A 3-part series explaining precautions to take and questions to ask before spending time and money on a patent.

Now you know how to determine whether your idea is worth patenting and how to choose the right strategy for capitalizing on your patent. Knowing these two things alone makes you more prepared than most. But it still might not make sense to apply for a full utility patent right away.

There is a much cheaper alternative: the provisional patent.

Very simply, a provisional patent gives you patent protection for 12 months. At the end of those 12 months, you have a choice: pay for the utility patent (the one that costs anywhere from $4,000-$15,000+ depending on how complex your invention is) or walk away and lose your patent protection. Virtually all inventors should take advantage of this.

Here’s why.

For one thing, a provisional patent is much cheaper than a utility patent. LegalZoom.com, for example, can get you set up with a provisional patent for less than a thousand dollars. If you are serious about getting a patent, this is a worthwhile investment.

Once you have your provisional patent, you can spend the next 12 months testing the waters. You can network with potential buyers or licensees, or even try creating a business around the patent. In the eyes of the US Patent & Trademark Office, you are the patent holder during that 12 month timeframe. This is an extremely valuable window of opportunity that you should use to your full advantage.

Let what happens during those 12 months decide whether you get the utility patent or not. For example, if you find entrepreneurs, retailers, or manufacturers who are interested in selling or licensing the patent, this is a good sign. Ditto for other signs of interest, such as a retailer offering to stock the invention, an investor willing to mass-produce the invention, or an eager list of customers who can’t wait to buy the invention.

You would be well-served to get the utility patent and take full ownership of this intellectual property that people are obviously interested in.

On the other hand, if your attempts to drum up interest in the patent result in slammed doors, unreturned phone calls, or an overall lack of interest, this might suggest paying for the utility patent would be a bad idea. Or maybe it would still make sense. Just make sure you have a good reason for thinking so. If nobody was interested this year, what makes you think anyone will be next year?

(When thousands of dollars and years of your time are at stake, it pays to be as honest and realistic with yourself as possible.)

We hope this series has inspired you to think long and hard about whether getting a patent is truly in your best interest. It was not our intention to make you less enthusiastic about your invention or kill anyone’s dreams. Rather, we simply wanted to help inventors consider all the relevant questions and make a decision they felt confident in.

If you want to learn more about any aspect of patents (from writing a good patent license, to choosing a patent attorney, to determining your patent’s market value and more), feel free to browse the extensive PatentHelpNow.com article library.

And, as always, feel free to ask us any questions we haven’t written about. We’ll happily research them for you and publish our findings on the website!

A 3-part series explaining precautions to take and questions to ask before spending time and money on a patent.

In Part 1 of this series you learned that getting a patent is an involved process that needs to be carefully researched and thought through. By this point, you should be confident that your idea is worth patenting. Today, you’re going to learn the most common ways to make money from a patent once you have it.

Henry David Thoreau said that if you build a better mousetrap, the world will beat a path to your door. There is also a myth about patents that simply having one enables you to make money from it. Well, here’s the truth on both of those things: Henry David Thoreau never built any mousetraps, and the world never beat a path to his door. And while having a patent is the necessary starting point, that in and of itself is not going to make you any money.

Rather, you must do one of three things:

1) Sell your patent

2) License your patent

3) Sell the invention itself (through stores, the web, etc.) to customers

Each of these strategies offers unique advantages and disadvantages that need to be considered in light of your own situation. (There is no one “right” way to do it, only the right way for you!) We will outline each strategy here to get you thinking about which one fits your strengths, weaknesses, and expectations.

Selling Your Patent

As the name implies, selling your patent is a strategy where you sell full ownership of the patent to someone else. This could be an entrepreneur who wants to create a company around the invention, a retailer who wants to sell the invention in stores, or a manufacturer who wants to mass-produce the invention. It is a “quick exit” strategy whereby you wash your hands of the patent and all future responsibility for it in one fell swoop.

