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Jan 5

I frequently talk to inventors who jump into engineering a prototype and / or filing a patent before having the professional search done. I understand: it’s the fun part. However, it can be a critical financial error. Most inventors are on a budget; and while you can fix anything if you throw enough money at it, you will use less of your stomach lining and cash if you just get the search done first.

After you, the inventor, have done as much of your own searching as you can, it’s time to get a professional search done. This is the first serious money you should spend. All of the business decisions you make will be based on the results of a professional search. You can find a comprehensive search for a flat rate. You certainly don’t want to pay an attorney his/her hourly rate for this.

A professional comprehensive search is a combination of the US patent database, the international databases and product searches. The United States Patent and Trademark Office (USPTO) is a great place to start your search. A search of just the USPTO database will obviously only give you US patent filings. This isn’t enough. If your invention has been done anywhere in the world at any time in history, you will not be granted a US patent. The international search has nothing to do with where you plan to sell and everything to do with what is considered “public domain.” I’d also suggest you use SearchQuest Patent Search for your patent search needs.

Why is the product search so important? There are many products in the marketplace that are not patent protected. This means they are part of the public domain. You can’t get a US patent. Also, there is a two and a half year blind spot in being able to find filed patents. A provisional patent application is good for one year and is never made public. When the non provisional application is filed, there is about an 18 month delay before it is published for the public to see. However, many times an inventor will go to a tradeshow, set up a website or post a video of an invention. The only way to find these products is to do an in depth product search.

If you have questions about a good search or any other topic, let me know.

Mar 22

I had a client call me last week for the sole purpose of venting.  It seems that she had received an office action from the USPTO and was upset over how much it was going to cost her to have her attorney answer the office action.   Her telephone call caused me to reflect and resulted ultimately in my feeling that I needed to blog about this particular issue.

First, it’s important to always bear in mind a simple truth: inventing is expensive.  There is no way around it.  If you are going to pursue your invention, it is going to cost money.  The exact amount of money varies from case-to-case depending on the complexity of your invention.

Second, it’s important to keep things in perspective: obtaining a patent for the invention isn’t the most costly part of the process.  However, it does seem to be the one that draws the most ire.  It will cause you less stress if you keep in mind that these fees are paid over a period of years not all at the same time. 

To give you a better sense of how involved the process actually is, here’s a list of the most obvious costs in the patenting process:

  1. The first step is to have a professional search done.
  2. Second, you need a review of the search by an intellectual property attorney before you meet with an engineer or make final adjustments to your design.
  3. Third, have an intellectual property attorney draft an application for a utility or design patent.
  4. Fourth, when you’re ready to file, there are filing fees that have to be paid to the USPTO.  This is in addition to your attorney’s fees.
  5. After you’ve waited anywhere from 14 to 36 months, you should receive your first office action.  You will be charged for the attorney’s time to draft a response to this first office action.
  6. Additionally, if you’re not diligent and you fail to file your response before the appointed deadline, you’ll have to pay a penalty to get your patent out of “abandonment”.  This is what it is called when you don’t respond in time.
  7. Next, if there are no further office actions (generally not the case) and you get this far, there is a “Notice of Allowance”.  This means that the USPTO will issue your patent if you pay them the next fee which is around $800.
  8. Once your patent issues, however, you’re still not done:  there are maintenance fees that you have to pay periodically during the life of your patent.  All of the fees are listed on the USPTO website and your attorney can give you a list so that you know what to expect.

Don’t be caught off guard.  Always ask “what is this going to cost”.  Educate yourself on the patenting process.  There are plenty of resources out there.  We try to make sure every inventor knows what to expect, but you have to pay attention.

Mar 8

I recently had a call from a patent attorney who wanted me to introduce him to my clients so that he could offer to buy their intellectual property from them. He has, what is called, an “Intellectual Property Holding Company” or “IPHC”.

IPHC’s come in essentially three different flavors.  The first category consists of those whose purpose is essentially malevolent; they buy up IP, lie patiently in the grass and wait until a major company introduces an arguably infringing product, and then they pounce on that company with a lawsuit, demanding extraordinary damages.  The purpose of the lawsuit is not to pursue the actual litigation; rather, the purpose is to use the litigation to force a settlement in which the IPHC extorts a lucrative contract for licensing the patented technology to the infringer.  These types of predatory IPHC’s are commonly referred to as “patent trolls”.

