Invention Royalty Assessments and Distribution for Inventors New Product Ideas

Royalty Assessments:

Determining royalty amounts depends on a number of factors including: industry specific royalty rates, overall product margins and manufacturer margin. Figure I below, outlines the typical distribution channel for product marketing. In most cases a royalty and/or upfront fee is paid to the inventor by the manufacturer or distributor. The most critical factor in achieving a high royalty rate is the ability to negotiate effectively.

Figure I :: Typical Distribution Channel:

Royalty assessments and distribution of new product ideas inventions: royalties for inventors depends on royalty rates, overall product margins and manufacturer margin

MANUFACTURER

DISTRIBUTOR

RETAILER

Consumer

Manufacturers Responsibilities:

Normally Pays Royalties to Inventor
Produce
Package
Warehouse
Promotional Material
Consumer Awareness (advertising)
Warranty
May be Exclusive or Non Exclusive Producer

Distributers Responsibilities:

May have distribution license and pay royalties to inventor
Short Term Warehousing
Promotion at trade show events
Promotion and ongoing relations with retail buyers
Some packaging
Time management of product delivery to retailers
Merchandising: shelf placement and follow up
Warranty follow-up

Retailer Responsibilities:

Consumer recognition campaigns
Product Delivery Convenience
Consumer Service
Point of Sale Service