Which option is best for your company's Inventions: Licensing or Manufacturing?
Inventions that are profitable are the goal of most entrepreneurs and inventors. To accomplish this goal, you need to choose and take one of two unique paths: licensing or manufacturing.
There are several factors to consider before choosing between product licensing and manufacturing. The freelance product development industry requires new inventions, such as modeling and patenting, as part of its freelance product development services. You may want to think about which one would benefit and be more lucrative for your company's invention based on the long term goals.
Define Product Licensing
A product licensing service involves proving the new invention of your company. This stage requires you to explain why another company should license and invest in your product. To receive royalty payments on the wholesale of your invention, you must persuade a company to do so. Nevertheless, the company will want to make sure you have a successful product before investing in you.
Concept Drawings and Prototypes
Concept drawings and prototypes can be used to prove the potential success and worth of your product. In the case of a new idea that uses existing technology without proof that it works, you should develop a sell sheet for your new product. You must include your new strategy, fresh approach, or anything else that sets your product apart from similar products. You do not focus on the prototype of your new idea but rather on the benefits of it.
Patent Filling
Although filing for the patent does not have to consume your resources and time, your idea also needs some intellectual property protection. You can submit a provisional patent to provide temporary protection without any major expenses. You can research online for helpful resources on patent protection without a legal team’s guidance.
Cost
Get your business legitimate with a dedicated phone number, a professional website, and letterhead. It is also important to understand the manufacturing steps needed for your invention's design and production so you can clear up any implementation issues with prospective licensees. The process could be completed in less than 30 days if you work efficiently and spend approximately 500 dollars.
Define Product Manufacturing
Making a product involves taking your prototype and turning it into a finished product. Among other things, it includes die making and tooling. Your product will be showcased and introduced to your target market at trade shows, you will set up an office, and you will need to invest in inventory to get to the product manufacturing stage.
To introduce your product and entice customers to purchase it, you must develop a marketing and advertising plan. Despite a low cost invention, the estimated startup cost is 250000 dollars even with the entire process taking up to a year.
Licensing Process of Company’s Invention
Patent owners who license inventions allow another party to purchase the intellectual property rights when they license their inventions. You receive payment for licensing the invention rights for a specific period of time.
There are times when patent licensing payments are made through royalty payments. Patent owners license their inventions, and licensees pay for the right to use them. The licensing party of the invention usually does so in manufacturing and marketing.
Manufacturing Process of Company’s Invention
It is common for patent owners to want to manufacture their invention themselves rather than license the manufacturing rights to another party. In other words, the patent owner will continue to have full control over the invention. Furthermore, they will also be responsible for managing the entire manufacturing process, either overseas or at home.
You need to hire a company that will build or create your invention if you decide to manufacture it. To maintain complete control of the process, it is an attractive option for inventors with specific visions for their invention. You must also accept the costs and risks of manufacturing your new invention if your company decides to do so.
Merits of Licensing of Company’s Invention
Inventions require less involvement from the inventor after they are made. As a result, you can reduce risk and make significant amounts of money through royalties. Having someone else markets the previous idea and saving money on prototype services allows you to focus on future inventions.
Demerits of Licensing of Company’s Invention
Patent licensing has the major downside of requiring inventors to surrender marketing and production rights to their inventions.
If another party acquires rights to your invention, it may change its name, price, or appearance. If you do not have the assistance of an experienced lawyer, negotiating a licensing agreement can be daunting and complex.
Launch delays, difficulties securing a license for the patent, and manufacturing difficulties are other licensing drawbacks. If something goes wrong with the licensing agreement, legal issues may arise, as well as loss of money and time.
Merits of Manufacturing Company’s Invention
Taking care of the invention's manufacturing process can benefit the patent owner. When production is appropriately managed, inventions manufactured by investors get to market much faster. A patent is owned by the inventor, who retains control over its future. When an inventor manufactures their invention instead of just receiving royalties, they have a greater chance of making money.
Demerits of Manufacturing Company’s Invention
You should also think about several drawbacks of manufacturing or licensing your company's invention. Developing a virtual prototype is often more economical than creating one physically, while manufacturing requires an actual prototype.
Furthermore, creating an inventory of your new product is also very expensive. It is also common for inventors to look for investors who can help cover the initial costs of manufacturing their products.
A positive aspect of this practice is that the inventor retains creative control while also receiving some assistance towards the expenses. Additionally, corporations are a good option since they allow for multiple investors, although starting one costs money and time.
Which one to choose between Licensing and Manufacturing?
You can license your product for less money and time, but the potential payoff is smaller. Once you have licensed your invention, you can freely work and live wherever you wish. To license a product, you must be resourceful, creative, understand manufacturing, and be able to sell.
Manufacturing a product takes more time and money, but it can also yield higher returns, and you can do it on your own terms as well.
Manufacturing processes carry a higher risk than licensing, but if done correctly, can be successful. Additionally, a person must be knowledgeable about inventory controls, manufacturing, sales, and finance in order to run a small business.
To learn more, watch the following video tutorial.
Video Source: inventRightTV
Conclusion
Licensing products and manufacturing inventions have both positives and negatives. Many inventors find it worthwhile to maintain control over their products. There are more risks associated with manufacturing, as well as higher rewards. Licenses are generally less risky and bring a lower return on investment.
The licensing of products and manufacturing of products are not superior or inferior to each other, but each requires a different set of abilities and skills. It is always possible to pick the path that is most suitable for you based on your strengths.
