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Selling Your Patent: What You Need To Know
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Sep 2006
A patent is an important document which grants ownership to an invention. However, simply owning a patent won't generate a dime for the inventor. To profit from your idea, you must sell the patent, license usage rights, or market the product yourself.
Months—or years—of tinkering and experimenting have turned your idea into a viable product. A successful patent search and patent application fees have resulted in you getting a patent for your invention. Now what?
A patent is an important document which grants ownership to an invention. However, simply owning a patent won't generate a dime for the inventor. To profit from your idea, you must sell the patent, license usage rights, or market the product yourself.
Take the Money and Run
When you sell a patent, you are guaranteed a quick payoff for your idea. Thousands of inventions are patented each year but only a minuscule amount actually generate substantial, if any, profits. Some languish so long that their patent expires. By selling a patent outright, you at least gain some financial reward for your invention.
Selling a patent allows the inventor to generate income that will help pay the bills or finance other promising ideas. Selling a patent outright also eliminates the huge financial outlay required to start up a business based on a new product.
Although a quick, hassle-free payoff sounds enticing, by selling the patent the inventor gives up the right to future profits from his or her creation. In addition, the money earned from selling a patent may not be substantial unless the product has been on the market for a long time. The patent buyer usually won't want to spend a lot for an unproven product that might not generate a big profits. But what if the product does becomes a hit? You sold the patent for $500 but new patent owner rakes in $500,000 in profits!
Deciding on an outright sale of your patent depends on the invention. Is it an innovative idea that will revolutionize an industry? Or are there similar products already on the market?
Licensing Rights
Licensing the right to make, use, or sell your product is usually the most profitable route for inventors. As patent holder, you retain ownership of the invention and earn royalty payments on future sales of the product. You can grant an exclusive license to one company or several companies.
Your invention stands a better chance of generating big bucks if licensed through a well-known company that already has the consumers' confidence. In addition, the licensee assumes liability for any product mishaps.
Like selling a patent, licensing usage rights is no guarantee of financial riches. If the product fizzles in the marketplace, so will your royalty checks. Royalty rates run from 5% to 20%, so the product would have to sell quite a bit for the patent holder to earn big money.
Relationships with a licensee can go bad, thus costing you more legal fees and headaches. Before signing over licensing rights, research the potential licensee and contact inventors' organizations such as United Inventors Association.
Self Help
If you make and market your invention yourself, all the profits will go to your bank account. However, those profits may be eaten up by legal and accounting fees, business start up costs, and headache medicine. Most inventors make lousy business folk. Unless your invention requires scant start up capital and you are well-versed in business bureaucracy, it is probably wiser to sell your patent or license usage rights.
Selling or Licensing Options
Be professional with your marketing efforts. Prepare formal letters and nice looking brochures to showcase your invention. It also helps to have a prototype or at least a good drawing of the product.
1. Direct Contact: Make a list of manufacturers and potential users of your invention. The Thomas Register, available in libraries and online, has contact information for thousands of companies. The Yellow Pages and Internet are also good research tools.
When making contact with a firm, present yourself as a Product Developer, not an inventor. Request a face-to-face meeting with a Sales or Product Manager in the company.
This option is only advisable once you have actually secured a patent. Otherwise, you must ask the company to sign a non-disclosure agreement before discussing your idea. However, most companies will not sign this agreement as their R&D team may already be at work on a similar idea.
2. Trade Shows: Attend trade or invention shows where you will encounter companies or individuals interested in your product.
3. Advertise: Buy space for new product announcements in trade publications and inventors' magazines to generate potential patent buyers. The Patent Trade Office publishes a gazette where inventors can advertise their products for around $25
4. Venture Capital: Finance your invention by soliciting partners to provide capital required to launch the product.
5. Patent Website: Several companies have sites on the Internet where inventors can advertise their patents for sale. Some sites are free while others charge a fee if the patent is sold. Before posting your invention anywhere, check out the United Inventors Association website which has news on unscrupulous invention schemes.
6. Brokers and Submission Companies: A contingent fee broker will market your invention to manufacturers and receive payment for services if the product is sold, typically in the form of a percentage of royalties or cut of the sale. Never pay a broker in advance for his services. Reputable agents will only charge you if they sell your invention.
