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.
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 - the more patent royalties
you will get!
SO ...When negotiating patent royalties, how can you (the inventor)
make sure you get a good and fair deal?
What is a good and fair patent royalty deal?
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.
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 - FOR
YOU! Do be sure to read more about patent licensing for a more complete discussion
of this topic.
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 -
especially with respect to the revenue opportunity it affords them.
In other words, the more money your licensee can generate for itself by making and
selling your invention, the stronger your position!
How high a % patent royalty can you aim for?
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.
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.
it’s true that patent royalties of 5% (of the licensee’s selling price) are often
sited as a ball-park average - BUT it does vary considerably from market to market.
So, you MUST learn the norm for your particular invention market as part of your
market research (see steps 1 - 3 of my Invention Help Overview)
I address ALL these issues (and MUCH more) in my
Top Patent Royalties eReport.
Get it for FREE now, when you signup for my free monthly Invention Marketing Newsletter