Brooks Acordia Patent Attorney Explains Pros and Cons of Licensing, Manufacturing Inventions

Los Angeles, CA (Law Firm Newswire) June 27, 2014 – Inventors can monetize their patented inventions by choosing one of two methods.

One option allows an inventor to license the invention – that is, to sell the right to use or develop the invention for commercial purposes to another party. The second allows the inventor to manufacture and market the invention him- or herself.

An inventor’s decision should be based both on the invention itself and on the inventor’s personality and interests. Los Angeles patent attorney Jim Dawson explained some of the differences between the two approaches.

“Inventors who choose the first option might be called inventors for royalties,” Dawson explained. “This approach is usually relatively inexpensive and is simpler than manufacturing. It is an attractive option for inventors who may not have the time, money or business skills to run a business to monetize the invention. The licensee may assume all the work and risk of running a business. The inventor simply deposits his or her royalty checks and occasionally monitors the licensee’s efforts.”

Unfortunately, successful licensing can be difficult. One study showed that only 13 percent of inventors who attempted to license their inventions succeeded. And the financial reward may seem small to some – royalties typically range from 2% to 10% of net revenues.

Some inventors will encounter assignments while licensing a creation. The “assignment” of rights is similar to the licensing of rights, but assignment is a permanent transfer. The terms are sometimes used interchangeably, and an unlimited, exclusive license can function just like an assignment. For these reasons, inventors and their attorneys must carefully examine any potential agreement, choosing not to rely on whether it is called a license or an assignment.

Other inventors may choose to take charge of their own invention development. “Inventors who choose this second option might be called entrepreneurial inventors,” Dawson went on. “This approach is well-suited for inventors with strong business acumen. The financial rewards (and risks) are potentially far greater.”

The same study that measured licensing rates showed that half of entrepreneurial inventors claimed to be successful. On the other hand, starting a business and manufacturing an invention usually requires significant capital (usually from loans) and is quite risky. In addition, the undertaking can be incredibly stressful.

“Your patent attorney can help you understand the realities of licensing and manufacturing and can recommend which one might be best for your invention. But only you know whether you want to spend your time as an inventor or a business owner,” Dawson said.

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