By: Mark R. Malek
One of the things that I have encountered over the years is an inventor that comes up with an incredible invention, but that does not know what to do with the invention in order to make money with it. During my consultations, I generally break down the very complicated business side of inventing to the three most common ways that I believe the inventor can make profit from an invention. Of course, this article assumes that the invention is patentable, will eventually be granted a patent, and does not infringe on someone else’s patent (many assumptions, but I will discuss those in a future post.)
The first way that I know how to make money on your invention is to manufacture it and sell it yourself. Why do you need a patent to do that? To tell you the truth, you don’t. There is no requirement for you to patent your invention in order to sell it. If, however, you start selling your invention, or otherwise disclose it, and one year passes, you can kiss any hope of getting a patent goodbye. Suppose that obtaining a patent is not that important to you. That’s fine, but I guarantee that it becomes important to you once your invention starts getting knocked off and there is no reasonable remedy to stop the knock offs. Also, one thing that I have notices about trying to launch your own product, i.e., trying to manufacture the product and get the product into a distribution chain, is that the patent is usually the cheap part. Depending on the invention, just getting manufacturing set up can be extraordinarily expensive.
The second and third ways that I suggest profiting from an invention does require a patent, or some other protectable right. Way number two to make profit from an invention is to license a patent covering the invention. This is usually the case when an inventor can come to terms with an entity or person that desires to make, use or sell an invention that is covered by the inventor’s patent. In such a case, the two parties can enter into a licensing agreement. A licensing agreement is an agreement that allows the inventor to maintain ownership of the patent, and grant rights to another to use the patent for some sort of compensation (or other consideration) and for a fixed amount of time. Licensing agreements are not something that are scratched on the back of a Denny’s napkin in crayon. They are very complicated, and require a great amount of detail. If you find yourself in a position where you are shaking hands in a bar and thinking that you have just saved money on your licensing negotiation by not using an attorney, chances are you will be using an attorney in the not to distant future – in a much more expensive lawsuit.
The third way to profit from an invention is an outright sale of your rights to the invention. This, almost always, involves the sale of a patent. I have had many conversations with inventors that want to skip the patent process and just go right to the big company (say Johnson & Johnson, for example) and sell their invention for millions. Really? What would Johnson & Johnson be purchasing? The inventor’s thoughts? It doesn’t really work that way. An invention inside of one’s head does not result in a protectable right. Johnson & Johnson does not have any reason to pay for the invention because there is no protectable right in that invention until a patent is granted on it. Put another way, there are no lawsuits for idea infringement, but there can be a lawsuits for patent infringement. The above simplistic outline does not discuss other legal remedies, such as theft of trade secret, for example, but that is not really applicable to this situation.
There are several other ways, some more complicated, to profit from an invention. I will continue to write on this topic, as well as provide some additional details of the above in future posts. This is just a short intro to satisfy some of the common questions that inventors sometimes have.