Licensing vs Manufacturing Your Invention

License or Manufacture Inventions

Factors to consider when deciding whether to license your invention or manufacture and market it yourself.

There are two main ways in which inventors can seek to profit from their inventions:

  1. “Inventor-for-Royalties”: If you are a typical inventor, you will want to license your invention and collect royalties, or even sell it outright to another person or entity.
  2. “Entrepreneurial Inventor”: If you want to maintain control and you have a competitive business streak, you might wish to start a small business to produce your invention, and then market it yourself. In that case, you will need substantially more financing to develop, produce, and distribute your product.

Which method is best for your particular invention and goals? There is no “correct” answer. These different options will affect not only how you earn money, but also how much financing you will need in order to proceed.

Your success at either method will likely depend on your personality, capital investment, and perhaps most importantly, the time that you are able to commit to running a business yourself.

Two Avenues By Which to Profit From Your Invention

Whether you choose to license your invention or market and manufacture it yourself probably depends on your personality, skills, and interests.

Your decision will no doubt be influenced by the nature of your invention. Certain innovations, because of their complexity, scope, or exorbitant cost of production, readily lend themselves to licensing.

For example, if you design a new piece of industrial machinery, you might not have the money or factory space to easily mass produce it. Licensing or selling that same idea to a company that’s already prepared to undertake such an endeavor might yield better results, unless you have the financial capital to invest in your own operations.

Often, however, the decision to license is based more on the person than on the particulars of the invention. You must objectively examine your inventing personality. Is your goal to build a company? Do you have the time to find investors, lease factory space, and market your invention to buyers? The answers might inform your decision.

The Inventor-for-Royalties

Licensing or assigning rights to your invention is likely to be a simpler, less expensive route than manufacturing and selling it. Licensing or assigning your invention is often preferable for inventors who want to make money, but care primarily about innovating and spending time in the office or lab. These types of inventors are generally unwilling to undertake all of the business-related tasks involved in developing, manufacturing, marketing, and selling an invention.

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Brian Rayve

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