Acquiring and Defending Patents

You can manufacture and market your idea yourself while the patent is pending. Some companies will not license a patent until it is granted. If you chose not to manufacture and market the idea yourself then you will probably have to wait until the patent is granted.

Four Basic Marketing Strategies

1. Manufacture and market the product exclusively yourself.
2. Grant an exclusive license to one party.
3. Sell the patent outright.
4. Grant non-exclusive licenses to any party.

If your patent gives you a lock on a large market number 1 or 2 will encourage other companies commit patent infringement and or attempt to invalidate your patent. It may be necessary to grant an exclusive license if a significant startup investment is required to bring the idea to market. Outright sale removes most the burden of defending the patent but could result in dramatically less income for you if the patent is very successful. You can still be charged with inequitable conduct and dragged into litigation even after you have sold the patent.

Non-exclusive Licenses

Non-exclusive licenses remove much of the market pressure to get around the patent and ensure that you are compensated proportionate to the success of the patent's idea. In most cases, a non-exclusive license is most profitable for the inventor and therefore the best method of marketing your idea.

One other consideration is that income from an exclusive license that is properly drafted may qualify as a long-term capital gain resulting in lower taxes.

Going into Production

Producing products yourself is often more profitable then licensing. It may be necessary to produce a product to prime the market if it is a new technology. Promoting a product yourself will help to generate interest by potential licensees. One drawback to producing a product yourself is that the demands of running a business may leave you little time to create new inventions. I often joke about the fact that I don't own the business. It owns me.

The Importance of Marketing

Many people who get a patent expect money to start flowing without any additional effort. It doesn't work that way. Getting a patent is only 10% to 25% of the job; now you must market your idea. Marketing takes more effort than getting the patent. You must identify companies that would have an interest in your idea, and you must identify the proper person to approach within each organization. Sending a blind letter is usually wasted effort.

Find a Market

The next step is finding a market for your patent. This is where you will discover which companies are reputable and which are not. At least half will fit into the disreputable category. Make sure you create a clear paper trail of all your contact with each person of every company that you attempt to license or sell product. Try to get them to sign a nondisclosure agreement before you divulge much information. If they are honest, this won't bother them. If their honesty is marginal, it will show them you are serious and may deter them from trying to steal your ideas. If they do steal, the documentation will make a much better case and it is much more likely they will settle out of court. If they don't settle it makes your chances of winning much higher. A clear paper trail will make an attorney much more likely to handle your case on a contingency basis.

My personal experience is that it is best to market a patent by contacting upper level management persons responsible for sales at the target companies. Persons in engineering are usually not interested in new ideas that were not theirs. Persons in sales are usually paid on an incentive plan that creates a strong incentive ($$$$) for them to promote improvements in a product or expansion of the company’s product offerings.

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