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For the vast majority of inventors, patent licensing is by far the easiest way to generate substantial income from their inventions. However, it is not the only way, so before reading the rest of this page, do be sure to checkout
Sell Inventions - what’s the right way for you ?

So what exactly is patent licensing?

Patent licensing (or invention licensing as it is sometimes called) is the process by which an inventor gives another party (or parties) the rights to legally use the information protected by his or her invention patent - normally in return for royalty payments (royalties).

In this process, the patent owner is known as the licensor, and the other party is the licensee.

For inventors, this means that if you find the RIGHT company to license your invention patent to (the licensee), they will manufacture, distribute and sell your invention FOR YOU.
They put up the money, they take the risk, they do the work ... and give you a portion of the profit (the royalty).

This bears repeating: The licensee does all the hard work for you! They manufacture your invention (and take the risk of it not selling), market it, distribute it and place it into sales channels for you. In return, you get a royalty fee on the sales. The more they sell, the more you get!

So, by the time you are ready to sell your invention, which is normally when you have filed your provisional patent application and have a working-model prototype (see my invention help overview guide) ... you should begin to draw up a short-list of potential potential licensees.

So what makes a good Patent Licensee ?

But what makes a good patent licensee? To get on your short-list, ideal 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 desktop research ... will all help you to identify likely licensee candidates.

How to approach patent licensees

This is covered in summary form in steps 9 - 11 of my invention help overview. Additionally, check out how I do it for my new invention clients in my payment-on-success Invention Marketing Program

Want a CUSTOM patent licensing plan for YOUR invention?

What kinds of invention licensing deals are there?

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

Exclusive patent licensing deals

With an exclusive invention licensing deal you are contracting 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 patent licensing deals

Non-exclusive invention licensing is when 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 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 deals

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!

To help you along the way, do be sure to sign up
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