A patent is a license giving exclusive rights to an invention for a given period. A patent does not grant the right to sell, make or use. It is a negative right to exclude others from making, selling, or using. A person must still have legal and regulatory authorization to make, use and sell. Thus, a patent license is just a license to the patent, not a license to make product or provide services. Patents are a commonly used avenue to protect an invention through a legal platform. However, in order to profit from a patent, an inventor must sell the patent, license usage rights, or market the idea or product themselves.
There is a difference between a patent’s legal analysis and it’s technical analysis. Although this article may highlight some legal topics, GHB Intellect provides technology- and business-focused consultancy and does not offer accounting, tax, investment or legal advice, analysis, or representation.
How to Profit from a Patent
After securing a patent, an inventor or business may want to generate some income from their idea or invention. Here are the three ways to make money from a patented work.
Sell the Patent
Hundreds of thousands of inventions are patented every year. In 2020 alone, 399,055 patents were granted by the U.S. Patent and Trademark Office. Many of the patent owners do not have the means or know-how to produce a product or service based on their patents. Therefore, a patent owner might look to simply selling a patent.
Pros: Selling a patent can be attractive to an inventor as it is the easiest and fastest option to making money. Selling a patent provides quick cash without having to wait years for profits from developing products based on the invention. Selling a patent also removes the financial burden of developing, manufacturing, marketing, and selling the invention by oneself.
Cons:. Once a patent is sold, all rights to that intellectual property are conveyed to the new owner. As such, the original inventor is not able to reap any further benefits or protections from that patent.
If you are considering selling a patent, think about these questions:
- Is this an impactful idea or product?
- Are there similar patents already on the market?
- What businesses or markets would be interested in your patent?
License the Usage Rights
Often the most profitable path for inventors is licensing the usage rights for another person or business to make, use, or sell a product. In this scenario, the inventor maintains ownership of the patent and earns royalty payments on future sales of the invention or product. But, remember, a person must still have legal and regulatory authorization to make, use and sell. Thus a patent license is just a license to the patent, not a license to make product or provide services.
Pros: Licensing usage rights is frequently the most lucrative deal for an inventor especially when it is possible to grant licenses to several companies, thereby receiving multiple revenue streams. If the patent is licensed to a successful company with a strong existing customer base, the license can become a lucrative deal. As a result, the product can be developed and launched quickly and with few financial burdens to the inventor.
Cons: There is a risk that there are low sales of the product. This would mean that the inventor would receive little or no royalty from the licensee. On average, royalty rates are relatively low, so a product must sell well to generate substantial licensing revenue. It is also important to keep in mind that what you make from licensing a patent is dependent on the licensee’s efforts and sources, so choosing the right person or entity to license to is crucial.
Developing a product based on the patent invention chiefly works for those inventors who are well-versed in the business. This mode requires the inventor or patent owner to invest a large amount of upfront effort, resources, and capital to develop, manufacture, and market the product.
Pros: All profits earned through the sale of the patented product will directly benefit the inventor or patent owner.
Cons: Without a viable business strategy, product development contains numerous roadblocks and risk factors. Profits could be consumed by legal fees, business start-up costs, manufacturing costs, litigations, etc. Moreover, product development could take a long time before it becomes profitable.
Self-Marketing a Patent Portfolio
There are multiple ways that a patent owner can go about self-marketing their patents
Online: There are established online marketplaces with patent buyers and sellers. These sites allow patent owners to advertise their patents for sale. Be aware that some online marketplaces are fraudulent, so we recommend caution if posting online. Also, the utility of such online marketplaces has been traditionally very limited and the financial results are usually far below expectations.
Trade/invention shows: Many inventors or firms choose to exhibit their product at a trade or invention show where they may encounter companies or individuals interested in their product. Such shows are relatively expensive to attend, and the chance of meeting a decision-maker is very low.
USPTO: USPTO stands for the United States Patent and Trademark Office. It is a government authority that processes patent and trademark applications, issues patents and trademarks, and is partially responsible for safeguarding inventor rights under the U.S. Constitution. The USPTO has ways for inventors to advertise their products in their journals. Again, the potential for a successful sale through such advertisements has been very limited.
GHB Intellect’s Patent Marketing Process
It can be daunting to attempt to sell/license a patent portfolio without proper support. Selling/licensing a patent is a time-consuming and complicated affair, so having the proper approach, skill set, and set of tools is critical to achieving a desirable outcome. Developing a strategic plan, developing effective material to fully and convincingly showcase the value of the portfolio, connecting with potential buyers, and determining how to negotiate the best deal, not only are time-consuming but also take tremendous experience in the industry. As a well-experienced and professional intellectual property firm, we help patent owners overcome these obstacles to achieve their goals.
We take the following steps to assist our clients accordingly.
1. Market Research
We first leverage our strength in deep domain expertise by helping a client conduct proper market research. We assess the probability of the product’s reception in the market through in-depth patent searches. Patent searches help establish a comprehensive understanding of existing prior art in a particular area. This is important as patent searches determine competition, possible patent infringement concerns, the most effective markets, and potential areas of improvement.
We take advantage of our extensive expertise in various technological and scientific fields in performing our searches. The methodology requires a multitude of technical and intellectual property experts working as a team. Our team of experts at GHB Intellect provides state-of-the-art searches along with vital patent analyses.
2. Patent Valuation
We pride ourselves in offering quality and affordable patent valuation services. Patent valuation enables us to properly make informed decisions through knowledge of the expected financial return from an invention. Our patent valuation services include evaluating the patented technology, identifying markets and competitors, and assessing venture risks. We then advise each client on how to best leverage the value of their patent portfolio.
3. Marketing Strategy
At GHB Intellect, we do all the hard work when it comes to determining the right market to pursue and best approaches to finding potential license/sale opportunities.
We generate all the marketing material that provides potential buyers with everything they need to know about a patent portfolio. It explains what the patent is all about, what it is used for, which parts are the highlights and how they work, if and why they may be infringed, etc.
4. Attracting Potential Buyers
Our vast network of connections to key decision makers at various relevant companies allows us to be most effective in finding an interested buyer. More importantly though, our reputation in the IP industry for quality, thorough, and unbiased analyses and valuations allows the potential buyers to take our proposals very seriously. The spot-on marketing material we provide to potential buyers pave their way to quick decision-making, which means we typically get much faster responses and results. And, of course, our experience in deal-making allows us to negotiate with potential buyers in creative ways.
GHB Intellect Services
Our reputation in IP strategy, management, and support is grounded in over a decade of experience in the IP industry.
Reach out to us for custom solutions on how to sell/license your patent(s) hassle-free.
GHB Services, LLC (d.b.a. GHB Intellect) is a technology and business consultancy and not an accounting, investment or law firm. We do not offer accounting, tax, investment or legal advice or representation.