Why should an inventor license a patent?

Why should an inventor license a patent?

A patent is a set of exclusive rights granted by a government to an inventor of an invention.  To be granted a patent the inventor must demonstrate that the invention is worthy of a patent and teach the public how to make and use the invention.  In exchange for teaching the public how to make and use the invention, the inventor is granted the right to exclude others from making, using, or selling an invention.  If someone else uses a patented invention without the patent owner’s permission, this is known as patent infringement.  The patent owner can sue to stop patent infringement and get monetary damages.

The exclusive rights granted by a patent are extremely powerful.  However, being granted a patent on an invention does not instantly make an inventor rich.  A patent is typically a first step in the long process to monetizing an invention.  A patent protect’s the invention from people who would like to copy the invention, but a patent does not make it easy for consumers to purchase the invention.

Inventors are typically brilliant people, but even brilliant people are not experts in everything.  To successfully bring an inventor to market, many different skills are needed.  Advertising, marketing, sales, manufacturing, and distribution are just a few of the business disciplines that are needed to make a new product a financial success.  Solo inventors or small companies frequently do not have all the skills, or the financial resources, to bring a product to market quickly.  The speed at which a company can bring a product to market is key because a patent only lasts for 20 years in the United States.  By the time a solo inventor is granted a patent and finally begins selling the invention to the public the patent could have expired.  When the patent expires there is nothing to stop competitors from selling the invention.

Because product sales is so complicated and requires so many different skills, many inventors choose to license their inventions to other parties.  A patent license is a contract, and terms of the license can vary greatly depending on the agreement reached by the inventor and licensee.  When an inventor licenses a patent, the inventor grants the licensee the right to make, use or sell the invention.  The inventor might have a single licensee manufacture the products and then multiple licensees sell the products.  Or the inventor might license the patent to a single licensee who will manage all aspects of manufacturing and selling the product.  The licensee will typically pay the inventor a royally based on the sales of the invention.

The key reason that an inventor wants to license the rights to a patent is time.  The patent is only valid for a finite amount of time, licensing the patent allows the inventor to partner with someone who has skills the inventor does not possess.  Working together the inventor and the licensee can leverage each other’s strengths to monetize that patent as quickly as possible.

An inventor should license their patents to gain the best possible return on investment for their effort.

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