How to Sell Intellectual Property: Everything To Know
Determining how to sell intellectual property, when to sell, and how much to charge is not easy but, it can be a lucrative outcome to own an IP.4 min read
Updated July 10, 2020:
There are several reasons why you may decide to sell your intellectual property.
- Recoup the money you laid out to register the property. With trademarks and patents, this can be quite a substantial sum. If you do not have the ability to earn money immediately and there is a particular business that can benefit from your property, it might be a good idea to cut your losses and get out once you’ve gotten ownership.
- Avoid the costs maintaining your property. This can be a considerable expense, particularly in the case of patent maintenance, which can run into the thousands of dollars. If you determine that your return on investment will not cover the projected fees, it might benefit you to sell your rights rather than lose them entirely if you can’t afford to maintain ownership.
- Benefit from brand recognition and goodwill. Sometimes a name is more than just a name if the trademark for the product, service, or business has achieved a level of recognition in the minds of consumers. Customer loyalty is a valued commodity, and if you can transfer that loyalty through the sale of a trademark, then the mark has value well beyond the initial investment you made to register it with the USPTO.
Things to Consider
Like any property, the value of your intellectual property can be determined by several factors. If you think the market for your property will never be higher, and the thought of licensing your intellectual property or putting it to use for your own benefit is not appealing, then getting an agreed upon payment for your ownership rights might be the ideal situation for you. Keep in mind that like any property, after you sell it the value may increase, and the amount you received when you sold it may pale in comparison to its eventual worth.
One way to avoid this seller’s remorse is to include language in the sales agreement that provides for bonus payments after the sale if agreed-upon sales targets are reached within a fixed timeframe and can be substantiated.
In the long run, there really is no foolproof way to measure the value of your intellectual property and the cost of intellectual property is its estimated worth.
Factors in Valuing Intellectual Property
There are three standard practices for estimating the value of intellectual property. These are market-based estimates, cost-based estimates or estimates based on the past and future economic benefits of the property. Complications exist with all three when it comes to intellectual property.
- Market-based estimates: These are arrived at by determining what the buyer thinks the property is worth and is based on comparing what other similar properties are worth. Of course, with intellectual property this is difficult to gauge. How do you compare the Nike swoosh with the Adidas trefoil logo?
- Cost-based estimates: These are reached by attempting to determine the cost to create or the cost to replace the intellectual property. Since the costs paid to apply for and register a trademark or patent are essentially the same, the cost to create gives no indication of eventual worth. Predicting whether an existing mark, no matter how popular, will undoubtedly outperform a new mark is akin to looking into a crystal ball to estimate a mark’s worth.
- Past and future economic estimates: This is perhaps the most reliable method for setting a sales price for intellectual property. Of course, several factors besides the trademark as diverse as customer service, locations of the business using the mark and perceived value of the goods associated with the mark complicate the results of this method.
A great resource for assessing the value of intellectual property anywhere throughout the world is the World Intellectual Property Organization’s Directory of Intellectual Property Offices, which includes a link to the US Library of Congress and the USPTO.
Enjoying the Rights of Ownership
The important thing to consider is that it is up to you how and to whom you sell your rights and what portion of your rights you wish to relinquish. For instance, you can sell you rights to a competitor in their entirety or only in a specific region of the United States or the world. Just remember that you should always record the transfer of rights with the Intellectual Property in the country in which the property changes hands.
To learn more about how to sell intellectual property, 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.