Can You Earn Royalties On Your Invention?

Believe it or not, it’s not as hard as you may think to land a royalty deal on a product invention…provided you have a truly unique and innovative idea to start with and you have some important steps completed before approaching companies. In addition, you need go into the process realizing that finding a good company to invest and believe in your idea can take time. Royalty deals do not happen over night.


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.

” Inventors do NOT need to mortgage their homes to pursue an invention. All you need is a patent application filed and a prototype/design to pursue a royalty deal.”

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

It is important to understand that manufacturing your idea is NOT a requirement to license your invention for royalties. Many inventors believe that they need to setup manufacturing to pursue their inventions, which is not true. If your goal is to license your invention for royalties, I would not advise going down the path of setting up manufacturing capabilities. Assuming you have a good invention to start, you can approach companies about licensing your invention with a patent application filed, a prototype or design in place and a reasonably good presentation on why they should license your invention.

In the end it’s all about understanding the processes and making good choices for your situation.
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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/

Mark Reyland is a professional inventor and product developer. The information contained in this blog is based on years of taking products to market

5 thoughts on “Can You Earn Royalties On Your Invention?

  1. Dear Sir,
    This advise is really good and gives a good guidance.
    We also wood like to Know whether our inventions are really worth attracting some big companies, because every inventor feels that his invention is best and dreams that anybody will take it for Production and marketing.
    So what we want to know from your experience of experts is, whether our ideas are worth purcuing, if not we will be spending time and money without any results.
    So knowing our ideas let us know whether we can proceed further and develop the prototype of the product, or alternately give us ideas which a company needs to take up on license.
    This effort/process will be a short cut to success benefiting every body rather than
    every one spending time and money for the
    products which may not worth and may not have any future.
    This will be a national waste.
    We wll send you our ideas and let us know on which we should concentrte.we can dafinately produce products as per your demand.
    I hope you will agree on these points.
    Please visit my web site and click on Innovations Menu for new products and ideas. http://www.applecontrolsdiabetes.com
    I look forward to your guidance.
    Regards,
    D.P.Parkhe

  2. dpp,

    Wouldn’t it be better if you could learn a few simple steps to evaluate your own ideas? There is no voodoo or crystal ball to determine a potential products value, only a few simple questions you should ask yourself. Does it solve a problem for a large market, can it be manufactured at a low enough cost to allow appropriate mark up, is there distribution available for the product, and of course a few more common sense questions. A second opinion from a trusted source is always good but confidence in the beginning in your product and the processes you used to get there are the most solid foundation .

    Kenny Durham
    http://www.innovatorswarehouse.com

  3. At least there is one comment on my post.
    The major problems are for individual Inventors, who does not have any support, even if his ideas are good and marketable, he does not have resources nor marketing facilities, his product will be good but for lack of proper support it may not reach to the customer level and in spite of having a utility product/idea, no body gets benefit,If such good and useful ideas or products are to be left for their own fate, nobody benefits.
    As far marketing is concerned it is the skill of sales man and other factors by which product is sold. We see in the market that, so many products are such that they may not be that important or urgency to the customer but still it finds market.many products are not of immidiate necessity or a must to the customer but still they are produced and sold, so if a good idea product is there one needs the support form all concerned, This point I want to bring to the notice of the persons concerned.or experts of the trade.
    This main point I wanted to high light through my post.
    It will be worth referring my article on”A Dream Of an Inventor”
    from my web site:- http://www.applecontrolsdiabetes.com
    D.P.Parkhe
    Consultants-Innovations

  4. We have a patent pending in the US on our product. I wish we would have known more about a PCT that would cover our idea internationally. Is it posible you could provide future articles on this subject? It is more expensive but if the product is right it may be the best avenue.

    Thank You,
    Paula Chamberlain

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