What You Need to Know About Selling Patents

A patent gives you ownership rights to your invention. Simply owning a patent doesn't make you money, however.

To profit from your invention, you can do the following:

  • Market it yourself
  • Sell the patent
  • Sell license usage rights

After you've invested considerable time and effort into your invention, you now have a viable product, which you successfully obtained a patent for. If you decide to sell your patent, you may enjoy a quick payoff.

While thousands of patents are granted every year, only a small amount of them generate any profits for their owners. Sometimes, patents languish until they expire.

When you sell your patent outright, you gain some financial benefit, which can help finance other promising inventions or pay some bills. Selling it outright also eliminates the huge monetary outlay that's necessary to create a new business based on your product.

Quick and hassle-free payoffs are enticing to some patent owners, but they give up the right to future profits from their invention. In addition, what you earn from selling your patent may not be much, unless your product has been around for a long time. Patent buyers usually don't want to pay much for an unproven product that may not be profitable.

What happens if the product ends up being a huge hit, however? You may sell a patent for $500, and the new owner could rake in half a million dollars in profits.

Consider your invention before outright selling patent rights. Ask yourself questions like the following:

  • Is it innovative?
  • Does it have the potential to revolutionize an industry?
  • Do similar products already exist?

Licensing Rights

In many cases, inventors profit more by licensing patent rights. You keep ownership of the invention, and you also earn royalty payments on future sales. You can grant license rights to one or more companies.

You have a better chance of generating more profits if you license your rights with a well-known brand. In addition, the licensee assumes any liability for product mishaps.

Licensing usage rights holds no guarantee of future riches, however. If the product fails, you won't see much profit. Royalty rates may run anywhere from 5 to 20 percent. For you to make a substantial amount of money requires major sales. Also, if your relationship with a licensee goes bad, you may end up paying more in legal fees.

Selling or Licensing Options

If you decide to sell or license your invention, make your marketing efforts professional. Prepare brochures and formal letters to showcase your product. Include prototypes when possible.

Make a list of potential users and manufacturers of your invention. When you make contact with potential clients, don't present yourself as an inventor; instead, say you're a product developer. Ask for face-to-face meetings with the appropriate parties, such as a product manager.

You should only do this once you actually have a patent. Otherwise, you should request a non-disclosure agreement before you talk about your idea. However, if the company is already working on a similar idea, they won't sign a non-disclosure with you.

Go to invention or trade shows where you'll meet people or companies that are interested in your product. You should also advertise by putting new product announcements in inventors' magazines or trade publications

Raise capital for your invention by soliciting partners who can provide the necessary capital to launch the product.

Look to brokers. Brokers can market your invention to manufacturers in exchange for commission if your product sells. You shouldn't pay brokers in advance for their services.

Practice caution with invention submission companies because many of these entities have been charged with fraud. A number of inventors have lost out on thousands of dollars after paying these companies. Before you hire a broker or pay a submission company, check their reputation with the United Inventors Association and the Better Business Bureau.

If you have a viable product and conduct the right research, you may be able to profit from your invention by monetizing your patent rights.

If you need to know how to make money with patents, 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, Menlo Ventures, and Airbnb.