The next category are tax-advantaged off-shore subsidiaries of major industrial corporations with significant amounts of IP.  These types of IPHC’s are set up principally as a tax dodge.  As a category, they consist of off-shore holding companies in tax-friendly jurisdictions that are set up exclusively to hold the parent corporation’s IP and therefore secure for the parent, favorable tax treatment when the earnings are repatriated to the U.S.

The last category consists of groups of individual inventors who decide to band together to better position themselves to ultimately monetize their IP.

I always approach IPHC’s, particularly the patent trolls, with a measure of caution.  And, while I do not know the type of business model being pursued by the company represented by my attorney caller, my antenna were up.  Nevertheless, I do believe that there are circumstances when selling one’s IP to an IPHC might be a good option for an inventor.  And, there are even some situations when I might actually recommend an IPHC to a client.

As a general rule, however, it’s my opinion that you have other options that will prove more lucrative for you and should be considered first. You will get a much better offer if you do the work that is required to get a good licensing agreement from a company that will manufacture and sell your product.  It’s hard work, it takes time and money, but the pay-off is much more satisfying.  Therefore, in most situations, selling your intellectual property to an IPHC should be considered only as an option of last resort. 

Remember: always be careful and get help.  When it comes to selling, licensing and otherwise monetizing your intellectual property, it’s complicated and the price of a qualified, professional advisor is miniscule compared to the amount of money you might end up leaving on the table.

Feb 12

Inventors frequently swing to two extremes when it comes to their business plan.

The first one is simply: have idea – get patent – make money.  I can’t even tell you how many ways this is a flawed plan.  This plan is relevant only in fantasy land and real inventors can’t afford to live in fantasy land.  You have no proof of concept, no numbers, no packaging, nothing to sell and no customers.

The other extreme is equally flawed:  have idea – buy a piece of business plan software – go to a class – fill in the blanks – make money.  It doesn’t matter how much dreaming you do at this extreme, you can’t have accurate numbers without doing the hard work up front.  Again you have no proof of concept, no numbers, no packaging, nothing to sell and no customers.  With this plan all you are doing is guessing.  Real inventors don’t guess.

Honestly, the first stages of inventing do not require a business plan.  You have to do your homework first.  In fact, unless you are presenting to a bank or an investor, you don’t need a business plan until you are in business.  And then, a business plan serves as a road map for you. 

A more useful exercise is to develop a marketing plan after you know you have a product.  After all, if you can’t sell the product to a consumer, it doesn’t matter how good your business plan is.

The first inventing steps require your time and energy.  Do you own searching for like and similar products.  Search online, in stores and on the USPTO website.  Build a cheap version of a prototype.

The first thing you have to pay for is the professional patent search.  All of your business decisions will be based on the results of this search, but that is discussed in another blog.

FYI: You are still a long way from needing a Business Plan.

Oct 12

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A few weeks ago an inventor told me that he was checking into the cost of manufacturing before having his patent search reviewed.  This was a bit out of order but not a huge issue.  You want to understand the costs involved before jumping off the cliff. 

However, I found out later that the inventor had gone ahead with a rather large order before having the search reviewed and patent done.  This is not a fatal inventing mistake but it can certainly be an expensive one.

There can be several problems with manufacturing first.  They are:

 

  1. You may be making a design mistake that could have been caught with the search review (older patents often reveal bad designs).
  2. You may be infringing on other prior art that would have been revealed with the review.  In this case, you risk eventually receiving a “cease and desist” letter notifying you of the prior art and demanding that you cease selling your invention. Then, entire investment will have been wasted.
  3. If your patent attorney determines that you can file a patent but the first design either has flaws or infringes on prior art, you will end up paying for additional design work, new molds or tooling, and more manufacturing.

If you are going to bet your financial future on a new idea, it is in your best interest to do it right.  Make sure you do your homework beforehand.

Sep 25

The greatest challenge for an inventor is money. You have to have money to invent. No one invests in an idea. You have to have intellectual property protection and a working prototype or a very detailed 3D-CAD drawing. Unless you are working for a company and invent under its name, you have to be able to support your idea in the early stages. Do an asset inventory; know what resources you have and determine how much you are willing to spend. Then treat every penny like it’s your last.

If you are going to get “investors”, get a transactional attorney to explain all of the issues. I have a client who always wants his patent attorney to do his transactional work. This is like having a pediatrician do brain surgery. Get the right people for the right job. Cutting corners can land you in the “fatal mistakes” category.

Once you’ve identified the assets you have available, find out what it’s going to cost and budget the necessary expenses. I like to help my clients plan and budget according to their project’s scope and their financial and personal abilities. Different projects have different scopes, needs and agendas. It’s important to understand what your’s are.