How Many Patents Actually Make Money?

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You’ve got a great invention idea in the works, and you’re excited to get it to the masses and pull in the profits. You only need to land a patent, and then you will be home free. Or at least that is what you have heard from all those invention help companies.

In reality, only two to ten percent of patents ever make enough money to maintain their protection. As of the end of 2019, The United States Patent & Trademark Office has issued over ten million patents. Millions of patents that were expensive to get and keep active. Unfortunately, most of these invention ideas never went any further. Many good ideas are left untouched, and an even more significant number of the bad ones still receive patents.

But what about those that do see further action? Any successful inventor will tell you that a patent is only one step in the long and arduous journey. It takes hard work to see your product go from idea to patent to money maker.

There are no good ideas or bad ones. There are only the ideas that we turn into reality. None of us have any way of knowing which of those ideas will succeed, and which of them will fail. The only way we can find out for sure is to build them to see if people are willing to spend money on your product. Patents may seem like an easy first step, but nothing could be further from the truth.

Understanding patents

There are many ideas out there that are helpful and lucrative. If you believe that your idea fits that description, filing a patent is a way to protect your invention from being duplicated by another entity. While it’s common to think that owning a patent is a sure way to wealth, the number of patent holders that make money is very, very low.

This misconception comes from a lack of understanding. Obtaining a patent isn’t just calling “first” or “mine!” on an idea. It’s a complicated and expensive process that few can take on by themselves. There are application and legal fees, licensing, sourcing and manufacturing expenses, etc.. You’re much more likely to lose money than gain from your invention. Does that mean that you shouldn’t go for it? Not necessarily. But you should go into the process with a clear plan of action.

How many patents actually make money?

There are over two and a half million active patents, but only five percent of those had generated any money. According to Forbes, of the ninety-five percent left unlicensed, at least fifty-thousand of those were quality patents developed by university research and development departments. The US wastes one trillion dollars annually on untouched patents. That’s a lot of labor and money lost on filing some paper!

Filing (much less monetizing) a patent has become more and more expensive and complicated. The increased difficulty is making the process exceedingly inaccessible. What was once a system used to empower regular people with good ideas has become nothing more than a means for lawsuits and litigation.

Large companies can handle the associated costs, but what about smaller patent owners? The landscape of American patents has become too involved for many of us to navigate. There could be less innovation and opportunity for future entrepreneurs and businesses. The backlog of junk filings may be a backward step for American ingenuity. A great deal of this complication has arisen due to the never-ending advertisements bombarding would-be inventors with promises of fortune and fame by merely filing a patent. Many useless ideas also further clog the patent office each year. 

How to profit from a patent

That doesn’t mean that it’s an impossible venture, but you need to be smart and active. The secret to making – not losing – money on a patent is to keep it moving. You have to sell it, license it, or commercialize it. Each method comes with opportunities for gains or losses. You will have a better chance of making money by doing something rather than waiting. Too many patents sit untouched while racking up costly expenses to maintain. Generally, it’s not worth keeping a patent just so that you can hang it on a wall.

Commercializing your idea

For many inventors, an excellent way to profit from their patent is through commercialization. By manufacturing and distributing the product themselves, they will be able to reap the largest potential profits. However, there is a significant financial risk that comes with going down this route. Starting and running a business only adds to the risk while designing, building, and trying to sell your patent.

Ask yourself some hard questions about viability:
  • If your product becomes a reality, is it legal to sell?
  • Will the product be safe to use?
  • Will people be willing to buy it?
  • Can it be sold at a price that will be worth my time and effort?
  • Can the prototype and first one hundred units be manufactured at a reasonable price and initial cash investment that I can realistically afford?

We have created this great guide that helps you learn The Twelve Steps of The Invention Process.

Before you start getting worried about all the expenses, remember that Invention Therapy is here to teach you how to manufacture your products on your own. We can also show you how to significantly lower your upfront investment and reduce most of your risks. This hands-on approach is the only real method that we believe in and teach here every day. This way, you have control over your invention’s destiny.

