Category: Licensing

How to Sell an Idea to a Company

In this article I’ll talk about how to sell an idea to a company. I just want to provide you with a disclaimer upfront: it’s not easy, and sometimes it’s best to have a professional invention company work on your behalf (that’s why I offer a free invention kit on the right to budding inventors to help them professionalize their offering).

Ok, so now that you know it’s not a walk in the park, let’s get on with it. Like most things that lead to success, it’s best to follow a methodical approach.

1. Is it unique or protectable?

Firstly, let’s distinguish between an’ idea’ and an ‘invention’.

Idea

If the idea that you want to sell to a company is a new feature for a website, a better way for an existing product to function, or a scenario for an advertisement, it clearly falls into the ‘idea’ space. This means that it may not be patentable or protectable. In saying that, have a look at our feature on patenting an idea. Much of the time you may not wish to spend too much money on protecting it if you come to the conclusion that it is not something that can effectively be patented or protected in some form.

Invention

If your idea is a new kind of product, a new process or a new technology, then it falls into the ‘invention’ space. This means that you may need to consider protecting it in the form of a patent. The first place to start is doing a free patent search. You can then look at doing a provisional patent application and going down a process to protect it before you try and sell it to a company.

2. The Market

The next step would be to get a better understanding of the market for your idea or innovation. Do some research online to see what else is out there (you may have done this already), go to shops in a similar space and speak to sales consultants, or just consult with family, friends or co-workers about your idea.

Talk to people. Sometimes it’s best to be open about things and not too cagey, but you can judge for yourself. See what the feedback is for your idea.

This market research will be really valuable and can help you tweak your idea, or provide you with some questions that need answers, or give you the boost you need to take your idea to a company. Sometimes it will open up new ideas in your mind, or someone will suggest something seemingly obvious that you didn’t think of. Be psychologically prepared: your idea may be criticized or put down. Listen to the criticism, but in the end it’s up to you whether to dismiss it or to incorporate some of the feedback into your idea.

Also try and find out the potential size of the market for your idea. If it’s a niche market, try work out how big it is. Is it a product that could only work in the USA, or does it have potential to go international? Is it limited to one category, or could it be expanded into new ones? In doing this research, be realistic. Don’t assume that since the market you are targeting is a billion-dollar market, that you’ve suddenly got a billion dollar idea, or that it will be easy to capture even 1% of that market. Do your sums.

3. Sourcing and Manufacturing

If your idea is a tangible ‘real-world’ product, then it is going to have to be produced. Before you step into potentially difficult meetings with the companies to whom you will be trying to sell the idea, it will really help for you to be prepared. Research how your product is made, what materials are used, what processes are involved. What are the costs of the raw materials, and where are they sourced? Is your product something that could be manufactured locally, or will it need to be manufactured in China? Obvious questions but you’ll be surprised how often this is overlooked. If you can, do some kind of cost analysis based on quantities of production, and quantities of scale. When you do finally step into the meeting, you’ll be well prepared to answer some of the questions the may have. It will also place you in a much better negotiating position,

And don’t worry too much if you don’t have ‘perfect’ information (the company you are selling the idea to will probably have much more market data than you), but have enough information at your disposal so that it’s obvious you have done your homework.

4. Research the Right Companies

The web is your best friend here. You’ll be able to find, through Google searches most likely, target companies. Search for products in your idea’s niche, and see who manufactures them. Try find out who the parent company is of one of the companies you are researching, see how the companies are connected, and look out for who heads product development, research, or strategy. Go onto LinkedIn and see if you have any connections to these people. If not, just phone the company up and ask who is the person responsible for new ideas and development, and you’ll often be directed to the right person that way.

5. Presentation

It is very important that you are well-prepared for your meeting. Be sure to have some kind of presentation, whether it be Powerpoint slides, or designs that you hand out, or even a prototype. The more tangible you can show your idea, the more likely you are to sell your idea to a company . Watch Shark Tank on Youtube to see which presentation techniques work and which don’t.

6. Stamina

Be prepared to be rejected 9 times out of 10. Don’t walk into the first meeting thinking you are going to walk out a millionaire. It is going to take a lot of hard work and persistence to making this idea work for you.

7. Negotiation

If you’ve got to the point where a company is interested in buying your idea, you will need to have an idea of what kind of compensation you are looking for. This is probably a good point to bring in a lawyer or a invention advisory company to help you out, but generally your two options are:

a. An upfront one-off payment: here you will get a once-off fee for your idea. In some cases, if you are offered this, grab it. In others you may wish to be a but more pushy in getting a better longer lasting deal.

b. Royalties: sometimes this can be the best deal. You get a percentage (either for life or for a period of time), often a very low percentage such as 1-3%, of the wholesale price of each unit.

