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What Is It? |
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Who Owns It? |
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Documentation |
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Confidentiality |
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Licensing |
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Tax Advantages |
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Licensing FAQs |
There are several ways to extract value from an invention, including sale, exclusive and non-exclusive licensing, and manufacture and sale of the product.
Outright
Sale:
This is exactly what it says - all rights to the invention are sold
for a fixed sum. This is usually the least remunerative approach,
but it may be the only option in some circumstances, for example in
a sale to a company who holds a patent that blocks
yours.
Non-exclusive
Licensing
This is commonly employed by universities, but it is the least
preferable form of licensing for an individual inventor. If you
have an important invention, most companies will want exclusive
"ownership" of the technology, particularly if there is a long and
expensive product development phase.
Exclusive
Licensing:
This is the arrangement which we prefer if at all possible. It is
more salable to a potential buyer and, more important to the
inventor, under the correct circumstances, royalties received from
an exclusive license are treated as long-term capital gains, which represents a tremendous
tax savings.
Product
Manufacture and Sale:
This can be the most profitable option in the long run, but it
obviously requires an order of magnitude more expense and effort.
However, if you have an enabling technology, this may be the way to
get the maximum benefit from it. We have chosen this route ourselves
for a number of our new technologies.
How big is
big?
The huge cost to a manufacturer of setting up a new product line in
the medical diagnostic field is such that they will rarely look at
product lines which bring in less than $20M/year, and the larger
firms set the bar at $100M/year. If you have a product which fits
easily into their existing manufacturing and marketing structure,
then this may be lowered. The bad news is that it is hard to come
up with a product which will capture the interest of a corporation.
The good news is that if you can, you can do very well; licenses can pay
royalties of between 5% and 10% of sales (notprofits).