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What Should I Do With My Invention Idea?

If you are a typical inventor, it is possible that you would like to license your invention and receive royalties, or even sell it outright - we'll call that person "royalty inventor." But if you are more motivated with a competitive business streak, we'll call this kind of person "entrepreneurial inventor," you may want to start a small business to produce your own invention and market it. In this case, you will need much more funding to develop, produce and distribute your product.

Most inventors follow a model pattern they complete their invention, determine their marketability and take steps to protect it under patent laws, and then come a strenuous decision. How can the inventor make money from it? Should I license the invention to a third party, or should I manufacture and market the invention myself? This decision will not only affect how the inventor gains money, but will also affect the amount of funding needed to move forward.

To some degree, your decision is influenced by the invention. Some innovations, because of their complexity, scope or high cost of production, may be eligible for licensing. Often, however, the decision ought to be based more on you than on your invention. You must objectively examine your creative personality.

The Royalties Inventor Character

Licensing or granting your invention for cash is a simpler and less expensive way of manufacturing and selling your invention. Licensing is often the best invention for inventors who want to make money, but they are primarily interested in innovation and spending time in their laboratory.

Licensing Your Invention

A license is simply a convention that allows you to someone else to use or develop your invention commercially for a while. In return, you receive money either a one-time payment or continuous payments called royalties. As the owner of the invention, you will be the "licensor" and the party that obtains your license is the "licensee." What makes the licensing attractive is that the Licensee bears all the business risks, from manufacturing to marketing to stop those who violate the patents of the product.

Assigning Your Invention

Although they have different legal meanings, terms assignment and license are used interchangeably and sometimes these two types of agreements appear to have the same effect, as in the case of the unlimited exclusive license in which the licensee obtains the right to market the invention indefinitely. For this reason, you or your attorney must study the terms and obligations set out in each agreement to determine whether it is assignment or license.

The Entrepreneurial Inventor

For those who put a lot of weight on the leading side of the metrics, the financial reward for the license or job may seem unattractive - royalties typically range from 2% to 10% of net revenue. A businessman might think: "Why should I give up my control and take a slice of cake when I can keep everything?" For this reason, inventors who have a strong entrepreneurial drive often choose to form a business, manufacture, market and product, a course of action that requires much more financial assistance than a license.

Variation In Financing Your Invention

You will usually need more funding if you start your own business and manufacture and market your invention. Regarding financing your invention, capital licensing typically requires much less than the alternative, manufacturing and marketing invention yourself. What is usually required is money to create a prototype (or other suitable offers to potential licensees), to market a useful invention, and perhaps, to seek and negotiate with potential licensees. On the positive side, a favorable licensing agreement will free the inventor to continue his invention while still benefiting from another very good idea. On the downside, a bad licensing agreement may lead to legal battles over royalties.

The Right Thing To Do

If have other things doing, and creating an invention is just a way to get something for sale, then marketing and manufacturing can be the right choice for you. The same thing applies if you live for a transaction, you do not fear the risk, you love to innovate in trade, and you have the discipline to fight for market share. But if any of the above doesn’t looks like you, licensing is probably the right track for you.


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