Ways To Make Money From Your Patent
Here are some ways inventors can make money from their patents. These come directly from actual successes of actual inventors, as told by the inventors themselves in published interviews.
It is important to realize that every invention is different, with different markets. And, different inventions tend to attract different types of investors. Focus on what makes your invention different, and the rest will be easier.
The Licensing Approach - Accumulating Licensees
There are several approaches to gaining licensees. The following is one of the most successful approaches, where there are a number of different infringers. Where there is only one infringer, it may be necessary to threaten litigation, but that only works if the infringer believes you have the resources to do it.
First: identify which companies, products or services may be infringing your patent. Make a list, and try to estimate the sales of each one.
Then, line up the infringers by the estimated amount of infringing sales. Send demand letters to the smallest infringers, asking relatively small royalties. It would not be unreasonable to offer petty infringers royalty rates of 2%, or in some cases even a 0% royalty; all conditioned upon sales being below a certain limit.
As you accumulate more and more licensees, you will approach larger and larger infringers. The more licensees you have, the easier it is to sign on bigger companies as licensees. And, you can ask form somewhat larger royalty amounts. Having ten licensees, for example, is a persuasive factor to a company you approach for royalties, when that company is deciding whether or not to risk being sued for infringement. By this time, the royalty demands should be in the 6% to 9% range.
The largest infringers are saved for last. For those companies, seeing your list of licensees suggests you will have substantial reserves in case of litigation. It is much easier, by this point, to persuade them to pay the higher royalties in the range of 10% to 18%.
Market Your Invention the Easy Way – Consignment Sales
If you are able to make products embodying the invention, it makes sense to make small batches of those products. Many stores will carry the products, if you offer them on consignment.
So, what is a consignment sale? This occurs when you offer the goods to a retailer for a period of time, say one week, and at the end of the period the retailer either returns the items or pays a percentage of the selling price for each one sold.
A reasonable rate is 25% for the first batch. If the retailer sells out, then they will want more, in which case it is likely you can get 50% of the selling price for that batch. If sales are very good, then higher percentages are attainable, up to a maximum of about 75% in many cases.
Why try this method? Well, it is profitable, and if one retailer is selling, others will want the product too. And, it attracts the attention of large companies, who have been known to offer substantial sums of money (in the millions of dollars) for the rights.
So, why not save the time and effort, and just send the invention to many companies to see if they will buy it? Because that rarely works; and when it does work, the offers are usually in the range of $5,000 to $50,000. One of the most valuable products of the 1990s, used in many types of electronic office equipment worldwide, was from a small company that sold their rights for only $45,000. The company that bought those rights became a world wide powerhouse. Was this fair? It is up to the inventor to protect their own interests, and maximize their own potential. If you don't look out for your own interests, hardly anyone else will.
There are other ways to profit from your invention. One way is by attracting investors to help manufacture and distribute the inventive product. That would be the subject of much larger articles, but suffice it to say that having a well-prepared, professional-looking patent is an important factor to substantial, knowledgeable investors.
There are still other ways specific to particular types of invention, particular industries, and particular markets. Sometimes, the laws are different, and favor a specific invention, leading to specific types of favorable opportunities created by those laws – green technologies are an example of this.
The author is a patent attorney with over 28 years experience in patents and trademarks. For further information, please email at IP1lwyr@gmail.com, or call at 877-654-3336.