Trying to “Sell” Your Idea

“Going to market” refers to the process of trying to “sell” your idea. Now, if your goal is to manufacture and market your invention on your own, then “going to market” means approaching retailers to sell your finished product to them or perhaps setting up a website where consumers can place their orders directly with you. If your goal is to license your invention for royalties, then for you, “going to market” means to approach manufacturers related to the industry that your invention falls into and share with them details about your invention to see if they express any interest in the concept.

Some inventors end up doing a combination of manufacturing their invention on their own, followed by licensing the invention for royalties. The key is to think about which option you are trying to accomplish early in the process. For example, if licensing for royalties is your option, then you do not want to spend a lot of time and money doing things that are moving you towards manufacturing your invention. Spend your time and resources preparing to license your idea.

When you are trying to license your invention for royalties, the end result of all your hard work is to secure a license agreement. A license agreement is when the inventor [licensor] agrees to let a third party [licensee] commercially use his invention for a period of time. As a result of the agreement, the inventor would receive either ongoing payment called a royalty or a one-time lump-sum payment. The likelihood of an inventor striking a license agreement would depend on the premise that the inventor “owns” the invention (i.e.: a patent). Without patent protection, any individual or company could make or sell the invention; therefore, it would be unlikely that a company would license or buy the invention.

When negotiating a license agreement, there are various items that must be addressed between the inventor (licensor) and company (licensee). Some of these items are, royalty rate, up-front payment (if any), term, territory, etc. For example, the agreement can be limited to a particular area of the country, for a certain period of time or could be structured to allow for licensing to more than one licensee.

When the inventor assigns his rights, he is permanently transferring or selling ownership in the invention/patent. The inventor may receive a lump sum payment or a series of payments in the form of a royalty. The difference between a “license” and “assignment” is in the transfer of rights. With a license, the inventor retains rights (i.e.: like “renting” the patent) and with an assignment they transfer their rights (i.e.: sell it). InventHelp review

What are the types of payment?

1. Percent Royalty – This refers to regular payments the inventor receives for licensing his invention. Percent royalties are based on a percentage of sales. The payment frequency is negotiated and defined in the license agreement (i.e.: annual, semi-annual, quarterly or monthly)

2. Use Royalty – This form of royalty is based on number of units sold or frequency of use.

3. Lump Sum Payment – A lump-sum payment is a one-time payment for the transfer of licensing rights.

4. Advance – It’s possible that you can receive an up-front payment instead of future royalty payments or you could receive a partial advance up-front,  InventHelp review which would then be deducted from future earned royalties.

5. Guaranteed Minimum Payments – This is a guarantee that the inventor will receive a certain minimum royalty payment each year.

I assume that earning money is the main reason why you are considering licensing or selling your invention in the first place. The amount of money will vary with each scenario and will be a central point of negotiation in each license agreement; however, some basic guidelines to base royalty payments on are as follows:

– Industry standards – the rate that is customary in the industry. You may find that the prospective licensee is looking at industry standards as a guide in determining the royalty amount. It is difficult to pinpoint a standard due to the fact that circumstances vary for each agreement; however, a rule of thumb is that rates can fluctuate between 1% and 10% (unit rates will also vary). Typically, 5% is considered a good royalty rate.



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