A Detailed Guide to Selling Your Patent
While being granted a patent is a matter of great pride for the innovator, simply being the owner of one is of little or no value if you don’t intend to use it. The real joy lies in being able to see the commercial application of your patent. In order to do so and to earn a profit from your invention, selling the patent or licensing usage rights is important.
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“How can I sell my patent?” is a question that bother most innovators. The process of selling a patent is perhaps as confusing as the act of securing one. Various factors are involved in selling a patent that require careful assessment and attention. Below is a step-by-step guide that explains the process to sell patent in detail:
5 Steps of Selling a Patent
The foremost step to sell a patent idea is to evaluate the practical value or commercial viability of a patent (patent to market). Simply translated, it means assessing how successfully the technology of the patent can be applied to create a product as well as the market value of the created product. One of the best methods of making this assessment is to conduct an Infringement Analysis.
Infringement analysis involves determining whether a product or tech in the market infringes on the existing patent. Based on the analysis, “Evidence of Use” (EoU) Charts or competitive patent landscape analysis are created which are a repository of all players in the market who are currently infringing on the patent. Such an assessment throws light on the popularity of the patent at in the present market scenario.
Market Value Assessment
Since patents are intangible, it is difficult to assign them a monetary value. There are 3 approaches to determine the value of the innovation protected by the patent.
- This refers to the cost of reproducing or replacing a similar patent. Here we also take into consideration the historic and estimated costs as well as the time required to create an equivalent patent.
- In this method we take into account the future cash flows or benefits that a patent will generate.
- This approach evaluates the market value of a patent based on similar transactions in the near past.
Evaluating the market value of a patent is important as it needs to be accounted for in business deals like sale, acquisition, dissolution, joint ventures, bankruptcy, IP Management etc.
Scouting Potential Buyers
Exploring the length and breadth of the market is key to identifying the right patent buyers. Following avenues can be explored when looking for a buyer:
- Using the EoU charts to locate the market players presently infringing on the patent. After the competitor tracking, these companies may be approached for buying/licensing of the patent to avoid infringement.
- Exploring the market for companies who are in a similar field and can benefit from the patent technology. This can be done with the help of competitive intelligence data. More on how to sell patent to a big company in the following paragraphs.
- Finding companies that own similar patents. Such companies may be interested in buying the patent as it will strengthen their patent portfolio without the need to engage in further R&D.
- Companies looking to enter the market. Acquiring a new patent will give them an edge over their competitors.
Making the Pitch
All the above groundwork culminates into preparing a marketing pitch to the prospective buyers for selling the patent. A Pitchbook encapsulates all insights offered by the Infringement Analysis, Market Evaluation and other assessments to explain the present and future value of the patent, its relevance, applicability, commercial viability etc. to the buyer.
Alongside this, it is crucial to have extensive connections in the industry so that one is able to approach the right people. Most pitches never make it past emails due to lack of a prior relationship in the organization.
Negotiations and Deal Closure
Once a prospective buyer has been identified, the next step entails negotiating the payment amount and terms. The patent owner may expect a lump sum amount, monthly instalments, or a royalty payment. The top patents for sale usually demand a sizeable price in the market.
Once the payment terms are clear, the final step are the agreements and contracts. An NDA (Non-Disclosure Agreement) or a CDA (Confidential Disclosure Agreement) is signed first to protect the patent details form leaking. This is followed by other legal agreements to facilitate the final handover of the patent to the buyer.
Selling a patent is a challenging task that requires expert interference. Having an enabler like TT Consultants by your side makes the process of patent selling simpler and productive. By following a systematic methodology, you can learn how to strategize, identify competitors, reach out to potential buyers, and successfully sell your patent.
At TT Consultants, we understand and value the hard work, time and investment that goes into innovation. Our technology-driven solutions coupled with vast experience in IP helps streamline your patent selling strategy that derives the best value for your patent.