For your licensing support and advice, be sure to visit the Licensing Executive Society of Australia and New Zealand (LES) at http://www.lesanz.org.au/index.php

The US National Inventor Fraud Centre publishes the following licensing information:

Most individual inventors should consider licensing their "patent rights" to an existing manufacturer and simply collect a quarterly or annual royalty.  It is important to understand that you license the "patent rights" and not the invention.  In other words, you must either have a patent or have applied for a patent provisional specification "patent pending". 

No manufacturer is going to seriously consider licensing your idea without you obtaining a provisional specification "patent pending" or a full patent.

Licensing your invention is basically a Four Step Process:

1. Locate Manufacturers

2. Prepare Marketing Material

3. Submit Marketing Material to Manufacturers

4. Negotiate a License

Of course reaching Step 4 depends upon how well you do Steps 1 - 3.  

You will first want to locate at least 20 to 100 Manufacturers who make or sell products in a marketplace similar to your invention. 

You will then want to prepare a professional looking Marketing Letter and possibly even a Professional Brochure of your product. 

You may even want to start your own Product Website showing your invention in further detail for the manufacturers that receive your marketing letter.  

After you receive some responses from manufacturers, the next step is to Negotiate the Licensing Agreement which you should hire an experienced attorney for. 

If you are unable or unwilling to take the time for the Four Step Process, then you should consider identifying People Who Can Help for assistance in marketing your invention to a manufacturer.

How much can I actually make?

The rule of thumb is that inventors are paid five percent of the wholesale price.

There are three ways your invention can make money.

1) OPTIONS. This is a fee a company pays to have your item for exclusive review during which time they promise not to show it to anyone else. Option payments can possibly range from hundreds to thousands of dollars per month.

2) ADVANCE ROYALTIES. This is a payment advanced against future royalties usually paid upon signing of a license agreement. The company deducts this advance from royalties payable later. Advances can run from a few thousand to tens of thousands of dollars.

3) ROYALTIES. This is what it’s all about! Royalties are rent that the company pays for the use of your idea. There is almost no limit to total royalties, which can range from a few hundred dollars over the advance to millions over time.

How are royalties calculated?

Estimating royalty income is based on the wholesale price and not on the retail price.

As an example, let us say you have a product that is manufactured and sold by a supplier that retails the item for $34.99 with a wholesale price of $20.00.

If the royalty rate is five percent and 100,000 units are sold, then the income will be: $20.00 x 5% x 100,000 = $100,000 and your share will be 60% = $60,000.

Now suppose your idea is a toy that includes a well known character license such as Spongebob Squarepants. The royalty rate is likely to be only two or three percent, because the manufacturer is also paying Nickelodeon 12 percent, more or less, for the character rights. Hence the calculation will be as follows:

If the royalty rate is 2.5 percent with a wholesale price of $9.00 and 100,000 units are sold, then the income will be: $9.00 x 2.5% x 100,000 = $22,500 and your share will be 50% = $11,250.