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Patent royalties are fees paid to the owner of a patent (usually the inventor) by
those companies the inventor licenses his or her patent to.
This process is called
patent licensing, and the most crucial element of this process is the negotiation
of patent royalties (sometimes called invention royalties). In this process, the
patent owner is known as the licensor, and the other party is the licensee.
The licensee
pays patent royalties to you (the inventor and licensor) when it sells your invention.
Patent royalties are usually (but nor always) expressed as a % of the licensee’s
selling price. The more inventions your licensee sells -
SO ...
Actually, the clue lies in the wording of the question,
because the best deal for
the inventor is one that enables BOTH parties (the inventor and the licensee) to
make enough money to justify and sustain the enterprise on an ongoing basis.
From
YOUR point of view, you need to recognise that your licensees will be taking on both
the financial risk and hard work of manufacturing and selling your invention -
However, this must work the other way too: For patent royalty negotiations
to be fruitful, you must find licensees that properly value your invention too -
In other words, the more money your licensee can generate for itself by making and selling your invention, the stronger your position!
Ultimately, negotiating patent royalties comes down to bargaining. There are many
aspects to this (use the signup form below to get my FREE eReport which explores
this in much more detail) ... BUT here’s the thing: You must negotiate from KNOWLEDGE.
Knowledge
of what? Deep knowledge of your invention market! This includes (but is not restricted
to) knowing what royalty rates are normal for your particular invention’s sector.
Yes,
it’s true that patent royalties of 5% (of the licensee’s selling price) are often
sited as a ball-
I address ALL these issues (and MUCH more) in my
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