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Manufacture or License an Invention for Royalties?

Innovation ideaI have a new invention that I’ve been working on. I’m just not sure how to actually go about producing and marketing my invention. Do I need to arrange for manufacturing on my own, which seems like a challenging process in itself, or are there other options that I can explore to manufacture or license an invention for royalties?

Ultimately, after securing a patent (or patent-pending) every inventor reaches a crossroads where they need to decide how to proceed with commercializing their invention. Do they manufacture and market the product on their own? Or do they partner & license an invention for royalties with a company who will then bear much of the financial risks of proceeding? Whatever the case, after the idea has been protected with a patent, the inventor must weigh these options and decide which one is the right choice for his or her specific situation.

If you are new to the business of inventing or are not really sure how an inventor actually makes money from an invention, consider the following options.

License an invention for royalties:

A license agreement is when the inventor [licensor] agrees to let a third party [licensee] commercially use his invention for a period of time. Typically, the inventor would receive either an ongoing payment called a “royalty”, (calculated as a percentage of sales of the invention) or a one-time lump-sum payment. The company/licensee normally proceeds with developing, manufacturing and marketing the invention, which allows the inventor to shift these costs and risks to the licensee. Also with licensing, the inventor can rely on the company’s experience and established business to boost the product’s chance of success.

Assign or Sell an Invention:

When the inventor assigns his rights, he is permanently transferring or selling ownership in the invention/patent. The inventor may receive a lump sum payment or a series of payments. The difference between a “license” and “assignment” is in the transfer of rights. With a license, the inventor can retain patent rights (like “renting” the patent), and with an assignment they transfer their rights (i.e., sell it).

Manufacture an Invention:

Typically, entrepreneurs with aspirations of turning their inventions into a business where they would sell their product would be the best candidates for manufacturing. Manufacturing and marketing an invention can be an exciting and rewarding approach for some inventors. However, the process should be looked at more as a business venture, as it requires the inventor to have substantial capital and a well thought out plan on how to develop, manufacture and market their idea. Manufacturing is very different than finding a company to license the invention, and should not be jumped into without examining the risks and carefully planning the best route for success.

If you choose the path of manufacturing your invention on your own, you maintain far more control of your invention and profits, but carry the risk. You have the option of:

  • Finding a contract manufacturer who will produce it, but where you possibly pay for all the upfront cost of tooling, finished inventory, warehousing and shipping

or

  • Producing it yourself, where you assume the risks and costs such as: facility, engineering, production equipment, tooling, molds, raw materials, personnel costs etc.

In either case you are responsible for sales, marketing and distribution of the product. Profits vary between the two options. You also assume the investment of your own time and stress considering that many inventors hold full-time jobs.

Free Invention Consultation

Now that you have a better understanding of the options for commercializing your invention, it is easier to see why it’s important to think through the options and determine what makes sense for your situation. Taking the time to understand the options for taking your invention to market and thinking through what your goals are prior to leaping into either option will help you choose the path that’s right for you and give you the best chance for success. No matter which option you choose, New Product Consulting is a leading invention help company that can assist your with whatever you need.

For more invention help information and a Free Consultation please contact us https://newproductconsulting.com/contact-us/ at New Product Consulting!

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