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 The Inventor's Mentor

May 2013

Licensing your Invention for the Highest Price

You have a million dollar idea and you are eager to license it for – a million! Only one little problem. With a limited budget, you need to invest you money wisely. What is the best course of action to go from where you are to being a millionaire? You need a business plan.

You will have to keep in mind as you develop your business plan that one of its goals is to increase the value to your idea – not as seen through your own eyes, but through the eyes of a cold hearted but rich stranger who may potentially become the investor in your company or the licensee of your idea. Developing an idea requires many steps. The further advanced you are, the more value your idea has.

Step 1. The Search. There is no point spending money and time on an idea that already exists. The first step is to undertake a search to find out if your idea is already known. Initially do the search yourself. If you don’t find anything ask a patent professional to repeat the search. This is an excellent investment.  The search will teach you much about the technology of your invention and by revealing the prior art, will help in the writing of the claims. They should be neither too wide (overlapping on prior art) nor too narrow (depriving you of coverage.)

Step 2. The Provisional. Nobody will buy anything from you that you do not own. If the search has not uncovered any prior art invalidating the novelty of your invention, the next step is to claim its ownership. The simplest and least expensive approach is to file a provisional application. Such an application is not a patent. It is not examined by the patent office and does not convey “ownership” – the right of the inventor to exclude others from practicing the invention. Yet, given the new “First to File” patent law, filing a provisional is a must as it simply consists of a document filed with the patent office that establishes a filing date. It must be followed within a year with a non-provisional application that refers to the provisional and benefits from its early filing date. A provisional protects you against a later filed application and therefore must be written with the same care as a non-provisional application. Should someone else file after you did, your provisional as written, will be your only shield.

A filed provisional will also legally define your invention and will enable you to offer it for licensing without having to sign a non-disclosure agreement with companies that may be wary of NDA’s because of the possibility of jeopardizing their own R&D.

Step 3. The Prototype. Now that your invention is legally defined in clear legal terms by a provisional, with a copy filed at the US Patent Office, you have one year before you file your non-provisional application. During this year you can talk to manufacturers, marketers and distributors, test the market, and advertise on the Web. Building a prototype or even ordering a small production run is a good idea as it will strengthen your bargaining position with potential investors and licensees.

Step 4. The Non-Provisional. Before the one year anniversary of your provisional, file a non-provisional which can include the most recent improvements you made to your invention since the first filing.

Step 5. Prosecution. Ownership of an invention is not realized upon filing of an application, but upon award of the patent, an event that occurs at the conclusion of the patent prosecution This process can be a grueling legal battle that pits on your side your attorney or agent and on the opposite side, the examiner. At stake is how wide your claims should be. The outcome may be a total allowance of all claims, a complete rejection, or most commonly, a partial allowance. Several years can elapse between the filing date and the final award or rejection.

Step 6. Building up a Market Presence. The further along you are in the development of your product, the stronger your bargaining position will be.  Showing a strong market presence, for example, a large number of pending orders will convince potential investors of the desirability of your invention.

Step 7. Licensing your Product. Finally you have reached the point where you have accumulated enough convincing evidence that your invention is profitable. You are now ready to license it or to sell the patent. Licensing negotiations can be treacherous. Please rely on the service of a professional licensing expert to negotiate such deals.

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This newsletter should not be construed as legal advice.                                             ©2013 by George Levy