A primary reason why people file a patent in the first place is because they want to earn money from their invention. A good amount of cash stands to be earned, so it is important to understand exactly how a patent provides the individual who owns the patent with money. Here are some common questions people sometimes have about the patent process and how one can turn a profit.
1. Question: What Does Licensing an Invention Mean?
Generally speaking, a license consists of a written authorization so that an individual can exploit the invention. A license is needed when a person who owns the patent wants a manufacturer to help sell and/or create the invention in question. The manufacturer becomes the licensee, and this person or organization is given royalties to help with the invention-making process. There is also a process known as cross-licensing, which entails two companies trading licenses so that they can both benefit from each other’s technologies and inventions.
There are two types of licenses one can acquire: exclusive and non-exclusive. An exclusive license is one that is only given to a single manufacturer to help create the invention. A non-exclusive license is one where several manufacturers are helping with the invention. One important aspect of licenses to bear in mind is that licenses are bound to the jurisdiction where they were initially acquired. For example, if you received a United States patent, then you could only give a license to a company that is located in the U.S.
2. Question: How Exactly Does an Inventor Profit From a Patent?
Inventors can turn a profit from an invention usually in one of two ways. The inventor can create a new business that is dedicated to developing and selling new items. However, many inventors would rather simply invent than actually run a business, which entails a lot of additional responsibilities than simply making great new things.
If you fall into the latter category, then you will likely develop your own creation. After the item is made, you would license the invention to a completely separate company to develop and market it. You, as the inventor, would be allotted royalties and licensing fees. Royalties can consist of receiving payments for each individual item sold, or it can be a percentage of the revenues that the company receives from distributing your invention to the general public.
3. Question: Who Profits When an Employee Invents Something for a Company?
Companies employ a lot of workers, and situations do arise where one of these workers invents something that has the potential to be incredibly profitable. Determining who receives money from this item is entirely dependent on the employment contract at play. Many times, the contract states that the employer is the one who receives any profit from an employee’s invention. The employee then receives a bonus or some other fiscal incentive as a reward.
It is often more preferable to have a written contract in play. There is an “employed-to-invent” doctrine, which implies that an inventor who is employed at a company will create items, and the employer is the one who will own the patent to it. The reason why it is best to have a written contract at play is because it helps you in the event that an inventor wants a patent and threatens to take you to court.
There is also the shop right. This means that an employee was not intrinsically hired to create new items or processes but could still feasibly do that while working for someone. A worker could create something new using company materials and resources, and that worker could then file a patent on his or her own time. However, since company resources were utilized, the company could use this new invention without having to pay the inventor.
Patent law is incredibly detailed and nuanced. Make sure you understand everything thoroughly so that you and anyone who works under you receive the profits they are entitled to.
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