How to make money from your invention?

First things first

1. You need to create a good invention

Although this point is not really related to this website or intellectual property, it is a very important point. There are so many products and services in the world. Creating something that does not add any value to the customers will not help you make money from it.

2. You need to own intellectual property rights

Making money from an invention itself without owning an exclusive right over it is difficult, since you do not have any legal means to stop others from making and selling the same product. Of course, you can make money by manufacturing your invention, but you will not have exclusivity.

We are not just talking about patents, you can apply for a design patent – protecting the appearance of the whole or a part of a product –, or for trademarks protecting your brand name, slogan and/or logo.

Intellectual property (IP) rights, such as patents, designs, trademarks, are legal titles granting their holders the right – in a particular country and for a certain period of time – to prevent third parties from exploiting the protected good/appearance/name/logo for commercial purposes without authorisation. 

There are multiple ways to generate income if you have protected your IP. Furthermore, you can stop third parties from making and selling your product or their product with your name, etc. Consequently, when thinking about how to make money from an invention, it is evident that you will have to use some form of IP right in order to make more money and to have registered, exclusive rights. 

Recent studies show that companies caring about IP rights have higher revenue.*

The forms of protections that you will want to choose and rely on will depend on your IP strategy.

However, the fact that you own an exclusive right will not guarantee any profit itself. Protecting your intellectual property is just one factor among the many that you have to deal with. Nobody will give you money just because you filed a patent application. You will only generate income if the product (or method, etc.) is really good and valuable.

Since this website focuses mostly on patents, let's see specifically how you can make money from patents.

How to make money from a patent?

There are three ways to generate income from patents:

1. Manufacturing and selling the protected invention yourself

   This option requires a lot of effort, you have to be (or become) an entrepreneur and build a company around your product. A patent can contribute to selling your product at a higher price. If you already have a successful business in the same or a similar field, it is easier to start selling a new product in addition to the existing goods, since you already have the team and knowledge. However, if you are just starting, you have to think carefully if you are ready to start a new company and manufacture the product by yourself. In many cases, inventors are better off with licensing their inventions.

2. Licensing

   Licensing a patent application or a patent is a mutual agreement between the patent owner and another person/company. Under a patent license agreement, you, as the patent owner allow the licensee to commercially use, make, sell, import (etc.) the invention for an agreed period of time in return for royalty payment(s). The parties can agree on the specifics (limitations, field of use, geographical territory, exclusivity, structure of payments, etc.) of the license agreement as they wish.

   So, this can be a long-term solution providing a continuous source of income for your company. It is advantageous, because you remain the proprietor of the patent.

3. Transferring your right
   Transferring a patent application or a patent basically means selling your patent (application) to someone. By transferring the patent application or the patent you assign all of the rights, title and interests coming with the IP right to the assignee in return for a lump sum payment.

   This is a short-term solution. You will no longer be the proprietor, meaning that all future commercial opportunities (including royalties) will no longer be yours.

+1: Combining points 1 and 2
If you have not excluded this option in your licensing agreement, you can also sell the patented product while licensing it.

* “IP statistics show that 9% of SMEs in Europe own registered intellectual property rights (IPRs) like patents, trade marks or design rights, versus 40% of large companies. These IPR-owning SMEs outperform their counterparts that hold no IP rights. They are, for instance, more innovative, more likely to grow over time, and have almost 32% higher revenues per employee than SMEs that have no registered IPRs.”

European Patent Office and European Union Intellectual Property Office: “High-growth firms and intellectual property rights – IPR profile of high-potential SMEs in Europe” (May 2019)

Author: Zsofia Pintz
Published: August 2020
Updated: July 2023