Lawyers and Settlements

Intellectual Property: Patents

Exploitation of Patents

"The need for creativity does not end with the issuance of a patent".

Whether the inventor seeks to license his development or directly market the resulting product, success usually requires an innovative and intense effort. The process is likely to be difficult and chances for success are statistically poor.

This is true for the established businessman as well as the unknown independent inventor. The mere availability of the basis for a new product, even an exciting one, may not stimulate much interest from serious investors or purchasers. Develop credibility, use imagination, and make the effort. Thousands have been successful, but rarely without initial setbacks and disappointments.

Invention Promoters and Brokers - Watch Out!

Because of the difficulties in marketing new inventions, independent inventors have sometimes turned to promoters for help. These promoters have variously identified themselves, for example, as invention submitters, invention developers, idea brokers, inventor assistance companies, invention technology companies, global development companies, and technology or marketing consultants. Unfortunately, many invention promoters offering services to independent inventors have preyed on the unwary, making promises that they are incapable of keeping, then charging exorbitant fees. Financial loss and heartbreak have taught many inventors, dealing with unscrupulous promoters, the lesson of caution. The United Inventors Association provides a list of warning signs. Check with the closest Patent Depository Library (listed at http://www.uspto.gov/go/ptdl/ ) for more guidance on avoiding scams.

Patent Licensing

Patent licensing offers a variety of possibilities. A license can be limited to a single company (exclusive) or nonexclusive licenses can be granted to several companies. Other aspects of licensing include the responsibility for enforcement, conditions of termination, foreign rights, related trade secrets, know-how, and the very important royalty payment. Licenses are common which provide for either:
  1. a single lump-sum royalty payment;
  2. a royalty of a specified amount for each product produced under the license; or
  3. a royalty in the form of a percentage of the receipts from the sale of the licensed subject matter.
Although royalty percentage rates are the most common form of license payments, the rates vary widely from fractional percentages to double-digit percent figures, depending on the nature of the industry, production costs, the significance of the invention, and so on.

There are prohibitions on licensing, violation of which can amount to patent misuse or antitrust violations. For example, a licensor should not fix prices, require the purchase of unpatented products, regulate the use of the patented product, or require royalty payments beyond the life of the patent. Again, the law in this area is complex so the objective here is merely to indicate the possibility of danger. Similarly, a patent holder should be aware that the details of a license can have profound consequences on the tax aspects of royalty payments.

There is an outstanding trade association for licensing executives, the Licensing Executive Society (http://www.usa-canada.les.org/) that can provide all the information you might desire and contacts with many reputable licensing companies, and membership is about $160 per year.

Patents may also be sold outright.

Information on this page was supplied with permission of Bruce E. Burdick.


Patents | Enforcement