To begin, let me step back and explain what I mean by “royalty deal”, which is more commonly referred to as a Licensing Agreement.
If you aspire to earn royalties from your invention, then the typical arrangement would be to secure a License Agreement with an interested company. A License Agreement is the legal document between an inventor [licensor] and a third party [licensee] which defines specific terms by which the licensee can commercially use the licensor’s invention. Among other things, the Agreement will define a time period, royalty rate, payment schedule, cash advance, minimum annual payments, etc. As a result of the Agreement, the inventor may receive an ongoing payment calculated as a percentage of sales (called a “royalty”), or a one-time lump-sum payment.
Another option would be for an inventor to assign his rights, which is essentially the process of transferring or selling ownership in the invention/patent. The inventor may receive a lump sum payment or a series of payments. The difference between a “license” and “assignment” is in the transfer of rights. With a license, the inventor retains rights, like “renting” the patent, and with an assignment they transfer their rights (i.e., sell it).
In addition to having a good idea there are other considerations when preparing your invention for license, such as
In the end it’s all about understanding the processes and making good choices for your situation.
In addition to being a UIA Board Member, Russ Williams is the founder and CEO of Inventionhome – a well respected service provider to the inventing community. You can contact Russ through his web site at http://www.inventionhome.com/