Key Takeaways

  • Selling a patent involves valuation, identifying buyers, negotiation, and legal transfer.
  • You can sell a full or partial interest in your patent.
  • Platforms like IP marketplaces and patent brokers can help find buyers.
  • Preparation (e.g., pitch decks, NDAs) enhances your chance of a successful sale.
  • Recording the sale with the USPTO ensures enforceability and public record.

How to Sell a Patent: Everything You Need to Know

Securing a patent is an important part of becoming an inventor or an entrepreneur. It grants you ownership to an invention and excludes others from using the invention. However, a patent alone won't turn to profits. To generate income, you must license the rights, manufacture and sell the product, or sell the patent. When you sell a patent outright, you trade your ownership rights for a certain amount of money. If you have the right patent, many companies will vie for the rights, providing a quick payoff and eliminating startup costs.

The Pros and Cons of Selling Your Patent

Selling the rights to a patent has two main benefits:

  • A quick influx of capital, which can be used to recoup initial costs or finance a new invention.
  • Eliminating the production and startup costs if you were to manufacture the item yourself.

However, it also has some drawbacks. If a patent hasn't been proven to help sales, most companies aren't willing to spend much on a conceptual idea, even if it's useful to consumers. Selling too early also may also prevent the inventor from making larger profits in the future, as he or she gives up the rights to such ventures. For these reasons, it's important to analyze the market for your specific invention and compare your product to learn its potential profitability.

How to Put a Value on Your Patent

One of the most difficult aspects of selling your patent is putting a valuation on it. The prospective buyer typically does this in three steps:

  • Determining the quality of the patent and the practical application and profitability of the invention.
  • Evaluating if the patent is well-constructed.
  • Determining a monetary value for the patent.

As a seller, you should immediately analyze a company's existing patents to help determine the value of your own patent. This information is readily available online at the United States Patent and Trademark Office (USPTO) website.

If you're a manager seeking to acquire another company for its IP, or if you're wondering how to value your own company's patent portfolio, you must first take a look at the company's patents. From here, you can formulate questions to find out your patent's worth:

  • How many patents does the company own?
  • Are these patents better than the competitors?
  • Are the patents well-positioned for profitability in the market?
  • How well does management build a portfolio of patents and apply them?
  • Is my invention groundbreaking or just a fad?
  • Does the patent protect the invention from infringement?
  • How will the company get value from my patent?

Once you've figured out the answers to these questions, you can put a dollar value on your patent. The more answers you have, the better you can position yourself for a huge payday.

How to Negotiate Your Patent Assignment

If you decide it's in your best interest to sell a patent, it's important to know the legal and financial aspects of the deal. The USPTO refers to the sale of a patent as an assignment. This is because you assign your patent ownership rights to another party. Once you've picked a buyer for your patent, it's time to start negotiating the assignment agreement.

While most assignments transfer 100 percent of ownership interest to the buyer, it's also possible to transfer just a small portion of ownership. This is particularly true when two or more inventors are on the patent application. You can also assign a percentage of your ownership to the buyer, especially if he or she wants to work with you to manufacture the item. This could mean you only give up half, one-third, or one-quarter of patent ownership. The amount given during each assignment is entirely up to the patent holder.

Drafting the Assignment Agreement

After finding a buyer, it's time to draft the assignment agreement. UpCounsel has an assignment agreement form that's beneficial. However, you should also consider enlisting the help of a patent attorney to assure adherence to federal and state guidelines and laws.

To start, draft the initial agreement terms and provide a copy to the buyer for analysis and approval. Any written documents related to your patent should also be given to the other party. These documents should contain your name, the title of the invention, the patent number, and the date of patent issue. Without these details, the assignment could be void. If everything is agreeable to both parties, make sure to hire a notary to preside over the signing of any legal documents.

How to Record the Assignment With the USPTO

For your assignment to become legal, you must take it the USPTO. Recording this event is crucial to the sale, as if you don't record the assignment within three months of the effective date, you lose the right to sell it to any other party, even if you still have an interest or partial ownership of the patent.

You may record the assignment in two ways. By recording with the USPTO, you give legal public notice of the transaction. You should also record the assignment in the patent file, which gives the new owner the right to legal recourse in patent proceedings. This includes filing a patent infringement suit.

According to USPTO protocol, all recorded assignments must be written in English. If written in a foreign language, a translator must sign an English translation. You must also submit an official cover sheet that's required by the USPTO. Once completed, send the assignment, cover sheets, and all pertinent documents to:

Mail Stop Assignment Recordation ServicesDirector of the United States Patent and Trademark OfficeP.O. Box 1450Alexandria, VA 22313-1450

Make sure to only send copies and not the originals, as any originals sent will not be returned.

Common Mistakes to Avoid When Selling a Patent

Selling a patent is a complex process, and avoiding pitfalls can maximize your return:

  • Undervaluing the Patent: Use objective valuation methods or hire a patent valuation expert.
  • Failing to Understand Buyer Needs: Research the prospective buyer’s business to better tailor your pitch.
  • Not Having Proper Documentation: Ensure all patent paperwork and rights are up to date before negotiations.
  • Overlooking Legal Requirements: Each sale must comply with USPTO procedures and may need state-specific compliance.
  • Skipping Confidentiality Agreements: Always protect your IP before disclosing sensitive details.

How to Market Your Patent for Sale

Effective marketing can increase your chances of attracting serious buyers. Consider these strategies:

  • Prepare a Patent Pitch Deck: Include a clear description, images, market potential, and the competitive edge of your invention.
  • Develop a Non-Disclosure Agreement (NDA): This protects your information when sharing it with interested parties.
  • List the Patent’s Benefits: Emphasize cost savings, efficiency, or user benefits to show commercial potential.
  • Highlight Any Existing Licensing or Interest: Demonstrating traction can boost buyer confidence.
  • Use Professional Branding: A professional website or brochure can add credibility to your pitch.

Where to Find Buyers for Your Patent

Once you're ready to sell, finding the right buyer is key to getting a fair price. Here are several places to consider:

  • Patent Marketplaces: Platforms like IP Marketplace, Idea Buyer, and Yet2.com let you list patents and connect with companies seeking innovations.
  • Patent Brokers: These professionals help match inventors with potential buyers, often taking a commission if a deal is successful.
  • Corporate Outreach: Consider contacting companies in the same industry that could benefit from your invention. Tailor your pitch and show them how the patent aligns with their product line.
  • Licensing Fairs and Expos: These events attract businesses seeking innovations and can be a great opportunity to showcase your patent.
  • Online Networks and Inventor Communities: LinkedIn, Quirky, and inventor forums are potential places to make connections and gauge interest.

Frequently Asked Questions

1. Do I need to have a granted patent before selling it? You can sell both pending and granted patents, but granted ones are more valuable and easier to market.

2. How much can I sell a patent for? Prices vary widely—some patents sell for a few thousand dollars, others for millions, depending on market potential and enforceability.

3. What’s the difference between selling and licensing a patent? Selling transfers all rights permanently, while licensing allows others to use the invention in exchange for royalties.

4. How do I protect my idea when pitching it to companies? Use a non-disclosure agreement (NDA) to ensure confidentiality before disclosing details.

5. Can I sell a patent internationally? Yes, but you must have patent protection in the target country or region for the sale to be enforceable.

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 and Yale Law and average 14 years of legal experience, including work with or for companies like Google, Menlo Ventures, and Airbnb.