Chances are, you decided to protect your idea with a patent because you wanted to make money from your invention.
A patent gives you the exclusive legal right to profit from your invention. If anyone else tries to manufacture or sell your patented invention without your permission (otherwise known as “infringement”), you can not only stop them, but you can sue them, too.
3 Ways to Make Money from Your Patent
There are a number of ways to make money from a patent.
Start a Business. Some inventors have an entrepreneurial spirit and want to build a business around their patented product. But that option isn’t for everyone. Building a business can be life-consuming.
License Your Invention. Another option is to license your invention to a company that’s interested in manufacturing and selling it. In a licensing deal, a company pays you money (known as “royalties”) in exchange for permission to make and sell your product. They take care of producing, marketing and distributing the product – you just sit back and collect money.
However, licensing has become less common in recent years. More and more companies prefer to buy a patent outright.
Sell Your Patent. Selling a patent is usually straightforward. A buyer offers you money for your patent, and if you like their offer, you take it. Then, they own your patent.
Sometimes you can negotiate a deal where you can get a “license grant-back.” It’s like having your cake and eating it, too. You sell your patent, but at the same time, you also get a license to manufacture and sell the invention yourself.
How Much Do Patents Sell For?
We spoke to Alec Schibanoff, Vice President of IPOfferings LLC, a patent brokerage firm in New York. Schibanoff shared that over the course of a year between 2021-2022, among the individual United States patents that his company sold, the selling price was between $175,000 and $380,000. Sellers offering multiple patents, such as patent portfolios or patent families, can make even more.
How Do You Sell a Patent?
Selling a patent requires a lot of work.
You may want to try selling your patent yourself, but be prepared to put in a lot of time and effort.
Alternatively, you can work with a patent broker who will do all the work for you and collect a fee when they sell the patent, similar to working with a real estate broker.
If you’ve got the gumption to take a do-it-yourself approach, here are some essential steps you should be prepared to take to sell your patent:
1. Find Your Potential Buyers
In order to sell your patent, you’ll have to get it in front of the potential buyers who will be most interested. So, your first step will be to find out who those potential buyers are. This will require some research.
Business research requires special skill, and most people don’t even know where to begin. But if you’re determined to sell your own patent, you’ll have to learn, or take your chances with common sense and hope that it’s enough.
For example, you might search the internet to see what kind of companies sell products related to yours, or cater to the same consumer who’s likely to be interested in your product.
Once you’ve identified some potential buyers, you’ll also want to identify their competitors, because they could be potential buyers, too.
NOTE: It’s important to be clear about what kind of entities buy patents. Some inventors have misconceptions about this.
For example, Schibanoff’s company worked with a client who invented a system of smarter traffic signals that helped improve traffic flow. When Schibanoff asked the inventor who he thought would buy his invention, the inventor replied, “Every city in America will buy it.”
But Schibanoff points out, “Cities don’t buy patents. Government agencies don’t buy patents. We had to explain to him that a company that manufactures traffic signals would likely buy the patent, incorporate it into their product line, and then sell it to cities all over the country.”
2. Check to See if Your Patent is Being Infringed
Is someone manufacturing and selling your invention without your permission? If so, that’s infringement.
If your patent is being infringed, it doesn’t mean that a buyer wouldn’t be interested in it. In fact, some patent buyers actively look for infringed patents. For example, a buyer may want to purchase an infringed patent, then approach the infringing company and offer them a licensing deal. That way, the infringing company can continue to make and sell the invention legally, and the buyer of the patent will collect royalties.
However, if your patent is being infringed, you will need to share that with your potential buyers, and present them with a claim chart.
A claim chart documents the infringement of specific claims in a patent. It will show a potential buyer exactly how the patent is being infringed, giving them a clear picture of what they may be buying into.
A claim chart must be prepared by a qualified third party. There are people out there who specialize in preparing claim charts. It’s a little like applying for a mortgage, when the bank requires an appraisal from an impartial third-party appraiser. The bank isn’t going to let the homeowner perform their own appraisal. Likewise, a buyer will want an “inspection” of your patent’s claims from an independent claim charting specialist.
3. Create a Prospectus
When you approach a potential buyer for your patent, you’ll need to show them all the reasons why they should buy. These reasons need to be organized into a sales document called a prospectus.
At the very least, your prospectus should show:
- What kind of product can be developed from your invention; and
- The market dynamics for that product.
“Market dynamics” can encompass a lot of information. In a nutshell, you want to provide evidence that your product is likely to sell well in the marketplace.
For instance, if your product is a special kind of ski attachment, you might include information such as:
- Examples of products similar to yours that sold in the recent past, how many were sold, and at what price point
- How many people buy ski products, and how much they spend on ski products per year
- If skiing is suddenly experiencing a surge in popularity, you might include articles about that.
