3 expert tips for securing a profitable patent royalty for your technology
Article – November 2020 | RoyaltyRange
You’ve invested huge amounts of time, money and expertise into your technology. As such, you must make sure you are fairly compensated when another business benefits from your invention. But how do you protect yourself from agreeing to a patent royalty that’s too low, and cheating yourself out of a bigger share of the earnings? In this blog, we reveal our royalties experts’ top 3 tips on knowing your patent’s worth and strengthening your position in patent royalty negotiations.
By using a royalty rates database like RoyaltyRange, you can filter your search in line with your patent license, and find real market rates that you can be confident about using in your patent royalty calculation.
Tip 1. Get to grips with the details of your patent license
Before you attempt to calculate a patent royalty rate for your technology, you need to be clear on the details of the patent license you’re offering – as well as the patent itself. This is because patent royalties are affected by these details, even for similar technologies. For example, the royalty rate for an issued patent in an exclusive global license agreement will be different from that of a pending patent in a non-exclusive license agreement that is limited to the European market – even if the technologies in question are largely similar. When you are clear about your patent license, you will be able to find more relevant market data to help with your patent royalty calculation.
For more information, see our article on typical royalty rates and factors affecting them.
Tip 2. Invest in relevant, focused patent royalties data to strengthen your calculation
There is a lot of free information online about average royalty rates. The problem with this is that you cannot guarantee the data is comparable to the patent you’re licensing. How can it be, when the licensing agreements it’s based on have not been filtered for comparability? Understandably, most organizations and inventors want a more dependable and accurate source of data for such an important analysis, which is why they use a royalty rates database like RoyaltyRange. This enables you to filter your search in line with the details of your patent license, and find real market rates and averages that you can be confident about using in your patent royalty calculation.
For more information, here’s everything you need to know about our patent royalty rate database.
Tip 3. Solidify your negotiating position with real market data
Before you enter negotiations with a licensee, you need to calculate and understand the market value of your patent. By presenting the licensee with real, up-to-date data that proves your patent’s value in their target market, you make it much harder for them to dispute the royalty rate you propose. You put yourself in a very strong negotiating position and protect yourself from agreeing to a royalty rate that is too low, making sure you get a fair share of the licensee’s patent revenue.
So, how exactly do you work out the market value of your patent? One approach is to use the RoyaltyRange database to find comparable patent license agreements, and then conduct a valuation using a marked-based method.