SELLING PATENTS
It is not so much how you sell your patent. It is what you get for it.
Patents can be disposed of in various ways. We are sorry to say that
the majority of patents issued today, for reasons already stated, are
disposed of on the scrap heap, or the waste basket. However, if you
have a patent that possesses commercial value, it can possibly be
disposed of in one of the following manners:
First, by selling it outright for a cash consideration.
Second, by selling state, county or shop rights for the use of your
invention.
Third, by placing it with an already established concern on a royalty
basis.
Fourth, by the organization of a company or partnership for its
production and marketing.
Taking up each one of the methods in order, the following explanations
will possibly be of interest:
It has often been said that an inventor rarely underestimates the
value of his patent. Associating with and meeting large numbers of
inventors from time to time has convinced the writer that no one
individual can give a reliable estimate of the value of anyone's
invention. If an inventor desires to sell his invention outright,
he should take into consideration, in fixing the price, just how
much he spent on the development of the idea; how much money he
actually spent in procuring the patent, building the models, and
getting the invention into marketable shape. He should add a certain
modest percentage for good will, and if he desires to sell outright,
base his figures on some such estimates. For instance, a small, simple
patent could be estimated as being worth, say $2500 cash, as follows:
Twenty weeks of time spent in developing the idea,
$25 per week $ 500 00
Procurement of patent 75 00
Building of models 150 00
Expert advice and counsel 25 00
Manufactured samples, dies, tools, etc. 250 00
Good will, or present value of the patent per se 1,500 00
--------
Fair selling price for patent in which the time,
labor, expenditures, etc., were approximately
in accordance with the figures listed above,
would be $2,500 00
The man that buys the patent will be entitled to a great deal more
profit than the inventor who conceived it, and by the time he has it
on the market and has the sale established, he will be entitled to
everything he earns. Of course, there are exceptions to every rule,
but the writer is not speaking of exceptions now.
Another very profitable way to dispose of a patent is the selling of
state, county and shop rights. This has brought many inventors very
large returns, although it involves a good deal of selling expense,
and salesmanship of the highest order.
The placing of a patent on a royalty basis, and the payment of a
nominal cash "_quid pro quo_" we consider the best method of
disposing of an invention, and the one most likely to prove
profitable, provided, of course, that the firm with which the patent
is placed is thoroughly reliable, and can energetically push its sale.
Elsewhere in this volume you have read of the enormous sums in
royalties that have been received on various successful inventions.
One particular illustration at this time may not be in-apropos.
Oscar Hammerstein, the New York theatre proprietor, sold his first
cigar-making machine for $6,000 cash. The next one he invented he
placed on a royalty, and made $250,000. This is almost a typical case.
When the patent or its product has a sufficiently large public demand
it is oftentimes better to organize a new company for its development
and sale. This is done by applying for a charter under some favorable
State laws, (it is usually expedient to apply in the State in which it
is intended to manufacture,) and give the inventor a reasonable stock
interest in the company, together with an executive position if he is
capable of filling it.
"You must bear some of the burden of introduction yourself. A
capitalist may be willing to bet his hard dollars that your idea will
work, if you have secured a patent; or he may be induced to bet that
it is patentable, if you show him that it will work; but moneyed men
who will bet that your invention is both patentable and practicable
are few and far between. If they make such a bet, it will be with very
heavy odds against the inventor."--Grimshaw.
Do not forget that some men have made millions out of a single patent.
Do not forget that others have lost all they could make and borrow.
"Victories that are easy are cheap. Those only are worth having
which come as a result of hard fighting."