Other factors you will need to consider is that the purchasing company often wants some kind of exclusivity over your idea locally or globally.

How to Sell an Idea to a Company: Conclusion

This very broad and brief overview should give you some idea of how to sell an idea to a company. I recommend you also consider the invention kit on the right hand side, which will provide you with further information.

May 30, 2014
Patent Licensing: How To Monetize Your Ideas
In this article we provide a brief discussion of patent licensing as an attractive way for inventors to monetize their patents.

You have created a new invention and you have spent a lot time and a considerable amount money obtaining a patent for it. What’s next?

Well, you probably want to be rewarded for the many hours you spent developing your invention, and you would most likely want to recoup the thousands of dollars you spent obtaining the patent.

The solution then is to monetize or make money from your patent and the underlying invention.

Monetizing Your Patent

There are three basic ways you can monetize your patent:
1. By entering into some entrepreneurial venture involving your invention. For example, you may manufacture and market your invention, or employ it in some service related business.
2. By assigning or selling your patent and underlying invention to a third party for a financial gain.
3. By collecting royalties from patent licensing.
The decision ultimately depend on how you want to make money. For those who are business-minded, the first option may be the most appealing. With this option the potential financial rewards are greater, but so too are the risks.

For others, however, the second and third options may be the easiest and most economical routes to monetizing their patent. With these two options, someone else assumes all of the business risk, while you, the inventor, get paid comfortably just for being an inventor. The rest of this article will focus on the last of these options, patent licensing.

Patent Licensing

Besides a patent holders ability to exclusively manufacture and offer for sale his invention, the most common way to monetize a patent is through patent licensing.

A patent license is an agreement in which the patent holder, called a “licensor“, grants to a third party, a “licensee“, the right to commercially exploit a patent and the underlying invention. A patent license establishes the conditions under which a licensee may exploit the patent and the obligations with which the licensee must comply. Like other contracts, a breach of the obligations set forth in a patent license may result in the termination of the agreement and the return of the exploitable rights to the licensor. Thus, a patent license is revocable. This is in contrast to the second option above, where the patent holder sells or assigns his exploitation rights irrevocably.

In return for granting the patent license, the licensor receives a series of payments over a specified period of time, usually the life of the licensing agreement. These payments are called “royalties”. A licensee’s failure to pay royalties would be considered a breach of obligations and will usually result in the termination of the license agreement. If this occurs, the licensee loses his right to exploit the patent and the licensor may choose to license the rights to someone else. This acts as an excellent deterrent against the breach of royalty obligations and makes licensing particular attractive to patent holders.

Advantages of Patent Licensing

Some of the other advantages of patent licensing include:

– Low cost. Typically the only costs incurred when licensing a patent is for presenting and marketing to potential licensees and negotiating deal.

– Transference of risk. The licensee assumes all of the business risk.

– Freedom. An inventor is free to pursue other ideas while still profiting from his invention.

Disadvantages of Patent Licensing

A couple of the perceived disadvantages of patent licensing are as follows:

– Low rate of return. Royalties typically range from 2% to 10% of the net revenues. Compared to the potential rewards from entrepreneurial endeavors, this may seem miniscule.

– Risk of bad deals: A bad licensing deal can tie up your patent for an extended period of time and may result in expensive legal battles over royalties.

That being said, the route you take to monetize your patent should depend on your personal desires, resources and know-how. If you are simply an inventor and do not possess the the means to finance an entrepreneurial endeavor or the business acumen to make it succeed; or you simply wish to receive an income stream from the exploitation of your patent, without bearing any of the business risks, patent licensing may be your best option.
February 3, 2013
Licensing Inventions The Right Way

Many inventors have a great idea that they then go on to make into a machine, object , process or method. Once they create the physical object, though, many do not know what their next steps can be. Some decide to manufacture their invention themselves.

For those who do not want to manufacture an invention, or do not have the means to do so, licensing inventions can be a viable and lucrative alternative.

Why license an invention?

You have a great invention, but either you do not want to or cannot afford to manufacture it yourself.

Where do you need to be in the process to license an invention?

Licensing inventions generally requires you to have things in place: A working prototype and some sort of patent protection.

A Working Prototype

It is difficult to get a patent without some showing that the device or invention does what is claimed. It is also hard to get a patent if no one can see that the item works. It is also hard to describe something for patenting purposes without a functioning model.

Patent Protection

You need to own something to license. No matter how good the product is, if someone else can copy it without paying you, why would they pay for the license? They wouldn’t so you need the patent protection. You should have at least filed for the initial patent and had a patent search completed by someone reputable to show that the item can be patented before you look for a business to license your inventions.

When you are talking with companies about investing in your invention, it is important to keep your goals in mind.

