Licensing Inventions The Right Way

licensing inventionsMany inventors have a great idea that they then go on to make into a machine, object , process or method. Once they create the physical object, though, many do not know what their next steps can be. Some decide to manufacture their invention themselves.

For those who do not want to manufacture an invention, or do not have the means to do so, licensing inventions can be a viable and lucrative alternative.

Why license an invention?

You have a great invention, but either you do not want to or cannot afford to manufacture it yourself.

Where do you need to be in the process to license an invention?

Licensing inventions generally requires you to have  things in place: A working prototype and some sort of patent protection.

A Working Prototype

It is difficult to get a patent without some showing that the device or invention does what is claimed. It is also hard to get a patent if no one can see that the item works. It is also hard to describe something for patenting purposes without a functioning model.

Patent Protection

You need to own something to license. No matter how good the product is, if someone else can copy it without paying you, why would they pay for the license? They wouldn’t so you need the patent protection. You should have at least filed for the initial patent and had a patent search completed by someone reputable to show that the item can be patented before you look for a business to license your inventions.

When you are talking with companies about investing in your invention, it is important to keep your goals in mind.

What is the goal of licensing inventions?

A licensing agreement for your invention with a reputable company.

What is a Licensing Agreement? An agreement with between two parties, in this case, you the inventor and someone else who will manufacture or arrange for manufacture of the goods, where either the person manufacturing pays a fee to you, or a third party pays a fee to you, for the goods.

What about Licensing Invention Fees? How Do They Work?

The licensing inventions fee can be structured many different ways. A common way is royalties, where the other party pays a flat fee back for every item they sell. The price must be negotiated and varies greatly by type of industry, cost of product, nature of product, and what the market will bear.

Another option is for the manufacturer to pay a lump sum for the right to the invention license up front, or an annual fee, rather than a royalty based invention licensing fee. The total fees under the agreement can be a combination of the two described fees or some other combination of fees and charges.

How much should the fees come to?

It depends on the industry and whether you have multiple businesses interested in your invention. It also depends on the potential market for the invention, which can be analyzed and assessed based upon trends already known in the industry. In addition, the amount of profit that a particular product can make matters. The potential manufacturer will evaluate what people will pay for the product in comparison to what it costs to produce it, or potential profit margin.

Keep In Mind

No matter how great an invention is, it may or may not generate immediate interest. The level of interest in a product is based on whether potential businesses can see the possible applications and money-making opportunities, not whether they exist. So if no one is interested in licensing an invention but you have confidence in the product and you own the patent, manufacture a small amount and establish that the invention will sell. It may enable you to get a potential manufacturer interested when you could not before, and thereafter negotiate invention licensing royalties.