THREE WAYS TO PROFIT FROM YOUR INVENTION
First, you can manufacture the product of your invention and sell it yourself. This path is pretty long and tedious, but can also be very rewarding. In this path, you will need to protect your idea through a patent application. Then, you will want to build a prototype, test the prototype, and perfect any issues with the prototype, and then go into a limited production run followed by possibly a larger production run. While the path of making and selling the product yourself is a difficult one, it can be important to establish the market demand for your product and to show other manufacturers or retailers that you have the product available that is in demand. So, this can lead to connections with potential buyers for your idea. A lot of times, buyers are only interested in new products that have some sales already. You do not have to have a huge number of sales, but you just have to show that with your limited resources you are able to get the product produced, get it in front of people, and there is some demand by consumers to purchase it. In this path, the main things will be keeping your costs down as much as possible through the prototyping and limited manufacturing phases. You will want to do things in these phases as cost-effectively as possible and so do not get elaborate with your prototypes. Do minimal functional prototypes, preferably prototypes you can make out of things you have or modifying things you have purchased, that kind of thing. Do not spend a lot of money making a custom prototype, because the prototypes typically go through a few iterations before they are perfected, so you would not want to spend your whole budget on initial prototype only to find out you have to change it two or three more times before you get it perfected, so keep the initial prototype costs low. Use materials that you can find easily in your house, at Home Depot, online, you know, through Amazon, just buy inexpensive materials and try to get them made into the prototype at a bare minimal functional way to be able to test it and, if you are not able to, you know, make the thing that you need, find somebody that will make it for you in the limited quantity of a prototype basis that will not break the bank. Sometimes for prototypes you may look outside the country to have a prototype maker or some type of shop outside the country make something for you. Quite often, that can be cheaper than domestic options. I know many times when I talk to my clients, they want to manufacture their products in the U.S. and that is admirable and it is a very good sentiment to have for the country and I totally agree with it as well. However, the practical reality is that there are much more manufacturing companies and types of manufacturing done overseas now than in the U.S. There are options in the U.S., but they are typically limited and, from what I have observed with my clients and their experiences, the domestic manufacturers can be somewhat costly and also very slow compared to overseas providers. So, just keep your options open on that and recognize that you might have to go outside the country for a prototype, but basically my first suggestion is to start with a prototype that you can make yourself or have someone help make for you from things that you can readily find in your area. So, once the prototype is made and perfected, then you want to move to a limited production run and, in this instance, a limited run might be, depending on the product, the exact numbers can vary, but I would say from 10 to maybe a few hundred units to try to get some made and, then, get them in front of a market. Get them in front of a potential buying audience, and probably your cheapest way to do this for most products would be online. Get them into Amazon and be selling them through Amazon, but you may have other ways that are also cheap for you to get in front of your target audience. For example, if the product relates to a specific hobby or sport or something, maybe you know some people that you can get it in front of directly and get their reaction and response to it and, hopefully, some sales. And, then, once you get the sales from the initial production run, use those to evaluate and decide are you going to go for a full production run and then also you can use those sales numbers to be contacting you know manufacturers or maybe other retailers, that kind of thing, distributors. See if you can find someone interested in acquiring the whole package from you of you know limited production design materials, your patent application, you know, that kind of thing. Just look to get it all packaged up and sold to somebody. So this would kind of give you an overview of the first way that you can make money from your invention. It does involve a lot of work. It involves a lot of leg work. It takes a lot of time. You are probably looking at a year or more to get to where you are at a limited production run and, quite often, from my clients, I have seen timeframes more in the two to four-year range. So, just be prepared for it to be a bit of a journey, however, when you do get to making those sales at that point you are keeping 100% of that money. Of course, some of it goes to costs to make the goods, to package them, and market them, but there is no one else taking any of the money, so you keep 100% of the profit. So, there are some good aspects to it as well.
The second way to make money from your invention is selling the patent to another entity. So a lot of times inventors think in terms of licensing, which we will talk about in the next section, but more frequently what I see is the acquisition of a patent or a patent application as a way to make money on an invention, so what happens, in this case, is a company will buy the patent or patent application outright, it becomes their property, and they pay the inventor for it. Sometimes that payment is in the form of one lump-sum payment. It can also be in the form of payments over time, but either way, they have acquired the patent and they now own it.
The third way to make money from your invention is licensing. So this one may be familiar to some people, but it is essentially giving someone the right to produce and sell your invention that is patented in exchange for a payment to you that is called a royalty. Royalty rates generally run in the 5% to 10% range to give you a rough idea about, you know, kind of ranges of royalties. So, depending on the sales price of your invention, what the retail sales price are, the wholesale, depending on what type of invention it is, you could figure on a royalty of 5% to 10% of that price. Sometimes royalties are calculated on the gross sales amount. Sometimes they are calculated from the net profit amount from an invention. So you just have to pay attention on that and then in negotiations and figure out what is most advantageous for you, but licensing can be a way to also make money from your invention. And in licensing, you own the patent, so you retain the ownership rights. You are just giving someone else permission to use it. And the license simply just means that you will not sue them for using your invention. And in exchange for not suing them, they pay you money for each unit they make or per year or however the license is structured. So there are a lot of details to licenses and there are patent attorneys that specialize in license agreements. I do not specialize in license agreements, but I do review them from time to time, certain sections of them, but I do not draft license agreements from scratch. You need an attorney for a license agreement that is one that is drafting agreements every day and is familiar with what needs to go into them and what are the best terms of an agreement for you that you can negotiate. So these, in a summary, these are the three ways you can make money from your invention. You can make the product yourself and sell it. You can sell the patent application or patent or you can license someone to use the patent or patent pending invention and make money from licensing as well. So this gives you an idea about the three ways you can make money from it so when you are coming into an idea about approaching and protecting your invention with a patent, keep in mind these three ways to make money from it and keep an idea about which you think you would like to pursue and be sure to talk that over with your patent attorney or patent agent so they can be kind of tailoring the IP projection for you in a way that is most beneficial for how you want to monetize your invention.