CHAPTER III
SECURING CAPITAL
It is a curious but well demonstrated fact that people who have inventive genius often lack the means to carry out their ideas. An inventor who has ample means can secure his patent and proceed to turn it into money without the necessity of being compelled to solicit financial aid from anyone. This, unfortunately, is not generally the case with inventors; indeed, many are often barely able to stand the expense incident to taking out the patent. Patentees laboring under this disadvantage are frequently tempted to part with a small interest in their patents for the sake of securing sufficient funds to carry on the promotion of their inventions and sale of the patent; and in doing this the inexperienced patentee is apt to make the fatal mistake of assigning to another an undivided interest in his invention.
Danger in an Undivided Interest.
Such an assignment may appear well enough on the face of it, and many patentees have been misled, supposing that under the assignment the proceeds from the patent should be divided pro rata, according to the several interests. This, however, is not[p. 21] the case in such assignments, and joint-ownership of a patent, or interest therein, does not of itself, without an express agreement to that effect, make the parties partners. They are merely tenants in common, each having the right to separately make, use, or sell the invention so assigned without liability to account to their co-owners for any part of the profits derived from the invention through their own efforts.
In an assignment of an undivided interest, the assignee is afforded an opportunity of manufacturing, using, and selling to others to be used the article covered by the patent; also, to grant territorial grants, such rights being unlimited by the terms of the assignment, and it is actually of little consequence how small an interest is thus conveyed, the assignee can proceed with the patent in much the same way as if he were the sole owner; therefore, whenever it is intended that the relation of co-partnership shall exist between the patentee and the assignee of an undivided interest, and that the profits arising from the invention shall be equitable, for their joint benefit, there must be an express agreement between them to that effect, otherwise the assignee will have a decided advantage over the inventor, if he is inclined to be dishonorable, and there are numerous cases on record where patentees have virtually lost their patents by such assignments. Patentees should[p. 22] especially guard against strangers who offer to purchase an undivided interest in their patents.
A Better Plan.
A better procedure to secure means necessary for the development, introduction, and sale of an invention is to borrow the money from a friend contingent on the sale of the patent, sell a State or county right, or enter into a contract with a party willing to furnish the means for a certain proportion of the proceeds derived from the invention. Generally speaking, it will not be hard to find a party willing to advance sufficient means to promote an invention which is protected by a patent for a certain percentage of the net receipts arising from its manufacture, sale, or territorial grants, and the patentee will probably find a person among his own acquaintances who will not only be glad to furnish the means necessary, but also be of value to the patentee in realizing from his invention. In any case, whatever is agreed upon should be put in the form of a contract, or an agreement, couched in such terms as will leave no doubt as to the understanding between the parties. The following form secures both parties, and will be suggestive of others:
Form of Agreement.