Licensing Agreement or Sell Outright?

Is it Best to Pursue a Licensing Agreement or Sell Outright?

When it comes to a new invention, is it better to pursue a licensing agreement or sell outright? There are several factors to consider in making this decision, and the answer will depend on the individual inventor.

It’s possible to make money from your invention by pursuing either route, but how much you can earn and how much financing you need will vary a lot. Which decision is best for you will often depend on your personality. Some inventors prefer to sell the invention and its patents outright for a large sum of money.

In this case, however, the invention should have such high potential returns for the buyer that the buyer is willing to take on the risk of marketing and developing the product themself.

However, many other inventors choose the licensing agreement option because they want to collect royalties, which can provide a stream of income for several months or even years. This is typically a less expensive route than choosing to manufacture and sell the invention yourself, so it is the preferable option for those inventors who want to make some money and then get on with other research.

However, the chances of licensing success are low according to recent research. Only about 13% of inventors were able to successfully license their inventions.

Drafting a licensing agreement with an attorney or licensing expert is the best and easiest way to proceed, but some inventors would rather try to negotiate licensing agreements on their own. This can be risky, but it can sometimes be a better alternative given a limited budget.

The first step in negotiating a licensing agreement is to realize that it goes beyond a simple template and requires strategic thinking about the various clauses for a license. This is because each situation is different, and while some standard clauses will be the same for every licensing agreement the majority of clauses will depend on what the two parties involved can agree to.

When most attorneys begin to draft a license they will start with standard clauses and then modify these to fit the given situation and needs of both parties.