How to Sell Licensing Rights: Everything You Need to Know
While you want to find someone who will license your invention, you also want to be sure that your rights to your invention are protected.3 min read
Updated November 2, 2020:
Several steps are involved in how to sell licensing rights. While you want to find someone who will license your invention, you also want to be sure that your rights to your invention are protected. Fortunately, if you're careful about selling licensing rights, you should be able to make money from your invention.
Background to Licensing
The goal of the majority of inventors is to make a profit from their ideas, and licensing is the best way to achieve this goal. With licensing, you will get paid while someone else takes the effort to manufacture your product and bring it to market. When you allow someone else to produce and sell your invention in exchange for money, you are giving them a license. Basically, a license is a type of contract with two parties, the licensor and the licensee.
The payment that you receive for licensing your invention can take many forms. If you request a royalty, for example, it means you'll receive a percentage of every sale of your invention. In some cases, you will receive a one-time payment known as a buyout.
The biggest drawback to licensing your invention is that you will lose some control of your idea. In addition, while you will get paid for licensing your invention, the money that you receive will likely be a lot less than what you could earn if you manufactured and sold your invention yourself. Licensing, however, does provide several benefits, including:
- Less work
- Less investment
- Lower risk
If you're the type of person who doesn't mind taking risks and has the ability to work very hard, then you may want to try to bring your invention to market yourself instead of selling licensing rights.
Steps to Licensing
If you're interested in licensing an invention, you must first make sure that your idea is fully developed. Most companies will not pay for an underdeveloped idea, so if you want to license an invention, you need to be certain that it is fully realized. You should also make sure that you've secured some type of IP protection for your invention. If you have not secured legal protections such as a patent or copyright, companies will be reluctant to license your invention.
When you're ready to license your invention, there are seven basic steps that you need to follow:
- Research companies that may be interested in your invention.
- Approach the companies most likely to license your invention.
- Request a confidentiality agreement.
- Get ready to negotiate the license.
- Make a proposal to the company.
- Negotiate with the prospective licensor.
- Sign the licensing agreement.
Selling a Patent
Once you have invented something, it's important that you obtain a patent to protect your rights to your invention. While patents are certainly valuable, owning a patent doesn't generate any money in and of itself. If you want to make money from your invention, you have several different options. As mentioned, you could license rights to your invention to another person. Some inventors, however, instead choose to sell their patent.
When you sell your patent, you are guaranteed to earn at least some money for your invention. Because turning a patented invention into a profitable product is very rare, selling your patent can be a good idea if you're not sure how to go about bringing your invention to market.
Selling a patent is also beneficial because it means you will not have to take on the huge financial burden that is necessary to start a business for the purposes of selling your invention. While there are several advantages to selling your patent, you should be very cautious before you choose this option. If you sell your patent and it turns out that your invention is very profitable, you will not have any rights to these profits, as you will have given up your rights to your invention.
Also, unless you've already made some money from your invention, it's likely that the money you are offered for your patent will be very limited. Companies will not invest large amounts of money in unproven inventions, so you shouldn't expect a big payday from your patent alone. Licensing a patent is by far the better solution, as you will retain ownership of your invention and will profit if your invention becomes extremely popular.
If you still aren't sure how to sell licensing rights, 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.