One of the most frequently asked questions by inventors is should I license my invention to a company to manufacture and market or do I sell outright?
Licensing – Is a lucrative way to reap the financial rewards of your invention without having to outlay vasts amounts of money setting up manufacturing facilities. Licensing effectively gives a third party authority to manufacture, market and sell your invention with a proportion of revenue from the sale of the product returning to the inventor as a license fee.
There are many benefits that follow from a licensing arrangement:
- The main and most significant benefit is that of the financial investment that is required to get your invention into the market – The LICENSEE and NOT the inventor bears the financial burden of manufacturing and marketing an invention.
- The Licensee will pay a licence fee to the inventor to sell the invention to the market (this fee is negotiated).
- The inventor is not burdened with having to employ staff, set up manufacturing facilities and find distributors for their invention.
Sale – Where an inventor has a patent for an invention there may also be a second option available to it, the outright sale of the patent. This option involves the inventor selling off the patent to a third party for a significant upfront payment. The obvious benefit with this scenario is that an inventor can earn a more significant amount of money in the short term rather than smaller amounts over a prolonged period of time.
The best option available to an inventor will be identified when negotiations commence with potential licensee’s/purchasers of the invention.