What is the goal of licensing inventions?

A licensing agreement for your invention with a reputable company.

What is a Licensing Agreement? An agreement with between two parties, in this case, you the inventor and someone else who will manufacture or arrange for manufacture of the goods, where either the person manufacturing pays a fee to you, or a third party pays a fee to you, for the goods.

What about Licensing Invention Fees? How Do They Work?

The licensing inventions fee can be structured many different ways. A common way is royalties, where the other party pays a flat fee back for every item they sell. The price must be negotiated and varies greatly by type of industry, cost of product, nature of product, and what the market will bear.

Another option is for the manufacturer to pay a lump sum for the right to the invention license up front, or an annual fee, rather than a royalty based invention licensing fee. The total fees under the agreement can be a combination of the two described fees or some other combination of fees and charges.

How much should the fees come to?

It depends on the industry and whether you have multiple businesses interested in your invention. It also depends on the potential market for the invention, which can be analyzed and assessed based upon trends already known in the industry. In addition, the amount of profit that a particular product can make matters. The potential manufacturer will evaluate what people will pay for the product in comparison to what it costs to produce it, or potential profit margin.

Keep In Mind

No matter how great an invention is, it may or may not generate immediate interest. The level of interest in a product is based on whether potential businesses can see the possible applications and money-making opportunities, not whether they exist. So if no one is interested in licensing an invention but you have confidence in the product and you own the patent, manufacture a small amount and establish that the invention will sell. It may enable you to get a potential manufacturer interested when you could not before, and thereafter negotiate invention licensing royalties.

January 16, 2013
How To Sell An Invention

Want to know how to sell an invention? Well, first things first, make sure you have your prototype ready. With or without a patent, an inventor needs a working prototype to sell most inventions successfully.

How To Sell An Invention With A Patent

Inventors can sell their invention with a patent either approved or in process. Either position is stronger than without a patent. Most businesses that acquire inventions are interested in items that are actually patentable, so demonstrating this up front will increase the inventor’s negotiating position by a lot and enable the inventor to command much larger fees. This process can be negotiated with a full patent application in process, complete, or even a provisional patent.

Provisional Patents

A provisional patent may be a better route for an inventor that does not want to make the full commitment of funds to an actual patent. It costs a few hundred dollars and gets the patent process started, and allows for a year of not filing very much paperwork. It can allow initial protection of the inventive idea without making the huge investment while an inventor looks for an investor or buyer for the invention.

Downside to Provisional Patents: If the patentability of the invention is not at least explored by patent searches that show the invention can be patented, many potential buyers will look at the invention as unpatentable, or probably unpatentable. Having a provisional patent may help in how to sell your invention to companies that know the field and can gauge themselves the likelihood that the invention can be patented.

An Invention with a Patent that has issued (been approved) or under USPTO Review

A patent is an expensive process. Depending on the type of invention, the writing, researching and prosecution of the patent (taking the patent through the examination process with the USPTO) typically costs thousands of dollars. It is sometimes difficult to know how to sell an invention without investment. If the invention warrants the investment, however, the owner of the invention is in a much better position to market his or her invention to potential buyers. The inventor can also do so relatively “safely” with a patent in place to reduce the likelihood of outright copying of the invention.

How To Sell An Invention Without A Patent

It can be difficult to find someone to pay for an invention that does not have patent protection. Knowing how to sell an invention without a patent is tricky. If you do not have a patent the idea is not protected so anyone can present it. The company has little reason to pay for an unprotected invention, even if you have a working prototype. There is also an underlying concern that an invention that is not patented or is not in process is not patentable, and that while there may be value there is no reason to pay inventor royalties on it. If an inventor wants to try to sell an invention without a patent they can pitch the prototype with a presentation in similar venues to inventors with provisional patents or actual patents.

These would all be difficult avenues to pursue, but it has worked out with an invention here and there. Keep in mind that an unprotected invention may be copied, and the more freely the details of the invention are discussed, the easier it would be for a potential competitor to copy it.

How To Sell An Invention By Pitching

To Businesses that Deal In Products of the Kind: Focus on smaller to midsized businesses that may be open to products. Put together a marketing package to present the product to the company. The package should be just a few pages or even one page, explain what the invention does, and have pictures of the prototype to show that the inventor has something that works.

At Tradeshows

Here an inventor can pitch the product directly to businesses that may be interested, and a variation on the marketing package should be part of the plan.

Professional Marketing Companies

These are companies that specialize in marketing products and inventions, often for a fee and a cut of any sale of the invention to a company. They can be somewhat costly, so make sure they are reputable with a history in the field.

We hope this has provided you with some insight in how to sell an invention, and wish you much luck in getting your inventions out there.

January 15, 2013