Selling your patent rights

If the expense of commercializing your invention is too much, you could consider selling your patent instead. Companies that make similar products to yours are a great place to start. They also might find you while trying to patent their ideas, but don’t be afraid to go knocking on some doors (metaphorically speaking). 

You probably won’t make a lot of money by selling your patent to larger entities – especially if the innovation is nothing particularly exceptional. The biggest issue with this option is that you lose control of the process. The buyer may never actually go through with making the patented product, which means that you’ll never see it materialize. On the other hand, they may produce it and make significantly more profits than they paid you. You have to decide if you’re ok with either of those scenarios happening.

The plus side to selling your patent is that if you can agree on a price that you’re comfortable with, you could make a small profit off your idea. Considering how few patents even make back their processing fees, it might not be a bad idea to take the money and run.

Licensing your invention idea

If you don’t want to sell your patent or start a business, consider patent licensing. That would enable you to see your invention get made without worrying about funding the manufacturing process. 

Transferring your patent to another party is not our favorite way to get your product out there. Licensing does have a much lower financial risk. Part of the revenue will go to the licensing firm. We have seen a few licensing deals from our viewers. It seems typical that most of these deals only land the inventors a few thousand dollars. Not a very good return on investment as far as we are concerned.

Be careful when you listen to all those “invention help” companies and their empty promises. We have a few viewers here at Invention Therapy that have wasted thousands of dollars with them only to see their wallets left empty. With the power of the internet, if you choose to try to license your invention idea, use our free source of millions of businesses waiting for your ideas.

Licensing is also a common practice for universities. They can license their patents to other companies that will use them to create marketable products. Some see this as an example of patent exploitation. Yet, for many, it’s the best option to get their invention made. Companies like Google, Cisco, and many others started as university projects.

The biggest thing to consider here is the multitude of the ins and outs. You’ll want to enlist an attorney to make sure that you understand the agreements you will be making. That’s no reason to shy away from licensing, but it can get sticky if you don’t know how to protect yourself.

Using your patent as collateral

Using your patent as collateral might not seem like the most exciting use of a great invention, but this is a prevalent practice among large corporations. If you have a valuable patent, you could use it as collateral to secure a loan. Big companies sometimes use this option as leverage to obtain the money that they need from banks. If you can get a similar bank to work with you, it means that they acknowledge your patent has value. It’s a great sign that you’re onto something.

Applying for a patent

If you’re thinking about applying for a patent, take a moment to consider what you are undertaking. Make sure that you have all your ducks in a row, your I’s dotted, and your T’s crossed. Familiarize yourself with and prepare yourself for the process before moving forward. 

Ask yourself the following questions again:
  • If your product becomes a reality, is it legal to sell?
  • Will the product be safe to use?
  • Will people be willing to buy it?
  • Can it be sold at a price that will be worth the time and effort?

If you can’t answer yes to these, a patent is probably going to be a waste of money and resources.

Do the research

There’s a reason why people want exclusive rights to their ideas, and it’s because they think the idea is unique. Truthfully, most of the inventer’s ideas are not original, yet still might be awarded patents. It’s all about the scope of protection within the patent claims.

If there are already products and patents granted that resemble your invention, you may start to worry. Fear not because utility patents can be easy to design around. It’s all about knowing how to create a product in a way that avoids infringing on other people’s ideas. It is your job as an inventor to do the research. You need to learn and understand what is protected by those patents.

Check any patents that mirror your product idea. 

  • Is the entire idea or just a part of it protected by another patent?
  • Are there any functions or pieces of mine that are the same?
  • Can I make a part or function different?
  • If I make changes, can I avoid infringing on other patents?

If you can’t answer these questions, then you already know your answer. Be careful not to jump too quickly to a conclusion here. Look more closely at each patent and go over them with a fine-tooth comb. Soon you may discover that there are thousands of ways to design a new product while avoiding stepping on other people’s invention ideas.

Knowing Your Invention Inside and Out

Don’t try to patent a flimsy idea. Do the work to plan out exactly what your creation entails. You might discover that it’s too similar to another product. Maybe it requires a specific part to function that isn’t available. Or perhaps that part already exists as a patent. Trying to include that in your patent could prevent you from getting one at all. Put this effort in now to save yourself from a headache later.

