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Up Front Royalty?
Posted by Anonymous . updated on 2/26/2009
I have a patent on an extension cord design that has been under going testing by a very large company about $500m annualy and the company that wants to licence it asked us what we want for it.
We have about 150k into this so far with prototypes legal fees etc. Its my understanding that most companys wont pay that kind of upfront royalty. Plus they have already expresed they want the product but they implied they will not pay what we have into this. However I do believe they will give us about $0.30-$0.50 per unit sold.
There are several other companys equally as large should I spend more time pursuing them trying to get more up front money?
What kind of dollar figure can you expect on something like this?
This was the first company that we showed it to.
I just fear sitting on this thing and having to wait 2 years to get my money back or having them drop the ball and us have to start over.
Thanks for any advice!!
Answers (3)
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JSonnab...
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Your questions are reasonable ones, unfortunately, they're business questions, not legal ones. What's more, even though attorneys often become involved in negotiations such as the one you describe, the facts of each one differ greatly.
That said, a qualified attorney might be able to help guide you through the process, but you'd have to disclose a lot more details than you should here.
- Jeff
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Patent_...
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I agree with Jeff, these are primarily business questions. There are no hard rules here. But you should be considering things like: (a) how many other companies are there which might license your patent, (b)what is a reasonable annual sales figure (number of units) for each company/total, (c) how does exclusivity/non-exclusivity factor into this market and these deals, (d) what types of rights does the company want to license, e.g., geographical areas of sale, right to exclude others/sue, and lots of other things like that. You need to understand the market, try to pump the company for sales projections, etc.
Upfront money varies from situation to situation. Generally, a company which is willing to pay you a large upfront fee does so because it expects to pay way less over the lifetime of the license that way than on a per/unit royalty.
In terms of dropping the ball, you can structure the deal with a minimum annual royalty to put a floor on the per/unit royalty, if you end up going that way.
Best advice...get some good help and good luck!
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jadog
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Thanks for your insight. Do you guys have any good resources to find out annual sales figures. I havent had any luck diggin up those numbers.
Thanks again
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