Private Placement Patent Monetization
Patent Transfer Inc. offers its services for the private placement of high-valued intellectual property. Generally, only IP portfolios containing at least one PCT patent application, United States patent or United States patent application can be accepted.
Direct Sale of Patent
Selling a patent by private placement is another effective means of shifting the risk of commercialization and ownership to an assignee. A common method of selling a patent is to contact companies that are commercially active in the field of a patented invention. A company may buy a patent to incorporate a new or improved method in its existing fabrication processes or to offer a new or improved product to its customers. Sometimes a company buys a patent for defensive reasons, that is, so it cannot be sued for practicing the protected invention. Or, it might buy the patent to prevent competitors from using the patented invention. If a patent owner or broker is familiar with a particular industry’s technology and its major players, and if he can find the right person in a company for meaningful talks, he might be able to negotiate a good sale price. Agreeing on the value of a patent or a patent portfolio is not always easy. Also, skillful communications are necessary to avoid creating the basis of an undesirable declaratory judgment suit by which the patent owner could be dragged into court in a distant jurisdiction.
Licensing a patent is also an alternative to utilizing a patented invention directly. A patent owner can license permission to use the patent-protected invention to one or more third parties in return for up-front fees and/or royalties. Thus, a licensee assumes the risks of practicing the patent. A licensee typically is already commercially active in the field of the patent, so engineering, production, marketing and sales are usually not so daunting for the licensee. Of course, negotiating a fair patent license with a prospective licensee is not always easy, especially if the opposing negotiating team represents a dominant player in the field. Negotiations with a potential licensee must be conducted very carefully to avoid any basis for a declaratory judgment suit. For royalties based on sales, effective monitoring of licensee sales is necessary to ensure proper calculation and payment of royalties. Therefore, a patent license should include adequate accounting and inspection provisions to protect the licensor (patent owner). Nevertheless, policing licensing agreements can be difficult, and actually enforcing a license agreement by legal action is an expensive and risky endeavor. For example, what if a licensee simply announces that it is no longer using the licensed technology and challenges the licensor to prove otherwise? Also, the risk of patent validity usually remains with the patent owner-licensor. If a patent is declared invalid, a licensee need not pay further royalties. The more valuable the patented technology becomes, the more effort infringers (and potential licensees) make to invalidate the patent using various legal proceedings.
Direct In-House Use
For a relatively small entity, such as an individual inventor or an entrepreneurial start-up company, practicing an invention in-house can be risky, if not practically impossible. Design, engineering and planning must be performed in-house or by consultants. Production facilities need to be leased or bought, or production must be out-sourced to contractors. Marketing programs and sales distribution networks must be established. To pay for all of these activities, funding is typically procured from outside investors who often proceed to co-manage and direct operations and then finally appropriate a substantial portion of profits, if there are any. If the business fails, then the outside investors or creditors often end up owning the patent, and the original patent owner ends up with nothing. With respect to patent protection of an invention: actually enforcing a patent against outside infringers is expensive and exhausting even for large corporations. For an individual or small business, the time, effort, and costs of a patent infringement lawsuit or a patent reexamination proceeding in the patent office are overwhelming.