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Whether your invention is held within a technology startup company or by you as a private individual, patent licensing is
by far the best way to generate substantial (and global) revenue with the least amount of risk and effort on your part.

So what exactly is patent licensing?

By licensing your patent (in effect licensing the invention which is protected by your patent) you assign the legal right to a company to use your patent to manufacture and SELL your invention for you in return for payments in the form of royalties.

However, it is
crucial to find the RIGHT company (or companies) to license your patent to, because you must find a licensee who will produce, design, package, and enthusiastically market and pro-actively SELL your invention for you.

Put simply, with patent licensing the licensee does the hard work, and you get the reward.  Of course, both sides benefit when things go well.  The licenses makes a healthy profit, and you get a healthy royalty reward.  And if you know how to select the
right licensee(s) from around the world and negotiate effectively, the rewards can be $millions annually (depending on the scope and application of your patent).

The right licensee will manufacture your invention while paying for any special tooling needed for the machinery, handle quality control, design the packaging, and robustly promote your invention usually through their existing sales channels, and most importantly of all SELL it!  The more they sell … the more royalties you get!

So what makes a good Patent Licensee ?

But what makes a good patent licensee?  To get on your short-list, ideally licensees should ALREADY be manufacturing products related to your invention and be successfully selling them via established distribution and sales channels.

Trade magazines, trade show exhibitions and online research ... will all help you to identify likely licensee candidates.

   

What kinds of patent licensing contracts are there?

There are two main types of licensing contract - exclusive and non-exclusive:


Exclusive contracts

With an exclusive invention licensing deal you contract to license your patent to ONE company - in other words your invention becomes exclusive to the licensee.

However you can still have
several exclusive licensees, because the exclusivity can be for a geographical territory or even a specific vertical market application of your invention patent.  For example, you could have an exclusive deal with Company A for North America, Company B for the Far East and Company C for Europe.


Non-exclusive contracts

With a non-exclusive invention licensing deal you license your invention patent to multiple licensees who are then legally allowed to sell your invention into the same territory at the same time.


Which kind of patent license contract is best for Maximum Profit ?

So which is best?  Like so many areas of life, the answer is not straight forward!

At first glance, it might seem a no-brainer: Go with non-exclusive license deals, right?  The more companies that market your invention, the more will get sold and the more royalties you will get.
Actually not necessarily!

First off, if you license your invention to several licensees who all market your invention into the same market, two things happen: First, competition tends to drive down price (read
smaller royalties for you), and secondly it also tends to reduce the perception of “specialness”.

Remember, you can still have
several exclusive licensees - as long as you restrict the license terms in some way, for example, a geographical territory.

Higher invention royalties

Additionally, exclusive deals offer the opportunity to negotiate higher patent royalty rates.  After all, you are enabling a unique competitive advantage for your licensee as their competition won’t have your invention.


Exclusive vs non-exclusive patent license contracts

In the end then, there is no absolute right or wrong way to go.  It will be different for different inventions and different markets.

However, to get the maximum profit from patent licensing, you must consider this topic most carefully.  And in order to do so you will need a greater understanding of how
patent royalties work, and how much you can realistically negotiate!






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