Pros of Selling Your Patent: Cash out in one lump sum. No future hassles or involvement with the patent. Leaves you free to move on to the next project or enjoy your payout from this one.

Cons of Selling Your Patent: Possibility of having to watch whoever you sell the patent to reap huge profits from it that far exceed what they paid you.

If you are not business-minded or simply need the money right away, consider selling your patent if you have the opportunity to do so. But remember: entrepreneurs, retailers, and manufacturers are not going to beat a path to your door. In most cases, you will have to approach them. To learn how to get potential buyers interested in your patent, visit IdeaBuyer.com or check out our library of free articles on such topics as valuing your patent and creating a pitchbook to get it sold.

Licensing Your Patent

Licensing your patent is a bit more involved than selling it outright. A patent license allows a third party (an entrepreneur, retailer, or manufacturer) to utilize your patent for their own benefit, while you retain ownership of it. This person or company is called the licensee. In exchange for this privelege, the licensee agrees to pay you (the licensor) some agreed-upon amount of royalties. For example, you might grant a manufacturer a 5 year license to use your patent in exchange for 10% of yearly product sales.

A patent license creates an ongoing business relationship between you and the licensee. You will need to be involved at least enough to ensure that they are meeting the performance obligations they agreed to.

Pros of Licensing Your Patent: Enables you to share in the future profits that your licensee may achieve by capitalizing on your patent. Creates a passive income stream.

Cons of Licensing Your Patent: Requires you to stay involved with the patent. Requires you to wait to receive income from the patent (unless you also negotiate an up-front payment into the licensing agreement.)

If you don’t mind the occasional meeting or conference call with whomever you license the patent to, and you are willing and able to wait to receive income from the patent, licensing may be the way to go.

(This is only a brief overview of patent licensing. See the “Licensing a Patent Help” section of PatentHelpNow.com for more detailed articles on how to value your patent, how to pitch your patent to companies, and how to write good performance obligations into any patent license you sign.)

Sell The Invention Itself to Customers

This is the riskiest strategy of the three, and also the most potentially lucrative. Rather than selling or licensing the patent (thereby transferring the responsibility for capitalizing on it to someone else) you take on that responsibility by creating the invention and selling it to customers. This makes you an entrepreneur.

The risk is that you will be unable to convince a retailer to sell your invention or unable to sell it yourself via the web or some other medium. The reward is that, if you can, the profits are yours and yours alone.

Pros of Selling The Invention to Customers: You maintain complete control. You share profits with no one. You make much more money if you can successfully sell the invention to your target market than you would by selling or licensing the patent to someone.

Cons of Selling The Invention to Customers: All of the risk is on you. If you cannot successfully sell the invention to your target market, you stand to lose all the time and money you invested in trying to.

This strategy is best suited for people with entrepreneurial and business backgrounds. If you relish the opportunity to transform a patent from a piece of paper to a thriving business with hard work, networking, and deal-making, this could be the way to go. If you would rather cash out and let someone else do all of that, sell or license the patent instead.

See our articles on getting an invention on store shelves, who and who not to take investment money from, how to choose the right business partners, and how to fast-track an invention to market.

Again, none of these strategies is necessarily better than the others. It all comes down to what your strengths, weaknesses, and expectations are. The important thing at this stage is that you start thinking about which strategy suits you.

If you’re still convinced that getting a patent is worthwhile, great! (We didn’t mean to scare you off, after all.) Proceed to Part 3 of the series, which explains how using a provisional patent can lower your risk and save you thousands of dollars.

Read Part 3 Now.

A 3-part series explaining precautions to take and questions to ask before spending time and money on a patent.

Getting a patent is a serious investment of time and money. Gene Quinn, IP attorney and founder of IPWatchdog.com offers a chart of how much various types of patents cost. Depending on the complexity of your invention, the cost of patenting it can be staggering. According to Quinn, a “relatively simple” invention (such as an electric switch, coat hanger, paper clip, diapers, earmuffs, or an ice cube tray) will cost anywhere from $4,000-$6,000 to patent.

