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License to manufacture a product "invented" by another?

For comparison sake here are some real world numbers - I was involved with a company who mfd. and distributed motorcycle parts and accessories. Their gross sales were above $40M, they had 6 distribution centers in the US and a few in europe. Folks would send them sample custom parts to inspect, generally without any documentation to protect them.. If the Co. chose to develop it into a manufacturable and sellable product they generally paid them a royalty of 5% of what it cost them to make it and deliver it to their distribution centers in the US and europe. They were generally made in Korea, sometimes elsewhere overseas if the part was cosmetic only. So the mfg cost was less than half of the retail price, which means the royalty would be something like 2% of the retail price.
They approached me to license my product, I did not approach them. I licensed them a current performance product, complete with all mfg drawings, user manuals, artwork, with a proven decades long track record of premium performance, allowed them to use my brand name and logo in conjunction with theirs,(which was a large part of the value to them) and provided product support to their people. In exchange I got 10% of the mfg cost. About $30 on an assembly that retailed for $500-$700.
They eventually got sold to another international conglomerate investment firm which ended the relationship with the Korean manufacturer and all that manufacturing ended in bankruptcy, but I did get to see the entire process from the initial proposal from them to receiving mailbox money before it ended. The royalties are tiny, but there were some prolific creators with lots of product royalties who did well.
Your inventor may expect a big payday, If you level with him with realistic numbers that may change his mind.
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Me personally, I'd think you're just as ethically in the clear as if someone accused you of theft because you breathed oxygen that came from their orchard, but the public may not see it that way.
You're discussion of ethics leaves much to be desired. There is no difference between stealing someone's idea and breaking into their house to steal their TV. If someone approaches you with an idea in good faith in this country and you proceed to steal their idea there is a term called unconscionable conduct and believe me the court will find against you.
Sex toy Innovation is nothing to be ashamed of.
I worked with a guy who ran a toolroom in Wellington NZ, this butch chick walked in and slammed a 9" inch dildo on his desk and said I need this modified. Apparently they had the mold and she wanted some extra features added.