ents can be employed most
profitably by selling licenses, county and State rights; thus, in the
case of a method of constructing fences, the patentee could sell State
and county rights to parties, who in turn could grant farm rights, etc.
[Sidenote: Placing upon Royalty.]
The license and royalty plan is perhaps the best and most popular method
with inventors for realizing from their inventions. This, in effect,
involves a contract between the patentee and the manufacturer, by which
the latter in consideration of a license to manufacture the article
covered by the patent, agrees to pay the patentee a certain specified
sum as royalty for each article manufactured or sold bearing the
patented improvement.
Placing a patent on royalty is ordinarily taking chances, but if the
patentee has full confidence in his article selling well, he should by
all means take royalty in preference to selling the patent in its
entirety. Many valuable patents are sold by their owners for from $1,000
to $10,000, which yield the purchasers, when the article is on the
market and selling well, as much as $25,000 annually in profits. This
calls to the author's mind a patent for which at the outset was
doubtfully offered $3,000, but before the negotiations terminated, the
patentee succeeded in placing it upon an exclusive royalty basis. The
royalties paid to the patentee during the first four years amounted to
over $50,000, and the manufacturers subsequently made an offer of
$100,000, for the patent.
In making royalty contracts with parties, the patentee should
investigate the standing, rating, and capabilities of the manufacturer,
and, above all, should be certain that the parties have the right motive
in view, and that the contract is so drawn that it will fully protect
his own interests. Many patentees have been caught by manufacturers
offering large royalties for the sole purpose of gaining possession of
the patent, that they might pigeon-hole it, in order to keep the article
out of the market, so that the sale of some similar article in which
they are interested would not be interfered with by the introduction of
a similar or better article, such as the patent anticipates.
There are others who propose and make royalty contracts with patentees
with no other object than that of making the special tools, patterns,
dies, etc., for which they charge the patentee an extortionate price.
The best and safest way for the patentee to guard aga
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