How Much Do Patents Sell For: Everything You Need to Know
How much do patents sell for is a legitimate concern for patent owners. Several factors come into play based on an evaluation of the invention.6 min read
How much do patents sell for is a legitimate concern for patent owners. Several factors come into play based on an evaluation of the invention. These include the quality of the invention, making sure the construction of the patent is solid, and how to maximize the value of the patent.
Profiting from an Idea
A patent grants ownership to an inventor for an idea or invention. However, the patent itself doesn't generate any income for the inventor. Oftentimes an invention is the result of months or years of experimenting and tinkering, then turning the idea into a product that is viable. After going through the process of obtaining a patent, which involves paying all required application fees and spending time researching existing patents, the inventor receives protection for their idea.
Steps for Determining the Sale of Patents
There are several things to consider when determining what a patent is worth when you plan to sell. It's important to think about the value of the invention when determining a price for an outright sale.
- As a patent owner, be prepared to make the move as the legal owner of a patent to a strategic role.
- If you're selling to a company, research the company's patents to find out how many they have, how many could be in competition with other companies, if the company has strategic plans in place, and are the patents viable.
- Decide on the importance level of the invention. Is it something that will make a significant impact on an industry or is it something that makes a simple improvement to the functionality of a product?
- Do research using the United States Patent and Trademark Office website to search for information on the frequency of the type of patent you own, as well as how often it is cited in other patents. If a patent is cited frequently it is an indicator that it is a good choice.
- Is the patent well-constructed, and does it offer value to the invention that impacts its sale potential?
- An important step is choosing the way you will extract the patent's value, such as through licensing, which will generate revenue/royalties.
- Another aspect of selling a patent is its promotion. You must be willing to put in the time to create a presence for the invention that shows it is something the public needs.
- While social media is a viable option for getting the word out about the invention, that is only one avenue to use.
- Along with promoting the invention on social media sites, it is in the inventor's best interest to hire a marketing company that specializes in patent promotions. A professional patent marketing company has the experience, skills, and knowledge to create an aggressive marketing campaign.
- A well-constructed strategy and marketing plan enhance the chances of attracting potential retail or business buyers for your patent.
Pros of Selling Patents
Three areas to keep in mind to turn a profit include either selling the patent, assigning a license to a company for usage rights, or marketing the invention.
If you choose to sell the patent, there's the potential for a quick buy out. Selling the patent outright provides immediate income to pay for the costs of getting the patent, as well as funding new ideas. By selling the patent, the cost of starting a business or manufacturing the invention is eliminated.
For an inventor to potentially see the most profit from their invention, he or she can opt to license the patent. This allows the licensee to sell, manufacture, or use the invention while the inventor retains the rights to the patent. When licensing a product, the owner of the patent can retain that ownership and receive royalty payments for all future product sales. Average royalty rates are between 5 and 20 percent, so the product will have to take off and sell very well in order to offer a good return for the patent holder.
Licensing to a well-known company or multiple companies with established reputations and consumer following offers a better chance for the inventor to receive royalties. Before signing over any licensing rights, an inventor should research the company or individual who will be licensing the product as well as reach out to organizations designed to support inventors, such as the United Inventors Association.
Cons When Selling Patents
In some instances, selling the patent outright is the best option. This option is applicable for patents that are running the risk of expiring. By selling when the opportunity arises your patent provides some versus none of the financial gain.
The downside to selling outright is the buyer will own the patent and the inventor will have no claim to any profits the invention may garner in the future.
If the invention has not been on the market for a significant time and generated a "need" by consumers, the selling price may be substantially less than a patented invention that has had time to generate interest.
Potential buyers may not be willing to pay what you're asking for if the invention is considered unproven, which means the company would be gambling on whether the invention will turn substantial profits.
Like any business venture, there is no guarantee an invention that has a licensing usage agreement will turn a profit if it doesn't do well in the marketplace.
Retaining Control of the Invention
Some inventors choose to retain their inventions by manufacturing, marketing, and selling the product themselves. The benefit of this decision is the fact that all profits will go directly to the inventor, rather than only receiving a percentage. However, those profits may be quickly eaten up by the costs associated with starting a new business, as well as accounting and legal fees.
Unless the invention doesn't require much capital and the inventor is well-versed in the business world, it may make more sense to license the patent or sell it outright. Inventors often don't have the business savvy needed to build successful companies.
Steps to Sell or License a Patent
After you have decided to sell or license your patent, the first step is creating marketing materials that adequately show the product. These must look professional and appealing, showcase the invention, and include a drawing or prototype of the product. Next, do some research to find potential users and manufacturers of the product. You can use the Thomas Register, which is available online and in local libraries, it has contact information for many local and national companies. Using the internet to do your research can also be helpful to find more potential manufacturers.
When you have narrowed down the potential manufacturers to a manageable list, start making contact with firms and businesses. Present yourself as a product developer and request an appointment with the company's product or sales manager. You should also attend invention and tradeshows where you could meet individuals or companies that would be interested in the product. For example, if your invention is in the tech space, look into attending technology-focused tradeshows, such as the International Consumer Electronics Show.
Another way to get the word out about your invention is to post a new product announcement in inventors' magazines and trade publications. The Patent Trade Office also has its own publication and offers advertisement space to inventors for about $25 per ad. This action could generate interest among potential buyers of your patent.
Financing the Invention
Most inventors need capital to launch their product. Look for partners that might be interested in providing capital in exchange for a portion of the profits or buyout price. You can also use websites designed for inventors, offering advertisement space for patents that are for sale. Some sites offer the ad space for free, while others require payment of a fee. Start on the United Inventors' Association website as it includes a list of invention sites and schemes that you should avoid.
Brokers and Invention Submission Companies
Contingent fee brokers may reach out to you in regard to your invention. The role of this type of broker is to market the product to companies that could manufacture it. Brokers will receive payment for their services, often in the form of a cut of the patent sale or a percentage of the royalties. Reputable brokers will never ask for payment upfront. Instead, they charge their fees after the product has been sold.
Be cautious if you're considering using an invention submission company. Many inventors have paid a lot of money to these companies and have little to nothing to show for the action. Some of the companies have been accused by the Attorney General of fraud. Before you decide to use the services of an individual broker or company, make sure to review them through the United Inventors Association and the Better Business Bureau.
With a viable product and plenty of research behind your belt, you may be able to earn profits on your idea.
If you need help with selling a patent, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.