Beware of invention submission companies. There are lists of inventors who have paid thousands of dollars to these companies and have nothing to show for it but an empty wallet and broken dreams. Many of these companies have been charged with fraud by Attorney General offices in various states and by the federal government.
Before using the services of any broker or company that offers to market your invention, check them out through the Better Business Bureau and United Inventors Association.
With good research and a viable product, you just may be able to turn that patent into a moneymaker.
Most Viewed in Patents
Comments
Submitted by on Apr 21, 2010 - 6:34AM
dear advisor's,
hi, my name is kim and i need to ask you a question,-
on, what should i do with my idea.
i had submitted my idea to patent assistance, and they realy
like my idea, and when they sent me a bill for $2,000.00
for a patent attorney, i told them i couldn't afford that.
"they were hopeing to have my idea out by june of this year"
i told them, that i couldn't afford that amount, patent assistance asked if they could call me back.
the next day, patent assistance called me back, and said,
some of the people they talked to, realy liked my idea, and-
they wanted to put $300.00 back into my idea.
but, i still can't afford that.
so now, what do i do?
thank you.
Submitted by on Apr 23, 2010 - 4:54PM
Unfortunately LegalZoom deals only with the Legal Document aspect of inventions and patents and not the marketing/selling aspect. If you simply want to protect your invention idea, you can certainly apply for a patent through us. If money is a concern, you could start with a basic self-help Provisional Patent which is a 1 year registration of your idea with the USPTO. The cost of this service through LegalZoom is $309. The provisional patent must be followed up by a non-provisional Utility Patent in order to apply for exclusive rights which cost much more, but the provisional will allow you to attempt to market or sell your idea without having to worry about someone stealing it.
While we can’t give you any specific information or opinions about the company you mentioned, it is recommended that you do research before paying any particular company a large some of money in order for them to sell/market your idea for you. Look online for reviews/opinions of others who might have used their services. There are a lot of companies out there who promise to get your invention sold and make you a millionaire when in reality they make all their money off the fees they charge hopeful inventors.
Submitted by on May 4, 2010 - 7:43AM
kimberly:
Real-world, be prepared to spend a minimum of $10,000. Also spend some time at the USPTO.GOV site and do research for prior art. If there is no prior art, AND the idea is worth perhaps a minimum of 10X what it will cost to get the patent, then you can try to find an angel who will back the patent.
The clock is ticking also. You have a limited amount of time to file between the time you think of the invention and you file.
I do not want to burst your bubble, but if you don't have thousands of dollars OF YOUR OWN MONEY that you are willing to throw away and get nothing in return should a patent search reveal there is prior art, then move on.
David
Submitted by on May 10, 2010 - 10:31AM
Hola,
Si usted decea hacer una orden de patente usted puede seguir una de las dos opciones.
#1 Si su invencion es un diseno sin funcion de macanica o electrica por favor use http://www.legalzoom.com/provisional-patents/provisional-patents-overvie...
#2 Si su invencion es de manera mecanica o electrica por favor use http://www.legalzoom.com/design-patents/design-patents-overview.html
Si tiene alguna pregunta puede llamar al (800) 773-0888
Gracias.
Submitted by on May 31, 2010 - 9:27AM
What about patents on technology invented while being employed by a company? My dad has several patents on technologies he invented while working at a pharmaceutical company. The company has been experiencing legal and financial troubles recently and has been selling his patents. One sold for $12 million. Do they have a right to do this? he has never gotten a dime from any of the technology even though his name is ont he patent. He hasn't worked for them for several years. If the company goes under, do they still have the right to sell his ontellectual property for millions?
Thanks,
kml
Submitted by on Jun 1, 2010 - 11:58AM
Dear KML,
LegalZoom is not a law firm and we can’t offer you legal advice on your dad’s specific situation. You would have to consult a patent attorney to look into the exact details to see if your dad might have any legal rights. We can tell you that in general if you are employed by a company and part of your job is to develop new technology then usually any technology developed for the company as part of your job is considered owned by that company because you were hired to develop such technology on their behalf. In these cases the developer of the technology is considered “paid” by their salary because that is what they are paid to do.
