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datalog, Banker
Category: Finance
Satisfied Customers: 81
Experience:  FINRA/NASD 6 & 63, Health, Life & Annuities License, Bank Vice President
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I want to raise money for a patent. How can I do this and

Customer Question

I want to raise money for a patent.

How can I do this and solicit people with out the costly sec registration fees?
Submitted: 6 years ago.
Category: Finance
Expert:  datalog replied 6 years ago.

datalog :


Welcome to Just Answer Finance. I am here to assist

datalog :

What do you mean by SEC fees? Thank YOU!

JACUSTOMER-zckuf2e5- :

What I'm looking to do is to sell part of a patent to raise money to take it to market.

JACUSTOMER-zckuf2e5- :

My initail thought was to set up website and sell say 10% of patent for $10k

JACUSTOMER-zckuf2e5- :

In return I would give them part of the patent, regiter their name as partial assigned with patent office and also pay something like 3% on the sales. If we don't sell obviously don't pay but if sell pay them.

JACUSTOMER-zckuf2e5- :

Based on my research, I think it would be classified a stock, and not an asset, making it fall under the sec reporting guidelines.

JACUSTOMER-zckuf2e5- :

I have two other ways

JACUSTOMER-zckuf2e5- :

The first is to do it as a club.

datalog :

I understand you now. Have you tried researching " angel investors"?


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Search Results

  1. Inventing New Products/Inventions: angel investors, angel funds ...

Jun 3, 2008 ... seek angel investors for new products before the products are protected ? ANSWER : Other than (1) provisional patent or (2) confidential ... - Cached - Similar

  1. 10 Questions Venture Capitalists and Angel Investors Are Going To Ask

Jul 20, 2007 ... 5 Quick Tips on Pitching Angel Investors and Venture Capitalists .... you think patents are important or not, I suggest you have an answer ... - Cached - Similar

  1. National Angel Investor Groups | Patent Trademark Copyright Law

Dec 5, 2009 ... Contact information for angel investor groups throughout United States. › Business - Cached - Similar

Thank you for using Just Answer Finance. If this answer meets your needs, PLEASE CLICK THE ACCEPT BUTTON. Also, please feel free to reach me with any follow up questions, comments or concerns. Best Wishes!

JACUSTOMER-zckuf2e5- :

The club memembers say pick a patent out of a small listing (10 patents listed) and the people pick one patent, some could invest $50 others could invest $500, all picking that one patent they form a club, all that invested in the patent join a club with the investment being a portion of that particular patent. In return they own a hard asset the patent say 10% and get a 3% royalty when product actually sells.

JACUSTOMER-zckuf2e5- :

The other way is to have a listing of the patents the people pick one and as a group they decide to all be involved in that one.

JACUSTOMER-zckuf2e5- :

The investors put the money into a revokable trust

JACUSTOMER-zckuf2e5- :

the trust distributes the money to the inventor and then the inventor assigns the patent rights 10% and a 3% royalty to the trust. I should say that the grantors, investors, actually make a donation to the revokable trust, not a loan and not a purchase, but dotation or nonrecourse payment. What you end up with is a irrevokable trust, that distributes inituial money to patent holder, who in turns assigns the rights and payments, all the money is distributed at the end of the year. If there is no income all the tax returns are zero. the original investors are benificiaries of the trust and the patent holder is not,

JACUSTOMER-zckuf2e5- :

hope its not too chopped up to understand

datalog :

Sounds like a great idea, however, due the structure that you have in mind, it would appear to come under the "INVESTMENT COMPANIES ACT" . Your best bet is to locate a private investor/angel investor and to draft up an agreement with them via an attorney. Due the complex investment rules of the US and many other countries to protect consumers your options may be limited other than to find a private investor/partner.

JACUSTOMER-zckuf2e5- :

What i'm trying to do is create a cross between Prosper, peer to peer loan, and Shark Tank. I have been doing this ten years and there is a gap in the market. I want to find a way to make it work so inventors can take their products to the next level. One step at a time. How can prosper do it? What can I do to create a mass market. Will the irrovakable trust work if it is a gift. All disclaimers will be in. Don't invest money you can't ;lose. But structure as a gift to trust, trust buys patent or revenue stream and if it works they get paid. Most people small dollars. I make money of website and advertising not money collected.

datalog :

Sounds like a well planned idea. However, due the investment companies act, I don't see a way around it. Bearing in mind that although the rules may be burdensome, but are also for your protection. Short of this. your other option is to explore such options in countries that have less restrictive investment acts. Example, The Cayman Islands, Barbuda and perhaps Bermuda, etc.,

datalog : The Laws That Govern the Securities Industry

Securities Act of 1933

Often referred to as the "truth in securities" law, the Securities Act of 1933 has two basic objectives:

  • require that investors receive financial and other significant information concerning securities being offered for public sale; and

  • prohibit deceit, misrepresentations, and other fraud in the sale of securities.

