Advance or guaranteed payment

It is part of the mythology of invention that every inventor deserves a large advance payment from the company. This is highly unlikely to happen unless the payment is for some contribution to the development of your invention that the company would have had to pay for anyway.

If you demand an advance payment, you risk damaging your prospects of a licensing agreement.  Most companies will take the reasonable view that your reward and theirs can only come from sales of your invention. Many smaller companies may argue that developing your invention is a large enough cost already, and that they simply cannot afford an advance payment.

A compromise may be to negotiate for a guaranteed minimum monthly income deductible from future royalties. This should perhaps be a small proportion - 25-30 per cent - of your agreed royalty on predicted annual sales. Even if this income starts several months before production begins, it may soon be recovered from royalties if sales remain as forecast.


Alternatively, a company might offer to buy you out entirely for a fixed sum instead of royalties. The company will be gambling that your invention will be worth far more to them than they pay you. But the gamble may fail if the product does not sell as well as expected.

A buy-out may or may not be to your advantage, so seek professional advice if made such an offer. The company's aim will be to buy you out cheaply, but cash is always tempting and no one can predict the future. For example, one inventor was offered a choice of €1.5m for a buy-out, or a guaranteed minimum royalty of €90,000 a year. He chose the latter - but sales were much poorer than predicted and after two years the product was withdrawn.

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