Work on your new idea over and over. Improve every part that you can and make it as original as possible. If you keep working at it, you may discover that you have a real idea worthy of a patent. 

The reality of Provisional Applications

First, there are Provisional Applications that will only lock in the filing date of your invention. Often dubbed as Provisional Patents, but they are not patents at all. If you chose this method, know that although you can have up to a year from filing, you can’t add anything to the final design once you submit the Provisional Application. 

Provisional Applications only protect the exact design that you intend to patent. If you do not complete the costly and time-consuming Non-Provisional Patent process, you will forfeit your patent and any protection it may have provided.

If your invention has a particular configuration, you can file a design patent to protect the way it looks. If the design is more paramount than the function, you can also register for a design patent solely. Having multiple patents on your product will offer extra protection for your intellectual property. Although we do not recommend design patents for inventions, it is a decision you will have to make.

Applying for a patent

Patent applications are not easy to complete. They are tedious and demand complete knowledge of the invention and the filing process. 

Educate yourself on the procedure and plan out each part of the application carefully. Double-check everything. A mistake could cost you more than time and money. It could cost you the ability to file at all. These applications can take an entire team to complete, so there are plenty of patent agents or lawyers out there ready to help.

A patent agent is someone who writes patents for a living. They can provide a considerable advantage while applying for a patent. A patent agent will usually cost less than an attorney. Their knowledge won’t be as extensive as that of a patent attorney who must pass a separate board to practice patent law. Agents are also unable to defend a patent in court. 

As with any legal proceeding, you’ll need to find the professional that suits you best. Agents and attornies are both excellent options on paper, but it depends on your personal needs and budget. Either way, they are worth looking into if applying on your own becomes too complicated.

Waiting for the patent office

It’s going to take at least a year to get a response, and when you do, you might not like what you hear. That doesn’t mean all is lost. If an examiner doesn’t believe that your invention warrants a patent, you can always bring in a professional to help you try again. The process is longer than most people realize. It can take years to be awarded a patent finally. Once you receive your first response, you will have six months to defend your positions and, hopefully, change the patent agent’s decision. This part of the process can become very tedious and frustrating. Paperwork can go back and forth for years. 

While you wait, start working on the next steps for your product. Decide what you’d like to do with your patent once it comes through. As long as it’s pending and protected, you can start talking to others now. The sooner you understand your options, the better chance you’ll have at making money at this point in your journey.

Other Options

Patents aren’t the only viable way to protect your intellectual property. In some cases, you might be better off with a copyright or trademark. 

Patents are reserved for useful ideas, copyright protects expression in the form of art, and a trademark protects words or symbols meant to represent items or companies. For example, Velcro is the trademark for a particular hook and loop fastener, and Kleenex is the trademark for a facial tissue brand.

Consult with a patent agent or attorney to determine the best way to move forward. Ninety-five percent of patents never see the light of day. Give your idea its best chance.

Patents are a great way to make sure that no one else makes money off of your intellectual property. Those rights stay exclusive to you and ensure that no one else can profit from your idea. It isn’t easy. It’s involved, slow, and pricey. If you do the work to get the patent, don’t allow it to collect dust. Decide now how you want to see this lead to financial gain, and move in that direction. No one is going to work harder for your patent than you. 

And please remember one last hard fact. If you can redesign your product to avoid infringement, others will be able to do the same with your patent. Statistics show that it will be a tough road ahead if you want to see any money pursuing this method as an option. In the end, it may be another piece of paper hanging on your wall.

Are you ready to become an inventor?

Getting your idea out of your head and into your hands is only the first in a long set of steps towards becoming a successful inventor.

First Steps To A Successful Invention

At Invention Therapy, we believe that the power of the internet makes it easier than you think to turn your invention idea into a reality. In most cases, you can build a prototype and start manufacturing a product on your own. Changing your way of thinking can be difficult. Being an inventor requires you to balance your passion with the reality of having to sell your products for a profit. After all, if we can't make a profit, we won't be able to keep the lights on and continue to invent more amazing things!

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