Patent trading involves the purchase and sale of patents. Patent brokers act as traders and do not take ownership of the patents they sell. Rather, they represent buyers that are often anonymous and are able to purchase patents for less than high-profile buyers. This practice has earned patent brokers the nickname of “arms dealers of the patent wars”. Patent trading can help patent holders sell their patents at higher prices and avoid the potential risk of litigation.
Patent trading is a method in which companies sell or buy patent rights in units, just like shares in a company. One unit of license right grants an organization a one-time use of a technology on a single product. For example, a car manufacturing company might purchase 50,000 unit license rights for a single product at a market price. This method helps organizations monetize patents fairly and stimulates innovation.
Patent brokers earn substantial incomes. They must understand how to market and protect a patent. Patent brokers must be familiar with patent law and the legal environment, as they will be negotiating with parties on your behalf. They will also be familiar with the intricacies of patent litigation. They must also be able to effectively market and sell a patent to attract potential buyers.
Patent brokers work on commission-only or hourly bases. Some sell-side patent brokers work on a mixed commission and hourly basis. Most sell-side brokers earn their commission only when a deal is closed. Some patent brokers earn their commissions as commission only, and some offer appraisal services to patent owners. Regardless of how you choose to work with a patent broker, it is vital to know that you have the best interests in mind.
Unlike other investments, patents are not worth much when they are not protected. Investing in them can help you earn back the money you spent developing your product. They also give you the opportunity to earn royalties from other companies that might copy your product. In many cases, patent holders are paid in the form of licenses.
Patents protect innovations that are not readily available or can be reverse-engineered. For example, a manufacturing company may decide to patent its manufacturing process. This allows the company to keep specific components or materials confidential. It can then use these elements to create a similar product. But, if the process is easy to reverse-engineer, the competitor may decide not to purchase it.
Before pursuing patent protection, companies need to evaluate their business goals and the competitive landscape. This includes identifying their competitors and evaluating their IP strategies, portfolios, and litigation profiles. This information will help them determine whether they should pursue patent protection or not. For example, if the industry in which they operate is very competitive, they may wish to file aggressively to gain an advantage.