Being a patent owner can be an incredibly valuable resource. Applying for and obtaining a patent can be a sometimes long and complicated process. Once you finish the patent selling process, you still need to figure out how to monetize the patent.
How to Sell a Patent
How best to sell a patent depends on your ultimate goals and the patent value as well as your current circumstances.
To monetize your patent, you have a few options:
- Sell the patent rights for your invention;
- Grant licenses to others for your invention; or
- Manufacture and market your invention yourself.
Patent Rights Explained
A patent gives the patent holder the right to exclude others from making, using, selling, or importing whatever is within the scope of the patent. Essentially, patent protection grants the patent owner the exclusive control over the product or technology, i.e., the underlying invention.
This means that if you have a patent, you can shut others out of the market and have a monopoly over your product or technology.
Patents typically last 20 years for utility patents and 15 years for design patents. They require that you file a patent application with the United States Patent and Trademark Office. This can be a complicated and extensive process involving a lot of legal documents, so you no doubt want to recoup the investment you have made.
Patent Sales Vs Licensing Vs Ownership
You have multiple options for monetizing your patent: selling the patent, licensing the patent, or manufacturing and marketing it yourself. Each has pros and cons, so let’s explore which option may be right for you.
Selling Your Patent
Patent sales are a smart option for the inventor who loves to invent but does not want to invest the time and resources necessary to get an invention off the ground and into the market. Sale of patents will offer a quick, one-time payout for your invention and will remove any future business decisions.
Pros for Selling Your Patent
Even though many patents are granted each year, not all of them end up panning out into a smart financial investment. Monetizing a patent can often take substantial time and resources. You must do the research, market analysis, and testing to understand your market.
Every patent holder must analyze and determine the best way to produce your invention for the public. Any patent holder must invest time and talent often on a daily basis to have a truly successful patent.
Selling will remove these business decisions from your plate. If you are more excited about coming up with your next big patent idea than getting your invention off the ground, selling your patent may be your best option.
This way, you can generate substantial income from your invention and potentially use the money to finance the research, legal services, legal fees, and development for your next invention.
Cons for Selling Your Patent
There are, of course, some drawbacks to selling your patent outright. Keep in mind that once you sell your patent, you lose any right to potential future profits your patent may generate.
Selling is a one-time transaction that can offer a payout upfront, but with the risk that you may be giving up additional financial gain should your patent become successful later on. By giving up the licensing rights to the business decisions, you give up how the patent is presented to the public.
Licensing Your Patent
The next option for your patent is to license your patent rights. You can enter into licensing agreements with only one other party, or you can choose to license your patent rights to multiple parties. This option gives up some of your patent rights but retains other rights.
Licensing your patent means that you essentially transfer or “rent” your intellectual property right to others in the form of a license agreement. Patent licenses provide the license holder with the right to make, use, or sell a patented invention in exchange for royalties.
Pros for Licensing Your Patent
By licensing your patent to others, you can eliminate the hard work of manufacturing and marketing your product to the public, while still reaping the rewards should your patented invention turn out to be a huge success. This option can remove the stress of the numerous business decisions that must be made to get an invention off the ground.
The ability to earn continued royalties on your patent throughout the life of your licensing agreement is the biggest draw for licensing your patent. If your patent ends up being a huge financial success, you will be able to continually reap those profits for years to come. Even better, you can do all of this without having to actually develop and market the patented invention yourself.
It’s important to keep in mind that the most crucial part of your licensing agreement will be the royalty rate. These royalty rates will hinge on a number of factors, the most important of which are:
- The novelty of your patent;
- The extent of your patent rights over your invention;
- How profitable your invention is, or is projected to be.
Understanding the market for your invention will go a long way in helping you get the most financial benefit from your licensing agreement. Take some time to research what the market demand is for your patented invention.
Also, be sure to explore the royalties that other patented inventions are charging to license their invention for comparison purposes. This way you will be armed with data when it comes time to negotiate the licensing terms.