Submitted by on Aug 30, 2011 - 12:46AM
The inventors that I know want to create products, they want to develop and patent. They have ingenious ideas that need to see the light of day. Creating and solving problems is what draws people in and makes them want to become an inventor.
Submitted by on Jun 6, 2010 - 8:15PM
I am seeking a top-rated patent brokerage firm for my patent on an institutional exercise device,preferably in Chicagoland or in vicinity.
Are such firms quality/results rated?I am seeking a firm that can work on a contingency fee basis.
Thank you very much.
Tom Benoit
Submitted by on Jun 6, 2010 - 11:11PM
Hi there, my questions is somewhat dumb but here it is. SO i have an extremely succesfull creative idea for a new product I would like to pitch but have a very small income to put out. Is there anyway one could pitch their idea for free and end up selling you it if you are interested. Meaning is there a free way to sell you my idea. Thanks so much
Submitted by on Jun 16, 2010 - 5:32PM
At LegalZoom, we only offer legal document services related to patents. We do not buy or market invention ideas. There are companies out there who may be willing to buy your idea, but they often charge you a fee to try to sell your idea to manufacturers. Before using any of these companies be sure to look them up online and with the Better Business Bureau as many of them make all their money from the fees they charge inventors and not from actually selling ideas.
Submitted by on Jun 22, 2010 - 4:59PM
It depends on the type of patent you apply for. A design patent if granted by the USPTO is good for 14 years. If it is granted there is a one time issuance fee (this is in addition to the initial application fees). A utility patent if granted by the USPTO is good for up to 20 years max, but requires periodic maintenance fees in order to remain in effect. If there is a lapse in maintenance fees then the patent will expire earlier and the invention will become public domain. After the maximum number of years for either patent (14 for design, 20 for utility), the design/invention technology become public domain.
Submitted by on Jul 28, 2010 - 3:14PM
PatentBuyers (www.patentbuyers.com) provides offers on issued U.S. patents.
Submitted by on Jul 30, 2010 - 7:45PM
How can I search a patent or patent number to find out if it has either been sold or if the licensing rights have been sold? Can I find out who it was sold to and for how much?
Thanks
Submitted by on Aug 21, 2010 - 11:46PM
I have an idea for an invention that i have been developing but i have reached a hurdle. The idea is a spin-off from an existing product(a bulldozer). My problem is that I need drawings and/or details on how to construct the dozer first. However, I don't know where to go to obtain this information...can u help?
Submitted by on Nov 11, 2010 - 11:01PM
I need your company on a contigent fee basis , to help find manufacturers to license or buy the rights to my video compression software design. I have a patent application on file in Washington , DC , but I cannot raise the money to sell or license my invention
Submitted by on Dec 25, 2010 - 12:58PM
I have both a utility and design patent on my product. I also have a trademark and is licensed by the U.S. Forest Service.
Due to health reasons I would like to sell them.
I have test marketed my proudcts with very good success but it needs to go onto the next level.
What percentage of the net would you sell if for with a market potential of 42,000,000 ?
Thanks
Submitted by on Feb 25, 2011 - 9:48AM
You can list your patents for sale on www.theipbuzz.com. It is an online marketplace for buying and selling patents, copyrights, trademarks, inventions etc.
Submitted by on Jun 19, 2011 - 5:25PM
I have a provisional patent for a product that is used primarily in the kitchen. I have worked with a manufacturer for the past year that has helped me to package my product as well as create a website. I have put alot of time, energy and of course, capital into this project and have also sold quite a few units on my own. At this point however, I am interested in selling my provisional patent and all of the rights as I do not have the capital to move forward with my product in terms of advertising and marketing to the masses. This idea is simple, inexpensive to make and solves a common household problem. Those that know about it and are currently using my product, love it.
I would like to sell my provisional patent quickly and would appreciate any input that you may have. Thank you.
Submitted by on Dec 9, 2011 - 4:24PM
I am in this same position and would appreciate any help possible without up front money. Thank you
Submitted by on Oct 23, 2011 - 9:40AM
I am working with a company Invention Rexource International for an idea I had in packagaing am established product....I already provided them with 1100.00 for the patent they are now asking for an addtional 8900.00 is this company legimate?
