Ultimately, all products must be manufactured to make it to market, however that doesn’t mean that you (the inventor) need to be the one to manufacture it. Consider the different ways to take an invention to market and choose the best option for you.
Does this line of thinking sound familiar?
“I have a new invention that I’ve been working on. I’ve done my research, I’ve filed a provisional patent application and I have investigated prototype and design options. However, I’m just not sure how to actually go about producing and marketing my invention. Do I need to arrange for manufacturing on my own, which seems like a challenging and expensive process, or are there other options that I can explore for succeeding with my invention?”
Eventually every inventor reaches the point where he or she needs to decide on how to proceed with commercializing their invention. Some inventors elect to facilitate and manage the development process on their own, while others would prefer to hand-off the task to a qualified company. Whatever the case, after the idea has been protected with a patent, the inventor should weigh the various options and decide which one is the right choice for his or her specific situation.
Options for Making Your Invention a Reality
Although developing and manufacturing an invention themselves can open up some doors for inventors, it’s not always the best choice. There are various paths that inventors may choose to take in the pursuit of product commercialization. Becoming familiar with options can ultimately save inventors a lot of time and money.
If you are new to the business of inventing or are not really sure how an inventor actually makes money from an invention, consider the following options.
1. Licensing the invention for royalties
Many inventors have day-jobs, limited financial means, and a lack of manufacturing and marketing expertise. For them, it’s neither affordable nor practical to invest time and money to develop sophisticated samples and/or inventory. A better option for these inventors may be a License. Assuming the inventor can generate interest from a company, and that he or she has some intellectual property (such as a patent-pending or issued patent), a license agreement can grant certain rights to the company, while also spelling out how the inventor gets paid. As a result of the agreement, the inventor would receive either an ongoing payment called a royalty, which would normally be calculated as a percentage of sales of the invention or a one-time lump-sum payment. Typically, the company that licenses the invention would manufacture and market the invention. Without patent protection, any individual or company could make or sell the invention; therefore, it would be less likely that a company would license or buy the invention. Most inventors choose this route because it is significantly easier and the risks and costs are minor compared to manufacturing your own invention.
2. Assigning or Selling the Invention
When the inventor assigns his rights, he is permanently transferring or selling ownership in the invention/patent. The inventor may receive a lump sum payment or a series of payments. The difference between a “license” and “assignment” is in the transfer of rights. With a license, the inventor retains rights, like “renting” the patent out, and with an assignment they transfer their rights (i.e., sell it).
3. Developing & Manufacturing the Invention
Some inventors possess the time, money, and ambition to take a more hands-on role in the development of their invention. They may elect to develop and manufacture the invention themselves. Depending on the complexity of the invention, costs to get a product to market can vary wildly. The steps can also vary, and may include:
Development – CAD design, prototype development, working samples
Sourcing – choosing a factory (explore both domestic and overseas), building tooling, ordering inventory, packaging
Logistics – warehousing, shipping to customers
Marketing – where will you sell? Developing website
Other – product liability insurance, establishing a business entity
While this path to commercialization lets inventors maintain control of the invention, they also assume the risks and huge costs that are associated with the process.
Making the Right Decision
Remember that every invention is different in terms of its complexity and structure. This should be taken into account when deciding whether to license the idea or manufacture it. For some inventions, little development and setup is required, which can simplify the manufacturing process, however, other inventions may be much more complex requiring in-depth research, engineering, tooling, molds etc. for mass production. As a result, manufacturing can be very expensive and usually involves a large set-up fee for tooling, molds, etc., and once the invention is ready, there may be a minimum order requirement to pay for inventory. Some manufacturers can offer short-run production where they’ll make a small order in hopes that the larger orders will come later, but many require the inventor to pay for a large number of units that can result in unsold product and loss of money if the invention does not sell. Overseas manufacturing can have added frustrations associated with the difficulties of finding and communicating with a foreign company.
For the inventor who finds these aspects of manufacturing to be too costly, too difficult or too much of a hassle, seeking a licensing agreement could be a more suitable solution. If the invention is licensed, usually the company that licenses the invention will handle the manufacturing, which allows the inventor to shift the cost and risks to the company that licenses the invention. With licensing, the inventor can rely on the company’s experience and established business to develop and market the product.