Cons for Licensing Your Patent
By licensing your patent to others, you will also be giving up some rights, especially business-related ones. By licensing your patent, you may give up control in how the patent is developed and marketed to the public and other business decisions.
You run the risk that the licensee will do a bad job of marketing the invention, will go under as a business, or will choose not to pursue your invention after some time.
Moreover, licensing your patent will not guarantee any financial success. Your patent may not make much money in the hands of the licensee, in which case your royalty rate will not secure much financial gain for you in return.
Manufacturing and Marketing Your Patent
Once people have invested a substantial amount of time and resources in developing their invention and then pursuing and obtaining a patent, they often want to see the underlying invention to the finish line. Manufacturing and marketing your patent on your own can have some wonderful rewards, but there are risks and costs associated with this decision.
Pros for Manufacturing and Marketing Your Patent
Taking the reins on your patent on your own provides you with complete control over the business decisions of how the patent is manufactured and marketed. You get to make all of the business decisions and judgment calls regarding the best way to produce, sell, and market your invention. It also keeps your patent rights reserved.
After you have invested so much of your time and effort into the patent, many often want to retain control over how the invention is released to the public.
Another benefit of doing everything yourself in selling your patent to the public is that you reap all of the potential financial gains. If your patent takes off and becomes especially lucrative, you do not have to share this profit with any licensee.
Cons for Manufacturing and Marketing Your Patent
Conversely, manufacturing, and marketing your patent can take a substantial amount of work. Often, this business side of the table does not come naturally to those who are more naturally inclined to be inventors. Inventors can often struggle to get their patent off the ground and become financially lucrative.
To effectively sell your patent often requires great business acumen as well as a dedicated and relentless spirit should obstacles get in the way.
Tips for Selling or Licensing Your Patent
If you have decided to sell or license your patented invention, there are a few tips and considerations that will set you up for the most successful and lucrative deal.
Develop Your Elevator Pitch
The first thing you need to do before you look to sell or license your patent is to come up with an effective elevator pitch. Elevator pitches are short, pithy explanations of your patent that will draw the potential buyer in and convince them that investing in your patent is a good idea.
Practice this pitch until it rolls off your tongue easily. Be sure the pitch is more about the underlying ideas than any specific script so your words do not come across over-rehearsed.
Cater to Your Market
As you start looking to sell or license your patent, it is important to cater your patent to your specific market. Spend some time gaining a deeper understanding of the trade shows, trade journals, websites, and other resources that those in your market turn to.
These will be the best places for you to find potential buyers and licensees for your patent. Attend these shows, develop relationships, and be vocal about the outright sale of your patent.
Another tip for selling or licensing your patent effectively is to approach and pitch venture capitalists, inventors magazines and other investors about your patent. Investors are often excited about getting on the ground floor of the next big idea and may be willing to finance your invention and get it off the ground.
Engage a Broker
If you lack the time or energy to pursue potential individuals or entities that you can sell your patent to, consider engaging a broker or a law firm specializing in similar patents. These brokers will solicit potential buyers in exchange for a commission fee should the broker end up selling your patent.
One important note: be sure to keep a lookout and inquisitive eye for invention promotion companies. Invention promotion companies are often nothing more than enterprising scams that will cost you substantial funds with nothing to show. Indeed, the federal government warns against these and has pursued fraud actions against these types of companies.
How Do You Calculate The Value Of A Patent?
While there are many ways to calculate the value of a patent, the most commonly used is the market approach methodology.
Using this methodology, you determine what a willing buyer would pay for a similar property. Patents generally have a value comparable to similar products or patents that have been sold and purchased in the past.
What Patent Sold For The Most Money?
Among all patents sold, the bell’s valve is the most valuable. Bell’s valve has become the most valuable patent in history over the past century. In 1878, it was patented for transmitting human voices.
How Do I Know If My Invention Is Worth Patenting?
If you want to know whether your invention is worth patenting, consider the amount of money you will make from selling products or services under the patent and any licensing fees you will receive from others.