Thank you
Submitted by on Nov 27, 2011 - 11:21PM
To anyone looking to patent an idea, take heed. Any number of patent assistance, invention assistance companies are out there and all of them are more than happy to take your money. Of course they will tell you that "everyone" they have talked to loves your idea. That way it gets you distracted with dreams of all the money you'll make and not to the way they will nickle and dime you to death. First of all, find out what patent application documents you can get for free from the US patent office. Some of the companies out there will charge just to fill out forms that you can do for free. Even with this, I strongly suggest using a qualified patent attorney. Getting a patent will not be cheap, no matter how it is done. I was recently issued a patent in the US and in the EEU for technology related to low-fat stackable snack chips. I've been in the stackable snack chip industry for thirty-six years and so I know opportunities when I see them in this specific area. I hesitate to say you should go through the expense of getting an invention patented just because you or others think it's a good idea. If you don't know the industry of application or the overall market, think twice.
Submitted by on Nov 30, 2011 - 9:49PM
I have a legal document question. I have found a buyer for my patent and hoping to find a boilerplate document that covers both the legal/financial obligations of both parties and the waiving of any future liabilities. Would that exist or would those be two separate agreements? Also, the buyer wants to pay in installments, would that be a third document laying out the payment plan, defaults, etc. or can that be rolled into one document covering all aspects of the deal?
Thanks in advance.
Submitted by on Dec 22, 2011 - 10:01AM
Thank you for this article.
My husband's patent was recently approved and he just mailed out his issuance fee. We definitely are going the "licensing route". We just need more education regarding how to market his idea. Any other suggestions?
Submitted by on Jan 1, 2012 - 3:39AM
Dear sir
I have a recently registered US patent, which I am the representative of the inventors and interested in selling. Can you give me some insight on how to begin? You seem to be quite knowledgeable in this area, any assistance you can provide will be greatly appreciated.
Sincerely yours
Submitted by on Jan 2, 2012 - 4:25AM
I have various patents pending. I am negotiating with a company to grant them a licence that requires an up front license fee payment plus ongoing royalties and profit share (in the many millions). Since their share price will go up enormously the moment they announce this acquisition of worldwide rights (due to the massive profits expected even in year one with very little outlay), buying shares in that company would yield major profits itself. Would it be legal as they have not signed yet, and would it be legal to tip large investors before any deal is finalised and obtain a percentage share of the profits made by share buyers on my tip????
Submitted by on Jan 15, 2012 - 1:31PM
I have few questions regarding Telebrands, if anyone can help.
I needed to know if anyone has ever submitted their idea on their website to get the 5 minute to pitch their idea, and also whether or not its safe to do so without having a patent? thank you for any help I have a product idea and considering to submit it to telebrand on their website.
Submitted by on Jan 29, 2012 - 8:55PM
Under the 'direct contact' its mentioned that this is only really an option if you have the patent. Does that also go for those patents pending? thanks
Submitted by on Mar 12, 2012 - 12:41PM
I have an idea, got it patent pending and don't have the money to cover the utility patent. Do I suggest to sell the product or can I still get a profit even if the patent pending contract is over???
Submitted by on May 9, 2012 - 10:24AM
Thank you for contacting LegalZoom. While we make creating legal documents easy and affordable, we can't give specific legal advice regarding your patent. However, we may be able to help you find an attorney who can assist you through our Business Advantage Pro Plan! Feel free to visit http://www.legalzoom.com/attorneys-lawyers/legal-plans/business.html for more details!
Submitted by on Mar 23, 2012 - 8:51PM
I have a receipe I would like to license to a food manufacturer. Should I patent my receipe? Will it cost in the range of $10,000 to do that?
Submitted by on May 9, 2012 - 2:32PM
Hi Goldi - Thank you for contacting LegalZoom! We would love to be able to help you! Please feel free to give our Intellectual Property Sales department a call for further information at (888) 791-0227 or e-mail us at ipsales@legalzoom.com for more details.
Please note that we can’t answer legal questions in the article comments. If you have a specific legal question, click here to connect with an attorney.