http://patentlyo.com/patent/2014/01/acquired-patent-licensing-guest-post-by-prof-risch.html
Why license your patent?
Why license your patent?
Should you license or manufacture your own invention? This difficult
question has always troubled inventors. When should the inventor invest massive
amount of time and energy figuring out the best business plan and execute it?
If we think about it, producing a product might sound easy,
but there are many steps involved. First of all, you need to invest in
factories and warehouses. And this is a whole lot of money upfront. Then you
have to work with engineers and designers to further improve the product. Most importantly,
you will need to establish a sales and marketing team to negotiate with various
distribution channels and get your products on the shelf. These steps cannot be
done overnight. They are capital-intensive and time-consuming, so before you
are absolutely certain that you can make your money back, think twice about the
amount of financing that will be needed before producing the products on your
own.
On the other hand, licensing your patent out can make things
easier, and it will be less-expensive for you to start generating returns. The
drawback is of course your profit margin will go down. Be mindful, certain
products might be very easy to get a head start, so it makes sense for you to
start your own small business, while some other products are too complicated in
nature that licensing would be the best way to go about it.
How to make money?
“A license is simply an agreement in which you let someone
else commercially use or develop your invention for a period of time.” You can
sell your patent outright, or you can simply license out your invention and
collect royalties.
An exclusive license is a permanent transfer of ownership
rights from you to the licensee. You give up the rights to use the patent and
the right to sue for patent infringement. The licensee now take over all the
rights you had previously. A non-exclusive license is giving rights to the licensee
for using your patent; essentially, you are promising that you won’t sue the
licensee for patent infringement. As an
inventor-for-royalties, you are pretty much waiting for the paychecks to come
periodically while having more time to allocate to creating more innovations.
The debate of whether to patent a product or keep it secret until you have fully built it is really common. This makes me think of the Coca-cola recipe and how they just keep it locked away with only a few people knowing it at a time. While this seems extreme, it has been very effective in making sure no one steals it. I personally think no other soda tastes quite like what Coke does - they must have been successful in diverting copiers. Not to mention, a copy like Coca-Cola doesn't exactly need to sue other companies in order to make a profit, do they?
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