How to Market a Patent: Everything You Need to Know
A patent is a right granted by the US under the provision of the Patent and Trademark Office that gives an inventor protection against other people.4 min read
How to Market a Patent?
A patent is a right granted by the United States under the provision of the Patent and Trademark Office that gives an inventor protection against other people making, selling, or using an invention.
The Dilemma: Assigning a Patent or Licensing?
Inventors have a few ways to make money off their idea including:
- Assigning, or selling, the patent
- Licensing the patent
- Marketing and selling their product
Selling the Patent
Inventors spend months, maybe years, experimenting and adjusting their ideas into workable products. Tens of thousands of inventions are patented annually, but only a small amount actually generate significant profits. Some inventions are neglected so long their patents expire.
Many inventions don't generate profits for a while, but if inventors sell a patent too soon, they risk losing big. Manufacturing takes quite a bit of time, a lot of work, and substantial cash. If inventors don't have the resources to manufacture and distribute their inventions, they could be in the red for a long time.
By selling patents outright, inventors get a quick financial reward generating income to pay bills and invest in future inventions. Selling does away with huge amounts of investments needed to start a business around a brand-new product.
A swift, simple cash out may sound like a great idea, but by selling a patent, inventors give up all rights to future profits. Products that haven't been on the market long don't call for a big payout. Investors don't spend a ton for a product that's not been proven yet.
Licensing the right to use, sell, or make an invention is a good way for inventors to make profits. As patent holders, inventors earn royalties on all future sales. Licensing allows inventors to keep control and ownership of the patent. Licensing rights are granted to one or several businesses. Licensing an invention is not guaranteed to generate substantial cash.
Inventors are more likely to generate bigger profits if their inventions are licensed through a popular company that has proved itself to consumers throughout time. Typically, royalties run from 5 to 20 percent; product sales would have to be significant for an inventor to earn a bundle.
Licensing can be limited by geographical area, usage field, and time. Licensing can be nonexclusive or exclusive. Exclusive agreements grant licensees sole right to take action regarding inventions, but only for a certain amount of time or in a certain area.
Inventors that choose to market their inventions by themselves get to put all monies in their accounts. Often times, these profits quickly disappear because of accounting and legal costs, business starting fees, and aspirin. Most inventions require substantial start up cash and a business savvy person. Unless an inventor fits the bill, it might be smarter to sell the patent or licensing rights.
Ways to Market a Patent
The Thomas Register is a list of thousands of manufacturers around the world and is found in libraries and online. When contacting a company, inventors should call themselves product developers, not inventors, and ask to meet with the Product or Sales Manager.
Invention and trade shows are prime for finding companies or business people looking for the newest hot product.
For $25, inventors can place their ad selling their patent in the paper published by the Patent Trade Office. Inventors can check online marketplaces and databases to look for companies selling something similar to their products.
There are many websites where inventors can advertise patents. Some are free and some charge based on the patent's sale. Inventors should protect themselves by learning about schemes at the United Inventors Association website.
Brokers and Submission Companies
Contingency brokers market inventions to manufacturers and get paid when the product sells. Fees are based on a percentage of the royalty or sale total. Reputable brokers don't ask for money up front, but instead, contract payment upon sale of the product.
Inventors should avoid invention submission companies at all costs. Several companies are facing fraud charges from several Attorney General Offices and the federal government.
Negotiating A Patent Assignment
When an inventor picks a buyer, they negotiate. Most patent transfers encompass 100 percent of the patent, but not all do. If a patent is owned by three people, the seller can assign 100 percent of his part of the patent. This equates to 33.3 percent being sold. Assignments may be partial allowing inventors owning 100 percent to sell only a portion of their patent.
Drafting an Assignment Agreement
It's smart to hire a patent lawyer to draft the full assignment so that no federal laws are broken. Certain states have requirements regarding patent sales and transfers.
All paperwork should have the following to be valid and follow federal laws:
- Patent number
- Patent issue date
- Inventor name
- Name of invention
Inventors wanting to complete the process alone can find modifiable patent assignments online. Once negotiations are final, sign the agreement in front of a notary.
Recording Patent Assignments With the USPTO
All transfers have to be recorded at the USPTO to take effect. If an assignment isn't recorded in three months from its start date, the patent cannot be sold to another person. Assignments recorded by the USPTO yield public notice of the transfer and grant the new owner the ability to file infringement.
All assignment paperwork must be in English per the USPTO. Any paperwork in another language should have an English translation, signed by the translator, included. All assignment paperwork should have a properly completed USPTO cover sheet. Send copies, not originals.
Drafting A Licensing Agreement
When licensing gets granted, inventors cannot sue licensees for patent infringement provided licensees follow the terms of the license. Licensing agreements and terms are based on the inventor's desires. Licensing doesn't require a specific form, but inventors should hire a legal professional to draft agreements.
Licensing agreements should include:
- Advance payment provisions
- Royalty percentage
- Infringement issues
- Permission for audits by accounting firms
Adding in a minimum annual payouts or royalties that increase each year helps motivate licensees to be aggressive with sales and marketing. Licensing agreements don't have to be filed with the USPTO.
If you need advice on how to market a patent or need a patent assignment or licensing agreement, post your legal need on UpCounsel today. Our experienced attorneys have an average of 14 years' experience and have worked with businesses like Trulio and Airbnb.