Because the world is not going to “beat a path to your door,” you’re going to have to take the initial step in contacting your targets. Begin with a phone call to anyone in the target company with the objective of finding the right person to whom you can send information about your invention. You can explain briefly what you’ve patented and why it may be interesting to your target, but your main goal is to get a name and address of someone who wants to receive more information.
Once you have someone interested, mail a professional letter along with printed materials touting your invention and advertising your website if you have one. How glossy your marketing materials need to be depends on whom you’re selling to. In general, however, the more professional your materials are, the better.
About a week after your materials should have been received, place a follow-up call to be sure the package arrived and to ascertain interest. This is where you need your salesperson’s hat on. If sales is not your forte, you may want to consider engaging a professional salesperson on a commission basis.
Setting Royalty Payments
If the target has any interest at all, the subject of cost will come up. You should probably avoid discussing actual figures in the first phone call and letter. You can simply say that you’re open to discussing whatever would make sense in their case if they think the invention can benefit them. You want them to be sold on your invention’s benefits as much as possible before talking price.
Before discussing price, you should be aware of the various ways a license can specify the compensation paid to the inventor:
- Up-front fees (like a signing bonus)
- One-time fee (royalty paid in full in advance)
- Percentage of sales (percentage royalty)
- Fixed fee per unit sold (unit royalty)
- Minimum fee per quarter or year (minimum royalty)
- Other creative terms suitable to the needs of the parties
Unless you’re intimate with the cost structures and profit margins that drive your target’s industry, it may be difficult for you to determine what is a fair royalty payment structure. You’re best option is to let your attorney help you negotiate.
Negotiating the Agreement
You no doubt had a patent attorney assist you in your patent application. Law firms specializing in patent law are also usually well qualified to negotiate a patent licensing agreement on your behalf and draw up the final papers. The experienced attorney will help negotiate fair terms for many issues you probably would never have thought of, such as:
- Patent expenses and maintenance fees
- Your consulting services
- Improvements to the invention
- Rights reserved to the inventor
- Cancellation in the event of bankruptcy
- Production schedules and sales targets
- Quantity minimums
- Quality standards
- Accounting methods and audit rights
- Enforcement against 3rd party infringers
- Liability for damages
- Notice requirements
- Termination for breach or non-performance
If for any reason you didn’t have or no longer have a qualified patent attorney, you’ll want to find one. A good attorney will help you maximize the value of your patent and steer you clear of avoidable problems.