Kanika Sharma is a patent research analyst at GreyB Services. GreyB is a technology research and consultancy firm that helps Fortune 500 companies and top law firms across the world with its technological insights.
6 min. read
Updated October 25, 2023
You had a great idea for an invention, and after spending months brainstorming, filing, (waiting) and discussing the details with your patent attorney, your patent is granted.
Filing for a patent isn’t cheap, so it makes sense that if you went to the trouble of protecting your idea, the next step is to figure out how to profit from it.
According to Forbes, in 2014, 95 percent of the 2.1 million active patents weren’t licensed or commercialized: they didn’t generate any money.
The value of your invention is completely in your hands. Here are six ways to make money from your patents.
One of the best ways to make money from your patent is to create and sell the product you invented. If you’re thinking about manufacturing and retail opportunities, start by yourself the following questions:
Keep in mind that developing and selling a product—starting a business—requires different skills than creating a product idea and going through the patenting process.
There are plenty of independent inventors that have chosen to travel the path of entrepreneurship. Dan Brown, the inventor of Bionic Wrench and founder of Logger Head Tools, is a prime example.
Start by writing a business plan—they’re required by bank lenders and investors. But even if you don’t need outside funding to get started, business planning will help you make sure you’ve considered every aspect of your business.
If starting your own business isn’t the best approach for you, you can still earn a handsome amount by licensing your patent.
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Patent licensing is a practice that lets you transfer your patent rights to a party that can use it for making or selling a product or service.
Patent licensing as a number of complexities and intricacies. I recommend reading this article—it’s a guide to patent licensing. It will help you start developing solid understanding of what it entails, including scenarios where licensing may become less profitable than your initial expectations.
If you’re not interested in doing all the licensing legwork yourself, there are patent licensing companies, (some of them are publicly traded) like Acacia Research Corporation, that help individual inventors monetize their patent assets. Often these companies serve as a middleman, connecting an inventor with a company that could help them with expertise or capital.
Acacia Research Corporation, based in Newport Beach, has been one of the biggest supporters of individual inventors and small companies. They work with patent-holders to help them unlock the financial potential of their patent. It partners with many companies/inventors and splits the licensing revenue 50-50.
Intellectual Ventures is another such company. It is one of the top five owners of US patents. It acquires patents from almost every domain. It has more than 40,000 patents in its portfolio.
“The set of incentives that go around patents, that’s part of how the system works. Inventors should get rich. We should have more inventors. It’s good for everybody.”
― Nathan Myhrvold, former CTO of Microsoft and co-founder of Intellectual Ventures
It’s worth mentioning that companies like Acacia Research and Intellectual Venture are considered Non-Practising Entities (NPEs). NPEs are entities that own patent(s) but don’t use them to develop a product/process. Some of the NPEs have earned the moniker of “patent troll” because they use their patent(s) for filing frivolous lawsuits against renowned companies and startups.
Did you know that sometimes you can use your patent as collateral when seeking a bank loan? You might be surprised that this is a fairly common practice and something even major players like General Motors, Alcatel Lucent, and Kodak have done. Between 2011 and 2016, leading banks like JP Morgan, Morgan Stanley, Bank of America made 947,907 transactions for patent loans.
It has another benefit. If you mortgage your patent, there’s a fairly high chance that it could be acquired by a big company that wants to avoid litigation or to maintain its competitive edge. Often when patent owners mortgage patents, they’re more interested in leveraging the value of their resource, than licensing it or spinning up a business with it.
So, if a bank agrees that you can use a patent as collateral, they essentially agree that it has significant value, based on their due diligence. This can actually be a positive signal for companies looking to acquire patents.
What if you aren’t interested in licensing your patent? Maybe the market for your intellectual property is diminishing or the technology is becoming less relevant. It might be time to sell the patent.
The next big question is—where will you sell it? Check out this list of 22 patent marketplaces to get started.
Some patent owners make a point to research and keep tabs on overseas companies that are expanding their operations internationally.
Patents are location-based, meaning that you’ll need a patent in each country where you want to protect your idea. So when a company expands its operations to new countries, it will often try to acquire patents in the new country to help mitigate their risk of being sued for patent infringement.
Often, the expanding companies are openly looking for individual patent owners who are willing to sell. Xiaomi is one example of a company that acquired a lot of patent assets through its global expansion process.
Getting a patent isn’t a walk in the park. It is a complex, expensive, and slow process. Make sure your patent results in financial reward, whether you use it to launch a product, license it to someone else, or sell it. Don’t let your patent sit around!