6 Ways to Profit From Your Patent
You had a great idea for an invention, and after spending months brainstorming, filing, and discussing the details with your patent attorney, your patent is granted.
Filing for a patent isn’t cheap, so if you went to the trouble of protecting your idea, the next step is to figure out how to profit from it.
According to Forbes, in 2014, 95 percent of the 2.1 million active patents weren’t licensed or commercialized: they didn’t generate any money.
The value of your invention is completely in your hands. Here are six ways to make money from your patents.
1. Start a business: Product conversion
One of the best ways to make money from your patent is to create and sell the product you invented. If you’re thinking about manufacturing and retail opportunities, ask yourself the following questions:
– Does your invention solve a real-world problem?
– Does it do its job better than existing products in the market?
– Have you assessed if your consumers are going to like it?
– Do you have funds for manufacturing and promoting the product?
– Can you sell it at a competitive price?
Keep in mind that developing and selling a product requires different skills than creating a product idea and going through the patenting process.
Many independent inventors have chosen the path of entrepreneurship. Dan Brown, the inventor of Bionic Wrench and founder of Logger Head Tools, is a prime example.
Start by writing a business plan—they’re required by bank lenders and investors. But even if you don’t need outside funding to get started, business planning will help you consider every aspect of your business.
2. License your patent
If starting your own business isn’t the best approach for you, you can still earn a handsome amount by licensing your patent.
Patent licensing is a practice that lets you transfer your patent rights to a party that can use it for making or selling a product or service.
There are two types of patent licensing:
– Exclusive Licensing: The patent owner transfers all ownership rights to the licensee.
– Non-Exclusive Licensing: The patent owner/licensor can also produce the invention along with the licensee.
Benefits of licensing your patent rights:
– Your invention sees the light of day in the form of a product.
– Lack of resources or funding won’t stop your invention from going to market.
– The trust and brand value of the licensee could help you build a legacy.
– Your licensee may sell your product worldwide faster than you would have been able.
Patent licensing has complexities and intricacies. I recommend reading this article—it’s a guide to patent licensing. It will help you develop a solid understanding of what it entails, including scenarios where licensing may become less profitable than your initial expectations.
3. Use a patent licensing company
If you’re not interested in doing all the licensing legwork yourself, there are patent licensing companies like Acacia Research Corporation that help individual inventors monetize their patent assets. Often these companies serve as a middleman, connecting an inventor with a company that could help them with expertise or capital.
Acacia Research Corporation, based in Newport Beach, has been one of the biggest supporters of individual inventors and small companies. They work with patent-holders to help them unlock the financial potential of their patent. It partners with many companies/inventors and splits the licensing revenue 50-50.
Intellectual Ventures is another such company. It is one of the top five owners of US patents. It acquires patents from almost every domain. It has more than 40,000 patents in its portfolio.
“It’s good for everybody.” ― Nathan Myhrvold, former CTO of Microsoft and co-founder of Intellectual Ventures
Companies like Acacia Research and Intellectual Ventures are considered Non-Practising Entities (NPEs), meaning they own patents but don’t use them to develop a product/process. Some NPEs have earned the moniker of “patent troll” because they use their patents for filing frivolous lawsuits against renowned companies and startups.
4. Use it as collateral for a bank loan
Did you know that sometimes you can use your patent as collateral when seeking a bank loan? This is a fairly common practice, and even major players like General Motors, Alcatel Lucent, and Kodak have done it. Between 2011 and 2016, leading banks like JP Morgan, Morgan Stanley, Bank of America made 947,907 transactions for patent loans.
This has another benefit. If you mortgage your patent, there’s a fairly high chance that it could be acquired by a big company that wants to avoid litigation or maintain its competitive edge. Often when patent owners mortgage patents, they’re more interested in leveraging the value of their resource than licensing it or starting a business with it.
So, if a bank agrees that you can use a patent as collateral, they essentially agree that it has significant value, based on their due diligence. This can actually be a positive signal for companies looking to acquire patents.
5. Sell off your patent rights
What if you aren’t interested in licensing your patent? Maybe the market for your intellectual property is diminishing or the technology is becoming less relevant. It might be time to sell the patent.
Before you sell, ask yourself the following questions:
– Is there any way to further develop your invention that might make your intellectual property worth more down the road?
– Is patent pooling possible?
– Are you running out of ways to make licensing profitable?
The next big question is—where will you sell it? Check out this list of 22 patent marketplaces to get started.
6. Sell to a business that’s expanding to your country
Some patent owners make a point to research and keep tabs on overseas companies that are expanding their operations internationally.
Patents are location-based, meaning that you’ll need a patent in each country where you want to protect your idea. So when a company expands its operations to new countries, it will often try to acquire patents in the new country to help mitigate their risk of being sued for patent infringement.
Often, the expanding companies are openly looking for individual patent owners who are willing to sell. Xiaomi is one example of a company that acquired a lot of patent assets through its global expansion process.
Conclusion
Getting a patent isn’t easy. It is complex, expensive, and slow. Make sure your patent results in financial reward, whether you use it to launch a product, license it to someone else, or sell it. Don’t let your patent sit around!
Hello!
I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
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