the market demand and comparing it with other patent products.
Although licensing your invention may be a great way to get it onto the market, it is important that you are licensed by a reputable company. This can be done by looking online for similar products or by reaching out to local businesses that license them.