The full text of this Act is available at:

Purpose of Registration

A primary means of accomplishing these goals is the disclosure of important financial information through the registration of securities. This information enables investors, not the government, to make informed judgments about whether to purchase a company's securities. While the SEC requires that the information provided be accurate, it does not guarantee it. Investors who purchase securities and suffer losses have important recovery rights if they can prove that there was incomplete or inaccurate disclosure of important information.

The Registration Process

In general, securities sold in the U.S. must be registered. The registration forms companies file provide essential facts while minimizing the burden and expense of complying with the law. In general, registration forms call for:

  • a description of the company's properties and business;

  • a description of the security to be offered for sale;

  • information about the management of the company; and

  • financial statements certified by independent accountants.

Registration statements and prospectuses become public shortly after filing with the SEC. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at Registration statements are subject to examination for compliance with disclosure requirements.

Not all offerings of securities must be registered with the Commission. Some exemptions from the registration requirement include:

  • private offerings to a limited number of persons or institutions;

  • offerings of limited size;

  • intrastate offerings; and

  • securities of municipal, state, and federal governments.

By exempting many small offerings from the registration process, the SEC seeks to foster capital formation by lowering the cost of offering securities to the public.

Securities Exchange Act of 1934

With this Act, Congress created the Securities and Exchange Commission. The Act empowers the SEC with broad authority over all aspects of the securities industry. This includes the power to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as the nation's securities self regulatory organizations (SROs). The various stock exchanges, such as the New York Stock Exchange, and American Stock Exchange are SROs. The National Association of Securities Dealers, which operates the NASDAQ system, is also an SRO.

The Act also identifies and prohibits certain types of conduct in the markets and provides the Commission with disciplinary powers over regulated entities and persons associated with them.

The Act also empowers the SEC to require periodic reporting of information by companies with publicly traded securities.

The full text of this Act can be read at:

Corporate Reporting

Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC's EDGAR database.

Proxy Solicitations

The Securities Exchange Act also governs the disclosure in materials used to solicit shareholders' votes in annual or special meetings held for the election of directors and the approval of other corporate action. This information, contained in proxy materials, must be filed with the Commission in advance of any solicitation to ensure compliance with the disclosure rules. Solicitations, whether by management or shareholder groups, must disclose all important facts concerning the issues on which holders are asked to vote.

Tender Offers

The Securities Exchange Act requires disclosure of important information by anyone seeking to acquire more than 5 percent of a company's securities by direct purchase or tender offer. Such an offer often is extended in an effort to gain control of the company. As with the proxy rules, this allows shareholders to make informed decisions on these critical corporate events.

Insider Trading

The securities laws broadly prohibit fraudulent activities of any kind in connection with the offer, purchase, or sale of securities. These provisions are the basis for many types of disciplinary actions, including actions against fraudulent insider trading. Insider trading is illegal when a person trades a security while in possession of material nonpublic information in violation of a duty to withhold the information or refrain from trading.

Registration of Exchanges, Associations, and Others

The Act requires a variety of market participants to register with the Commission, including exchanges, brokers and dealers, transfer agents, and clearing agencies. Registration for these organizations involves filing disclosure documents that are updated on a regular basis.

The exchanges and the National Association of Securities Dealers (NASD) are identified as self-regulatory organizations (SRO). SROs must create rules that allow for disciplining members for improper conduct and for establishing measures to ensure market integrity and investor protection. SRO proposed rules are published for comment before final SEC review and approval.

Trust Indenture Act of 1939

This Act applies to debt securities such as bonds, debentures, and notes that are offered for public sale. Even though such securities may be registered under the Securities Act, they may not be offered for sale to the public unless a formal agreement between the issuer of bonds and the bondholder, known as the trust indenture, conforms to the standards of this Act. The full text of this Act is available at:

Investment Company Act of 1940

This Act regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public. The regulation is designed to minimize conflicts of interest that arise in these complex operations. The Act requires these companies to disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis. The focus of this Act is on disclosure to the investing public of information about the fund and its investment objectives, as well as on investment company structure and operations. It is important to remember that the Act does not permit the SEC to directly supervise the investment decisions or activities of these companies or judge the merits of their investments. The full text of this Act is available at:

Investment Advisers Act of 1940

This law regulates investment advisers. With certain exceptions, this Act requires that firms or sole practitioners compensated for advising others about securities investments must register with the SEC and conform to regulations designed to protect investors. Since the Act was amended in 1996, generally only advisers who have at least $25 million of assets under management or advise a registered investment company must register with the Commission. The full text of this Act is available at:

Sarbanes-Oxley Act of 2002

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, which he characterized as "the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt." The Act mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud, and created the "Public Company Accounting Oversight Board," also known as the PCAOB, to oversee the activities of the auditing profession. The full text of the Act is available at: (Please check the Classification Tables maintained by the US House of Representatives Office of the Law Revision Counsel for updates to any of the laws.) You can find links to all Commission rulemaking and reports issued under the Sarbanes-Oxley Act at:

Note: See also Researching the Federal Securities Laws Through the SEC Website.

datalog :

Thank you for using Just Answer Finance. If this answer meets your needs, PLEASE CLICK THE ACCEPT BUTTON. Also, please feel free to reach me with any follow up questions, comments or concerns. Best Wishes!