If your invention is “relatively complex” (such as a shock-absorbing prosthetic device), expect to shell out anywhere from $12,000-$15,000. Furthermore, Quinn notes that the prices shown in his chart are “just ballpark figures” and warns that attorney fees could make the overall cost even higher.

It can also be very time-consuming. As many as 1-5 years can elapse from the day you file a patent application until the day when you actually have full patent rights. And it is not just a matter of filing the application and then passively waiting for the wheels of the US Patent and Trademark Office bureaucracy to turn. In most cases, you will be actively involved in the process, working closely with a patent examiner who is appointed to ask you questions and see to it that everything goes according to planned.

So despite what you may have believed or been told, getting a patent is generally not quick or cheap.

Let’s be clear: none of this is to say you shouldn’t get a patent. If you want to sell or license an invention, patent protection is indispensable. Rather, the point of this series is stressing that it is a big decision that should be researched, contemplated, and planned rather than rushed into.

Several important things must be taken into account. They include:

1) Whether your idea is worth patenting (is there a market?)

2) Whether you have a viable plan and the resources to commercialize the patent

3) How long it will take to execute said plan

While it is impossible to know all the details in advance, these questions must be considered. Just as you wouldn’t buy a car without knowing the fuel mileage it gets or how quickly it depreciates in value, you should not get a patent without some idea of how and when you will capitalize on it.

Do not dismiss these concerns as “things you’ll figure out later.” Later is often too late, and the worst thing you could do is pay $4,000-$15,000 or more for patent you don’t want to or cannot capitalize on. So let’s begin by asking some questions to determine whether your idea is worth patenting.

Who will buy it?

There’s nothing worse than wasting weeks, months, or even years theorizing about a creation that’s “gonna be soooo great!” only to discover that no specific segment of customers truly wants it. To avoid this nightmare scenario, tell others about your idea. Ask them if and in what way it would truly improve their lives. The trick here is asking people who don’t know you very well. They are more likely to be honest instead of preoccupied with not hurting your feelings.

How will it be mass-produced?

Another common pitfall is glossing over the messy particulars of how something will be made. In the euphoria of brainstorming, your mind is naturally drawn to the sexy aspects of invention, such as the huge market waiting to be capitalized or your pitch to investors. Instead, force yourself to focus on exactly what it will take to bring your patent idea to life. How can it be made? What materials are needed? What types of skills are necessary to put it all together? Having firm answers to these questions turns you from dreamer into doer.

How much will it cost?

If technical particulars are easy to glaze over, forecasts about costs are downright ignored until it is unavoidable. This is a mistake. Crunching the numbers of how much it will cost to create your patent idea is not only necessary for investors to take it seriously; it will also make the idea real in your mind. Once you know what it will take to make your idea, do some basic research. Where can the materials be purchased cheaply? Do you know anyone with the necessary skills who will work for a stake in the profits instead of up-front cash payments? An entrepreneur who can answer these questions will be taken seriously by everyone involved in the patenting process, from attorneys to the professionals in the industry you are trying to enter.

How such products normally sold?

Finally, you need to know how your product will reach paying customers. If your idea is for a new, thinner and more puncture resistant bicycle tire, for example, you need a list of the top bicycle manufacturers in the country. These are the people who could potentially license your patent and put your patent idea into practice. A possible next step would be gathering the names of the top bicycle retailers. These are the stores who would be selling the bicycles. This type of analysis forces you to trace the chain of people you’ll need to work with in order to succeed.

If you had trouble answering these questions, your idea may not be ready for patent protection. Don’t worry, as this does not mean your idea is worthless! All it means is you need to do some more homework before spending years and thousands of dollars on a patent.

If you were able to answer these questions, proceed to Part 2 of this series which deals with coming up with a plan to commercialize your patent.

Read Part 2 Now.