Invention Marketing

Uninitiated inventors are sometimes shocked to discover that invention marketing agents (IMAs) usually take from 20 percent to 50 percent of the inventor's income from royalties. Unlike the real estate business, in which a 6 or 7 percent commission is typical, IMAs must work a lot harder for their money, and they justify the higher percentage. Here are the main reasons for the higher percentage:

Many inventions simply aren't licensable for a variety of reasons.

  • Even if the product is successful, significant cash flow may take two years or more, during which time the IMA has bills to pay.

  • Unlike real estate, in which the asking price can be lowered until the property sells, inventions are sold on the basis of perceived potential for making a profit for the prospect's business. Lowering the price (royalty rate) doesn't influence salability.

  • Prospective licensees are usually not local. Traveling is expensive and time consuming. Even if the inventor pays the expenses, time must be compensated.

  • Deals fall through. Even when the prospect negotiates in good faith, and signs a contract, changes within management or the economy may kill a deal. Prior to signing the contract, everything may appear to be a "done deal." But if a jealous engineering manager says your invention is no good, or technically not feasible, it may still be killed.

  • An up-front advance on royalties isn't always granted by the licensee, thus the agent shares the risk of the product selling slowly or poorly, and not earning his or her rightful fee in a timely manner, or at all.
If your invention has million-dollar royalty possibilities, the expense and risk of using a contractual licensing agent may be the best route. In this case contact either a reputable patent attorney or the Licensing Executive Society.

If you are at the negotiation stage, and your marketing agent (including you, if you do it yourself) is not experienced in the actual licensing process, or is not an experienced negotiator, then you should engage a patent attorney or a contractual licensing agent to wrap up the deal. But be wary of general practice lawyers in this process unless they are also members of the Licensing Executive Society.

However, always have a patent attorney review your license agreement before you sign it. Since patent attorneys have experience in preparing licensing agreements for inventors, and since most general practice attorneys don't, I strongly recommend that you work the patent attorney for this review.