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IP Licensing or Manufacturing – What’s Best to Get your Invention in the Market

ip licensing or manufacturing on your own - which way to choose

So, you have a patented invention, but don’t have any idea what to do next, and what are the different money-making options available for you. This blog will provide you detailed information about how to bring an invention into the market – manufacturing on your own and IP licensing.

The first step is to study your invention comprehensively, and familiarize yourself with the industries it can have applications in. Do market research!

Google can help you a lot in this. Search for the top companies and emerging players that are active in the target markets of your invention, and what products/services they are offering. Sources and references may include online business journals, magazines, and blogs.

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Also, try to know the products, and technologies that are trending and going to hit the markets in the future. This is because, maybe you find a product infringing your technology, and you can file an IP infringement case against the manufacturer. Maybe your technology can be used in an existing product improving its functionality, thus creating IP licensing opportunities for you.

You need to think from the customers’ point of view if you want to succeed. Read customers’ feedback on social media, e-commerce sites, companies’ official sites, and online blogs. Analyze the problems customers are facing with the current products and help them in finding solutions.

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Thus, you can create your personal brand, and establish your own fan following. Here, you can also tell customers about your future product launches and business plans.

Let’s take an example. A company is selling an electronic device, which has an early heat-up problem. Fortunately, you developed a special chip, which can solve the problem. What you need to do is to search for the online reviews customers have posted regarding the problem and tell them that you have invented a solution for this. You can build trust among a group of customers, thus, marketing your products become easy.

If you do market research comprehensively, you win half of the game. The next step is studying market analysis reports and building IP monetization strategies your invention. There can be two options:

IP Licensing

Patent licensing is same as renting a house to a tenant; you retain the ownership of your IP rights and at the same time allow someone to use them to manufacture and sell products for a given period. The licensing agreement can be held between individual inventors or companies; the IP holder is called licensor, and the party that get rights to use, sell, manufacture from the patented technologies is called licensee.

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As the IP holder, you have the right set terms and conditions in the licensing agreement. The terms may include a fixed amount of the future sales or a part of the royalty per unit.

However, it is hard to tell the total amount you can earn as an inventor by licensing your patent. It depends on patent valuation, and there are several factors affecting this. These include:

  • Total market size and the growth rate
  • Number of customers that fall in the patent life
  • Number of customers that make purchases
  • Product development costs and taxes
  • Annual profit to the manufacturer

There are two options in IP licensing – exclusive and non-exclusive. In exclusive licensing, the licensee got exclusive rights to develop and market the invention, and usually start-ups consider this type of licensing. On the other hand, non-exclusive licensing allows multiple licensees to practice the patented technologies at the same time, thus utilizing the IP to its full potential.

Manufacturing on your own

Usually, the royalties that inventor gets by IP licensing range from 2% to 10% of the total revenues. If you think “why should I get a small slice from the pie when I deserves the whole part”, you should go for manufacturing and selling products on your own.
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According to a study by Ed Zimmer and Ron Westrum, more than half of the inventors who decided to manufacture and market on their own claimed to be successful.

To be a successful businessperson, you need to be familiar with the business world. Additionally, you must possess these personality characteristics:

1. Salesperson:

All entrepreneurs have one common objective i.e. to sell their products to the maximum number of people. Thus, you should have qualities of a salesperson, telling people about your products and convincing them to be your paying customers as well.

2. Risk taker:

Sometimes, you need to come out of the crease to hit six on the last ball to win the game. Although, there is a chance of run-out, but you don’t have other option. Similarly, to grow as a successful businessperson, you must be willing to take risks. You may face bankruptcy or down credits but at the same time have fair chances to come back for another game.

3. Innovator:

Innovation is one of the key tools of entrepreneurship, and you should be expert in that. Providing people with something new and upgrading products and services with the latest technologies help attracting new customers and retaining the existing ones.

4. Manager:

You should possess managerial skills and know how to handle a team. Understand the fact that employees are core elements of a business; if they are focused and inspired, they will help in increasing sales.

Conclusion

Patent licensing and manufacturing can help you bring your invention in the market. But, it is difficult to tell which one is better. Both have their own benefits and drawbacks, and no one guarantee success. It is up to you to choose based on your personal preferences.

Thus, your objective should be very clear. Whether you want to set-up your own business or get royalties by allowing someone use your IP rights.

However, returns on investment is more if you go for manufacturing, but you need thousands of dollars to establish a company, and run other business operations. If you don’t have enough financial resources, IP licensing is the right way for you to go.

Manufacturing or licensing, what do you think is best option for commercializing IP?

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