Practical Pointers for Patentees

by Franklin Allison Cresee

Experience teaches that it is usually advisable to accept any reasonable offer made for a small right, even if it does not come up to the patentee's estimate of its value, as he has plenty of other territory left, and may lose much time and money in finding another in the same territory willing to pay more; besides, the purchaser of such a right may, by his energy and good judgment, advertise the invention in such a way as to greatly benefit the patentee in making further sales.

Some patentees employ good and reliable special agents to travel and dispose of the patent rights; others advertise for and appoint State agents to sell their respective county rights. In either case these agents expect to make money by the operation, and require a liberal proportion of the proceeds for their remuneration; generally speaking, they will require about one-third the selling price, unless the patentee can show that the rights will sell readily, in which case the rating can be made lower.

Granting Licenses.

The patentee may also sell licenses under his patent; that is, in consideration of a certain sum, the patentee licenses a manufacturer to make the invention at his own place of business; it being a personal privilege[p. 63] and is not transferable unless its terms so state.

Unless there are a great many manufacturers in the line of industry to which the patent relates, and unless the invention has real merit so that it will be readily adapted by the manufacturers, the patentee cannot hope to realize any considerable amount from selling shop-rights alone. As a general thing, patents for mechanical inventions can be disposed of to better advantage by other means, or by selling shop-rights in connection with other methods; for example, if the patentee was selling his patent by territorial grants, he might grant shop-rights in such territory as he has not sold; or if he is placing the patent upon non-exclusive royalty contracts, he could grant shop-rights in such portions of the territory as he does not contemplate using otherwise.

Some inventions, such as methods or processes, as a general rule, have to ultimately be sold by licenses. Such patents can be employed most profitably by selling licenses, county and State rights; thus, in the case of a method of constructing fences, the patentee could sell State and county rights to parties, who in turn could grant farm rights, etc.

Placing upon Royalty.

The license and royalty plan is perhaps the best and most popular method with inventors for realizing from their inventions. This, in effect, in[p. 64]volves a contract between the patentee and the manufacturer, by which the latter in consideration of a license to manufacture the article covered by the patent, agrees to pay the patentee a certain specified sum as royalty for each article manufactured or sold bearing the patented improvement.

Placing a patent on royalty is ordinarily taking chances, but if the patentee has full confidence in his article selling well, he should by all means take royalty in preference to selling the patent in its entirety. Many valuable patents are sold by their owners for from $1,000 to $10,000, which yield the purchasers, when the article is on the market and selling well, as much as $25,000 annually in profits. This calls to the author's mind a patent for which at the outset was doubtfully offered $3,000, but before the negotiations terminated, the patentee succeeded in placing it upon an exclusive royalty basis. The royalties paid to the patentee during the first four years amounted to over $50,000, and the manufacturers subsequently made an offer of $100,000, for the patent.

In making royalty contracts with parties, the patentee should investigate the standing, rating, and capabilities of the manufacturer, and, above all, should be certain that the parties have the right motive in view, and that the contract is so drawn that it will fully protect his own interests.[p. 65] Many patentees have been caught by manufacturers offering large royalties for the sole purpose of gaining possession of the patent, that they might pigeon-hole it, in order to keep the article out of the market, so that the sale of some similar article in which they are interested would not be interfered with by the introduction of a similar or better article, such as the patent anticipates.