In many instances, inventors find that they have a salable product or service after filing a patent application, even without having a well-defined IP strategy. However, they cannot afford the cost of development, manufacture, and/or implementation. Thus, they use the priority year of the patent application to search for investors such as angels and venture capitalists as the main avenues for obtaining IP finance. Typically, the inventors do not have efficient channels for accessing the investor community directly. Therefore, many inventors turn to “finders” in their industry to help speed up the process. The finder presumably has good ties with the investor community, and knows how to gauge and advance new business proposals. In exchange for the finder’s services, the finder will expect compensation which should be agreed upon, in writing, in a finder’s fee agreement.

While intellectual property firms specialize in such activities, many cash-strapped entrepreneurs forego such services. Without a basis in technology law, contracts, and licensing, here is where it can get a bit dicey. Many inventors figure that if the finder can produce a sizable investment for the proposal, why should they care if the finder receives a fraction. Certainly, this is an equitable way of thinking. However, this reduces the issue to a game of numbers (typically, a percentage of the investment amount over a period of time plus a percentage of exercisable options). Since most industries have their own standards, the finder usually asks for reasonable percentages in these regards. However, the agreement typically includes many more terms which are usually where inventors stumble by not scrutinizing carefully the entire agreement in the context of a long-term IP strategy. While elaborating on these issues is beyond the scope of this forum, it is good to consider giving a higher up-front compensation to a veteran finder with an excellent track record rather than having restrictions on future development and important decision-making processes.

FlashPoint IP, a leader among intellectual property firms, endeavors in this regard to provide an enlightened perspective for its clients to move forward with business ventures with the assurance of being well-informed. FPIP strives to implement these diverse issues into a unified framework. Our engagement managers, with an emphasis on technology law, are adept at synthesizing the many facets needed to create a winning formula for your IP. We assist in securing financing for your IP ventures by building relationships from inventors to investors. Contact us to discuss your options regarding IP strategy and positioning, and how best to advance your business interests.