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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 21
I get asked this question all the time, “Can I patent it myself?” Technically, yes, you can. However, my answer is always No. No! and Absolutely NO!! Doing your own patent work is like doing your own brain surgery. By the time you realize you’ve made a mistake, it’s too late to fix it.

Let me explain.  I do recommend that you read about the patent process.  The book “Patent It Yourself” is a good one.  You don’t want to pay the Intellectual Property (IP) attorney to educate you.  That you can do yourself.  However, that said, there is a reason why these professionals go to school for years and take several exams.  Writing a good patent is a unique and specialized skill set. 

I had a gentleman call me last week and ask about filing his own provisional patent application and then his own utility patent application.  If you’re going to bet your financial future on an invention, why wouldn’t you get the very best help and follow the steps that will give you the best opportunity for success?  Why would you risk everything on doing something that you are not trained for or had any experience doing. Would you really do your own appendectomy?

Honestly, unless you have the money to pay for a professional to file that patent application for you, you shouldn’t be going down this path at all.  Inventing is expensive and hard work.  Don’t cheat yourself by cutting corners on the important steps.  There are other ways to “bootstrap” that won’t put you at risk.

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 27

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Inventors are frequently afraid someone will steal their idea.  Some paranoia is good.  Too much is crippling.  You have to find a balance between protecting your idea and being able to get your idea incorporated into a tangible product that you can get to the marketplace.

 Here are some guidelines:

1.    You can talk in general terms about your project without giving an “enabling disclosure”.  An enabling disclosure would be when you give enough information for someone else to make the product. 

2.   If you want or need to talk about the details, use a non-disclosure agreement or a non-disclosure / non-compete agreement.  This is your due-diligence, your responsibility.

3.   Keep in mind that even though we have all heard stories about someone’s idea “being stolen”, most ideas are not stolen.  Ideas are like belly buttons, everyone has one.  People want to steal market share.  It is your market share that you have to protect.

Sep 25

rita_crompton-1The most tragic part of inventing is when an inventor with a reasonably good idea makes a serious or fatal error. I see it happen all too often. For instance, getting a patent before you know if your invention can be made at a price someone will pay just means you’ll end up with very expensive “wall art”. The fatal error: spending several thousands of dollars (patents are frequently over-priced because inventors usually don’t get competitive bids from attorneys) before it’s time.

Another fatal mistake is not making sure that the attorney writing your patent works with the engineer. This is critical. If the patent is written first and the engineer makes changes to the design, you now have a product that doesn’t match the patent.

However, one of the most serious mistakes an inventor can make is believing everything he or she hears on television and/or internet advertising. Anyone who wants you to spend thousands of dollars up front may be making their money on you, rather than your idea, especially if you really know nothing about the service provider. Beware of TV and internet advertising that promises to make you rich on your invention! Check out the Federal Trade Commission websites on invention promotion schemes:

(http://www.ftc.gov/opa/1997/07/mouse.htm) and
(http://www.ftc.gov/bcp/conline/pubs/services/invent.htm)

or the NCIO’s (National Congress of Inventor Organization’s) “Scambusters” website:

(http://www.inventionconvention.com/ncio/scambusters/index.html).