Exploiting an Invention

There are broadly three ways for an individual to exploit an invention:

START A BUSINESS

In some ways this is the most likely to result in success. The inventor has a large degree of control over how the invention is exploited, and the potential rewards will be high. On the other hand, he will need to have the necessary business skills and will be required to devote a considerable amount of time to the project and arrange finance, which could become a full time job.

LICENSING

This is often the most acceptable arrangement. The inventor retains ownership of the patents and other intellectual property and allows other people to use it in return for regular royalty payments.

In most cases the licensee will want exclusive rights in return for the payments. This has advantages for the inventor too, since if there is only one party in the marketplace the market price will generally be higher. On the other hand, for exceptional inventions which have a limitless market it is possible to grant non-exclusive rights to several parties.

The payments are often small in relation to the selling price of the patented products (typically between 1 and 5 per cent) but against this, if you license the right company the sales can be enormous resulting in a very handsome income for relatively little work.

Since the inventor retains ownership of the patents the patent costs will have to be provided for.

SELL THE INVENTION

This will probably give the lowest return since nobody wants to pay much for an idea which is untried and untested. In most cases the patent is simply sold to the purchaser for a fixed amount. Nevertheless, this is often the best option for simple ideas, for which it is possible to get a reasonable lump sum. You can then walk away and spend the money on a holiday lying in the sun inventing something else!

Anyone considering granting rights to manufacture an invention should seek professional advice.

© Craske & Co., 1998

Last updated: March 2006