Key Takeaways

  • Selling a patent provides a one-time payout but forfeits future profits.
  • Licensing allows inventors to retain ownership and earn royalties over time.
  • Before monetizing, determine the commercial viability and competitive landscape of your invention.
  • You should have a granted patent or at least a provisional application before engaging in serious negotiations.
  • Market your invention through trade shows, direct outreach, or by working with experienced brokers (avoid upfront fees).
  • Filing for a patent is an essential first step to protecting your invention and enabling monetization.

What You Need to Know About Selling Patents

A patent gives you ownership rights to your invention. Simply owning a patent doesn't make you money, however.

To profit from your invention, you can do the following:

  • Market it yourself
  • Sell the patent
  • Sell license usage rights

After you've invested considerable time and effort into your invention, you now have a viable product, which you successfully obtained a patent for. If you decide to sell your patent, you may enjoy a quick payoff.

While thousands of patents are granted every year, only a small amount of them generate any profits for their owners. Sometimes, patents languish until they expire.

When you sell your patent outright, you gain some financial benefit, which can help finance other promising inventions or pay some bills. Selling it outright also eliminates the huge monetary outlay that's necessary to create a new business based on your product.

Quick and hassle-free payoffs are enticing to some patent owners, but they give up the right to future profits from their invention. In addition, what you earn from selling your patent may not be much, unless your product has been around for a long time. Patent buyers usually don't want to pay much for an unproven product that may not be profitable.

What happens if the product ends up being a huge hit, however? You may sell a patent for $500, and the new owner could rake in half a million dollars in profits.

Consider your invention before outright selling patent rights. Ask yourself questions like the following:

  • Is it innovative?
  • Does it have the potential to revolutionize an industry?
  • Do similar products already exist?

Understanding Patent Valuation

Before deciding to sell your patent, it's essential to understand its potential market value. Patent valuation depends on factors such as:

  • The size of the target market
  • Existing or potential demand for the invention
  • Whether the technology is disruptive or incremental
  • Comparable market activity for similar inventions
  • Stage of development and commercialization

If your invention is already generating revenue or has received interest from investors or companies, your negotiating position is stronger. Consider getting a professional valuation or consulting a patent attorney to assess whether selling, licensing, or commercialization makes the most financial sense for your situation.

Licensing Rights

In many cases, inventors profit more by licensing patent rights. You keep ownership of the invention, and you also earn royalty payments on future sales. You can grant license rights to one or more companies.

You have a better chance of generating more profits if you license your rights with a well-known brand. In addition, the licensee assumes any liability for product mishaps.

Licensing usage rights holds no guarantee of future riches, however. If the product fails, you won't see much profit. Royalty rates may run anywhere from 5 to 20 percent. For you to make a substantial amount of money requires major sales. Also, if your relationship with a licensee goes bad, you may end up paying more in legal fees.

Steps to License Your Patent

Licensing can be a flexible and potentially lucrative route if you want to keep ownership while monetizing your invention. Follow these key steps to license your patent effectively:

  1. Identify Target Companies
    Look for businesses in your industry that would benefit from incorporating your invention into their existing product lines.
  2. Create a Licensing Package
    Include a brief business plan, technical specifications, any test data, and a working prototype (if available). This helps demonstrate value to potential licensees.
  3. Choose the Right Licensing Model
    • Exclusive license: One licensee gets exclusive rights in a defined market or region.
    • Non-exclusive license: Multiple companies may use the patent simultaneously.
    • Cross-licensing: An agreement between two companies to license patents to one another.
  4. Negotiate Royalty Terms
    Royalty rates typically range from 5% to 20% of the sale price of the product. Ensure you define minimum sales thresholds, audit rights, and duration of the license.
  5. Draft a Strong Licensing Agreement
    The agreement should clarify scope, field of use, payment structure, sublicensing, and termination clauses. It’s highly recommended to work with an experienced attorney to avoid pitfalls.

Selling or Licensing Options

If you decide to sell or license your invention, make your marketing efforts professional. Prepare brochures and formal letters to showcase your product. Include prototypes when possible.

Make a list of potential users and manufacturers of your invention. When you make contact with potential clients, don't present yourself as an inventor; instead, say you're a product developer. Ask for face-to-face meetings with the appropriate parties, such as a product manager.

You should only do this once you actually have a patent. Otherwise, you should request a non-disclosure agreement before you talk about your idea. However, if the company is already working on a similar idea, they won't sign a non-disclosure with you.

Go to invention or trade shows where you'll meet people or companies that are interested in your product. You should also advertise by putting new product announcements in inventors' magazines or trade publications

Raise capital for your invention by soliciting partners who can provide the necessary capital to launch the product.

Look to brokers. Brokers can market your invention to manufacturers in exchange for commission if your product sells. You shouldn't pay brokers in advance for their services.

Practice caution with invention submission companies because many of these entities have been charged with fraud. A number of inventors have lost out on thousands of dollars after paying these companies. Before you hire a broker or pay a submission company, check their reputation with the United Inventors Association and the Better Business Bureau.

If you have a viable product and conduct the right research, you may be able to profit from your invention by monetizing your patent rights.

Protecting Your Idea Before You Pitch

If you haven’t yet obtained a patent but are actively marketing your invention, consider these steps to safeguard your idea:

  • File a Provisional Patent Application (PPA)
    This gives you “patent pending” status for 12 months and allows you to safely disclose your idea to potential partners while preserving your rights.
  • Use a Non-Disclosure Agreement (NDA)
    An NDA is useful when dealing with individuals or companies not actively developing similar inventions. It helps protect trade secrets and technical disclosures.
  • Avoid Public Disclosure Without Protection
    Publicly disclosing your invention before filing for a patent can compromise your ability to obtain patent protection in many countries.

How to Get a Patent: The First Step to Monetization

Whether you plan to sell or license your invention, the process begins with securing patent protection. Here's a general overview of how to get a patent in the U.S.:

  1. Determine Patentability
    Your invention must be novel, useful, and non-obvious. Conduct a patent search to confirm it's not already patented.
  2. Choose the Right Patent Type
    • Utility patents protect new processes or machines.
    • Design patents cover ornamental design.
    • Plant patents apply to new plant varieties.
  3. File a Provisional or Non-Provisional Patent Application
    • Provisional gives you a filing date and one year to file a formal application.
    • Non-provisional starts the official examination process.
  4. Work with a Patent Attorney or Agent
    Patent applications require technical accuracy and strategic claims. A qualified attorney can significantly increase the chance of success.
  5. Pay Required Fees and Respond to Office Actions
    The USPTO may issue office actions requiring clarification or revisions. Timely and thorough responses are essential.

You cannot enforce patent rights or license/sell the invention until you have filed an application. Protecting your idea is the first critical step to profiting from it.

If you need help with how to get a patent, you can find experienced patent attorneys on UpCounsel’s marketplace.

Frequently Asked Questions

Can I make money from a patent without starting a business? Yes, you can license or sell your patent to companies that want to produce or distribute your invention.

How do I know if my invention is worth patenting? Conduct market research, check for existing patents, and assess whether your invention solves a problem or meets a market need.

What’s the difference between a provisional and non-provisional patent? A provisional patent secures a filing date and allows you to claim “patent pending” status for 12 months; it does not get examined. A non-provisional patent starts the full patent process.

Do I need a lawyer to sell or license my patent? While not required, a lawyer can help draft licensing agreements, negotiate terms, and avoid legal risks in transactions.

What if someone copies my invention before I get a patent? Without a filed patent or NDA, your invention may not be protected. Always secure legal protection before publicly disclosing or pitching it.

If you need to know how to make money with patents, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.