Your prospectus should persuade your buyer to take the plunge and purchase your patent, but it must be based on facts and figures, not your personal opinion.
4. Market Your Patent
Any time you’re trying to sell something, you need to let people know about it. That’s called marketing. Trying to sell your patent is no different. It, too, must be marketed.
You will need to find ways to get your patent noticed by the people you identified in the section, “Find Your Potential Buyers.”
So, how do you do that?
There are many different ways to market a patent. Here are just a few examples:
– List Your Patent on an Online Patent Marketplace. An online patent marketplace is essentially a website where patents are listed for sale.
However, you’ll want to be sure that you’re dealing with a reputable marketplace that gets a lot of quality traffic from serious patent buyers. In theory, anyone can throw up a website and call it a “patent marketplace.” Some of them will charge you money to list your patent for sale. But if the marketplace isn’t well-known and well-trafficked, you’ll be throwing your money away.
– Publish An Article About Your Invention in a Trade Magazine. There’s a trade magazine for almost every industry you can think of. People read trade magazines to keep up with the latest news and trends in their particular industry.
So, let’s go back to our earlier example: you’ve invented a ski attachment. If an article about your invention appears in a trade magazine for companies that manufacture ski-related products, someone from one of those companies may reach out to you with interest in buying your patent.
If you’re not a writer, you can hire someone to write an article about your invention, and then you’ll have to “pitch it” to the trade magazine. That usually means reaching out to their editor and asking if they might consider publishing the article.
Alternatively, you can write a press release about your invention, and send that to the trade publication. If they find it interesting, they might have a member of their staff write the article about your invention.
You will need to learn how to write a proper press release, and how each particular magazine wants to receive press releases. For example, a magazine might want all press releases directed to a specific email address.
– Give a Talk at a Trade Show. Just as there’s a trade magazine for almost every industry, there’s usually at least one annual trade show or convention for every industry, too.
Trade shows are always looking for speakers to make presentations of interest to people in their industry. If public speaking is one of your strengths, you may want to write a presentation that incorporates your invention. Just be sure that your presentation is more than just a sales pitch for your invention. It should teach the audience something new, or get them thinking about ways to improve the way they serve their target market.
A trade show will usually have its own website, and it’s common to find a page dedicated to information about submitting a speaking proposal.
– Take Your Sales Document Directly to Your Potential Buyers. This is the most straightforward way to market your patent. You’ll need to reach out to the potential buyers you identified and find out who in each company is the key decision-maker when it comes to buying patents.
It’s important to connect with the right people. Schibanoff shared a story that illustrates this point:
“I remember one fellow who tried for two years to sell his invention, and then he came to us for help. He said, ‘let me send you my prospect list with the names of my contacts at the companies.” He sent us an Excel spreadsheet. The contact person at each company was the receptionist. That’s who he was talking to. He thought the receptionist would fall in love with his idea and go find the right guys and drag them into a meeting to tell them about it. He really believed that.”
The receptionist who answers the phone at a company seldom has influence with the company’s executives when it comes to buying a patent. In fact, that decision rests with a very small number of people – potentially just one person. That means there are a lot of other people you could talk to at a company who have no power whatsoever to help you sell your patent.
In short, find out who’s really involved in buying patents, and direct your prospectus to them.
Keep in mind that executives usually don’t have time to take phone calls from patent sellers, so you may be asked to submit your prospectus by email or postal mail.
These are just the most basic actions you can expect to take when trying to sell your own patent. You will need to become a fast master in a variety of areas.
The Benefits of Working with a Patent Broker
When you work with a reputable patent broker, the process of marketing and selling your patent is taken off your hands by experts who know how to do the pertinent research, create a prospectus, identify potential buyers, market the patent, identify and connect with potential buyers, and more.
Often, a patent brokerage with a long track record will also have established relationships with decision-makers at companies that buy patents, making it easy for them to get past the gatekeeper and get things done.
Schibanoff of IPOfferings LLC tells a true story to illustrate the value of using a patent broker:
“Over my lifetime, I have known five people who all decided to sell their home themselves and not use a real estate broker. One guy put up a special website just to show pictures of the house. Another guy hired a clown and gave out hamburgers and hot dogs to persuade people to come by and look at this house. These people did everything you can imagine to sell their house. They all failed. Each one gave up, called a real estate broker, and sold their house – two of them at higher than their original asking price,” says Schibanoff. “That’s why you use a real estate broker, and that’s why you use a patent broker. Because we know how to do it. It’s a combination of putting together the right marketing materials so that the potential buyer has in front of them exactly the information they need, and nothing they don’t. It’s also about contacting the right companies, and then contacting the right people at those companies.”
There’s money to be made in selling your patent, but the selling process is neither quick nor easy. With a wide array of the right skills, it’s possible to sell your own patent. However, working with an experienced, reputable patent broker can streamline the process and dramatically increase your chances of a successful, satisfying sale.
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