A patent is a right given to you that excludes another party from making, using, and selling your invention. For starters, your invention could be a machine, process, or even new drugs used for the pharmaceutical industry.
Filing for a patent is no simple task. If your patent isn’t strong, your competitors may find loopholes within it and steal your ideas without having to face legal repercussions. This is why an inventor may hire a patent lawyer such as those from Heer Law for their expertise.
What can you do with a patent?
Well, most people file their invention for a patent with the hopes of turning it into a business venture. In this article, we’ll take a look at why someone would do this and some common ways inventors can make money from their prized possessions.
Why Turn a Patent Into a Business
It’s pretty obvious that people want to capitalize their patents to make more money. However, it does go slightly deeper than that. For a lot of inventors, their dream is to be entrepreneurs and intend on providing value and service to the common folk who use their products and create a household brand.
Some would love to see their products on the shelves of hundreds of retailers and even have different companies legally reproduce their products and systems for a royalty check that comes in the mail at the end of the month.
So, there are a few ways to how inventors can make money off their valuable assets, but we’ll take a look at the two common ways:
Not everyone is fit for starting a business from scratch. The risks involved may not favor you in any way. A way for you to turn your patent into profit is by licensing your patent.
This is when you transfer your patent rights to another or multiple parties, allowing them to use, reproduce, and sell your technology or product under their name for a licensing period. During the licensing period, you will get a royalty for every product sold.
Depending on the industry, the royalty can range from 2-10% of the net sales. However, be very careful when going over the terms, as this may vary depending on the company you license to.
The two types of patent licensing are:
- Exclusive Licensing
- Non-Exclusive Licensing
If you have the entrepreneurial spirit, this is perhaps the route for you. With this, you get to keep all of the profit, but keep in mind there are a lot of things to consider, such as:
- Assessing the market to see if there is any demand
- Finding the funds to manufacture your product
- Educating the public on how to use your invention
- Ensuring smooth progress in the supply chain.
- Keeping track of accounting
Keep in mind that 90% of startups fail, and only 40% make a profit. Just because you’re smart enough to invent something, doesn’t mean that you can successfully create an empire because both require drastically different skill sets.
However, for those that thrive during tough times, this route can be a rewarding, life-changing experience.