Practical Pointers for Patentees

by Franklin Allison Cresee

This method of procedure not only enables the patentee to get a just valuation of his patent, but also puts it in a more favorable position to be sold; since the commercial value is known and established, it no longer remains an experiment. Interested parties can take their calculations from these figures, and the patentee can exact a price in proportion to the success of the trial experiment.[p. 34]

In order to thus demonstrate the value of a patent, the patentee must possess and advance the necessary means to carry it forward, though, if the experiment prove at all successful, the profits derived from the articles sold will in nearly all cases more than offset the expense incurred. This is a very popular course with inventors, especially in handling small inventions, known as novelty or specialty patents.

If the patentee have not the means to successfully demonstrate the value of his patent by actual trial, as above outlined, then the next best course would be to inquire among reliable manufacturers and ascertain the lowest price for which the invention can be manufactured in large quantities, and the highest price at which it will retail; and then, by carefully studying the market, the patentee should be able to estimate the amount of competition, cost of selling, probable number of sales, interest on the investment, etc., and on these figures base the price he should receive for the patent, being careful to allow the purchaser a liberally fair profit.

While there are at present about ninety-five million inhabitants in the United States, it is scarcely probable that any invention has yet or ever will be made that will reach half this number of people. With an article of the most general adaptability, including both sexes, the inventor[p. 35] can hardly hope to reach more than a fourth of the entire population, though, of course, the invention may be subject to regular consumption, so that the people reached would naturally purchase the article again a number of times during the course of a year.

The statistics in the last chapter are given with the view of assisting patentees in determining what proportion of the population will likely want their inventions, and to enable them to estimate prices. In estimating the price to ask for a patent, patentees should not conceive and hang their hopes upon fabulous prices and immediate wealth, which too often dooms ambitious inventors to bitter disappointment; they should rather endeavor to look at their inventions from the purchaser's stand-point, and try to see it in the light in which others view it. It may be well to remember that the million mark of patents issued in the United States, including re-issues and designs, was passed in 1911, and it is quite probable that any one inventor may not have the only good thing in the line of patents.

How Rating for Royalty Is Figured.

Many patents are more profitable by being placed upon royalty than by any other means, and quite often the patent can be placed this way when it is not possible to sell outright at a satisfactory price. In determining what royalty the patentee should receive,[p. 36] he should carefully estimate, in connection with the probable number of sales, what profit the manufacturer can probably make on each, or a number of the articles containing the patented improvements, and should require about twenty-five per cent. of the profits as royalty. Another method used by some inventors is to ascertain the price at which the article can be retailed, and figure the royalty at between one-twentieth and one-tenth of the retail price. Either of the above should give the approximate figure to ask for exclusive royalty contracts. For non-exclusive rights the patentee should ask about one-half of that for exclusive rights.

Stock in Stock Companies.

There is another class of patents that can be best realized from by organizing the proper kind of joint stock companies, and manufacturing the invention, the inventor taking a certain amount of the stock and assigning the patent to the company. The patentee should receive between one-fourth and one-half of the capital stock in consideration of his assigning his patent and rights to the company.

The inventor should see that a good portion of the stock is subscribed for and the amount actually paid into the treasury of the company before making the assignment. As a rule, inventors' stock is full paid and non-assessable.[p. 37]