Archive for the ‘Licensing’ Category
This past week I visited the University of Illinois in Chicago (UIC) where I guest lectured in the classroom of Bruce Tharp, PhD, a professor at UIC and regular contributor to Core77. Bruce is teaching a first of its kind college course on licensing to a group of industrial design students. A licensed designer himself, Bruce realized there was a disconnect between industrial designers and licensing knowledge, which could be an important part of their future careers.
I lectured on the topic of licensing and product entrepreneurship, and spent a great two hours talking about theories and practices in the invention industry. It is always fun to get to talk about the thing I love best to an interested crowd. Designers are almost always inventors and are well positioned to take advantage of this type of opportunity, since they don’t necessarily have to hire a design firm to execute on their ideas!
The class was held in UIC’s awesome new Innovation Center (Check it out here).Thanks for the invite Bruce!
You can read some of Bruce’s ideas and thoughts on licensing and product development on Core77, be sure to check it out!
We are all extremely excited to see our product the Pitzo Pizza Cutter (under license to Farberware) has shipped to Walmart and is currently available for sale. This was a internal project that was invented and designed by Trident Design Director Jessica Moreland. We also had the pleasure of licensing a stainless steel version to the German Company, Rosle who makes some of the finest kitchen utensils found anywhere. The stainless version can be found at Bed Bath and Beyond , Brookstone and Kitchen Universe with many more stores to follow.
You have to determine somewhere along the way how you are going to try and monetize your invention. There are numerous variations on how to do this, but they tend to fall in two groups: 1. Licensing or 2. Manufacturing. Licensing is when you “rent” your patent and the rights it confers to a manufacturer in exchange for a royalty. It is much less expensive and simpler to license an invention, though it is still challenging and still requires a significant investment of both money and time. Manufacturing, of course, is when you get involved in actually producing your invention and selling it with a mark-up. It involves purchasing, tooling, creating marketing materials, selling the product, purchasing inventory, marketing, etc. It is, obviously, much more costly and time-consuming. In order to decide which path best suits you and your invention, first you must conduct a detailed analysis of the financial aspects of your product. Ask a manufacturer how much the tooling (machinery required to produce the product) will cost and what units will cost at certain volumes. You can contemplate different price points and margin levels and determine how many you would need to sell to break even should you invest in production. If you ultimately decide to license the product instead on manufacturing it, these numbers will be invaluable in negotiating and selling a license. The more info you can provide to the potential licensee, the easier it is for them to make a decision. The easier you make their decision, the easier it is for them to say “yes.” I call this the “easy yes”.
Once you have this information you can decide how you want to proceed. This is also a decision about what you want in your life. You can potentially make more money from your invention if you manufacture and sell it, but then you are running a product company. Is that what you want? Can you assemble the financing? Then go for it! If not, licensing is your better option. You’ll still need a patent and can count on some legal fees. In addition, you’ll have the best opportunity to pitch at industry tradeshows (like the Consumer Electronics Show), so count on that expense. A licensing deal will have fewer risks and take less of your time, but you will have much less control over how the product is implemented and marketed, and the level of attention it is given. I’ve licensed some products to only have the licensee sit on the patent and do nothing. This is a pain of course. You have to terminate the license and then re-license it, having lost potentially years of revenue. Licensing can pay off, though, and is often the best path for most people, especially if your product is complex.
Intellectual property (IP) protections are obviously an important part of being an inventor, thus, as an aspiring inventor, it is vital to learn about the different IP tools. There are many books on the subject of IP. If you are serious about your product, take the time to learn about this, because it is the source ofyour ability to practice.
First, there are non-disclosure or confidentiality agreements (NDAs). Use NDAs to protect the confidentiality of your invention while talking to potential partners, but don’t be overly paranoid. In my experience, paranoia stops way more business than it saves. You can have a lawyer draw one up or by a generic one. If you are applying for a patent, it is important to keep your product officially confidential in order to not accidentally destroy your ability to apply for a patent.
Patents serve several purposes:
1. they provide some legal powers to maintain exclusivity
2. they give you the ability to seek a licensee
3. they lend credibility to your product in the eyes of the consumer or licensee
4. they discourage casual knock-offs.
There are several types of patents: provisional, design and utility.
Provisional applications give you a one-year period of “patent pending” before you have to file a full application and cost much less to file. The provisional patent application is a powerful tool for the inventor and used properly can save lots of money and help drive better patent writing.
Design patents cover the physical appearance of a product. They provide much more protection than most inventors realize and are great for protecting products that derive their benefit primarily from their form.
which cover novel, non-obvious inventions “reduced to practice” (you can’t just patent an idea) are expensive and tricky to get, but are also potentially the most valuable as they can cover numerous applications of the same idea.
What many people misunderstand is that patents don’t actually prevent anyone from doing anything. They just give you the right to sue someone to stop them if they are infringing. You still have to sue them and win. This is very expensive. A utility patent lawsuit can easily cost more than $1 million in fees per side (Design patent lawsuits are typically much less expensive as the situation is usually clearer cut.). If you lose, then you not only lose the decision you were hoping for, you also lose all that money. Therefore, at the individual inventor level, it is unusual for a case to be prosecuted, as neither side can really afford to take the risk on a business where the money isn’t in the many millions of dollars. As a result, most patents are never truly enforced. It often comes down to a game of “chicken”– where the side with the deeper pockets usually wins. If there is doubt, the parties will usually settle and make a deal. Nevertheless, it is very difficult to license an invention without a patent, even if neither you nor the company is likely to enforce it.
You don’t have to wait until your patent is issued to get a license. I have licensed many products while the patent is still pending. Most licensees will insist on adding a clause that says if the patent never issues and the application is abandoned then the royalty they have to pay either disappears or goes way down, but I feel it is much better to get going rather than wait, which might take several years. In fact, I usually try and license my inventions under provisional applications, which give me the opportunity to work with the licensee to perfect the application before submitting it. This is to both parties’ benefit!
Trademarks can be just as important as patents to the success of your invention. Registering your trademark is a great way to add value to your invention. This can increase your payday if you license it or increase your sales if you manufacture it. As I mentioned earlier, the PowerSquid trademark was just as important to the success of that product as the design.
We are good friends with our fellow inventors at Edison Nation, (www.edisonnation.com), who conduct live product and invention searches to find new ideas for corporations to pursue. They also recently launched a $25 Million Innovation Fund. This fund is going to be used to invest in high potential inventions and patents with funding up to $250,000 per invention, in order to prepare them for market. This money will be spent on R&D, engineering, patent and IP protection, and marketing materials. The Fund is sure to be an exciting opportunity for those who make it in.
We are extremely pleased to be able to announce that one of our inventors, Trevis Kurz, has had his invention (which we helped him develop and patent) selected to move forward in the Edison Nation Innovation Fund. Trevis’s already well-developed invention will get even closer to a production ready design, as well as a great boost from Edison Nation’s high profile. Trident Design will be there along the way, working with their team to perfect the device and bring it to market.
Although every one of us interact with plastic on a daily basis very few people consider that there is a whole world out their surrounding the plastic industry. Industry professionals who have a need to know the ins and outs of all things plastic related turn to the monthly periodical, Plastics News. Plastics News focuses on commercial, financial, legislative and market-related developments worldwide that affect North American plastic product manufacturers, their suppliers and customers.
Based off our successful licensing of the Trident invented Scriptsafe (which securely protects prescription medicine from unauthorized use)to Flambeau (one of the United States largest manufacturers of plastic cases and boxes.) Plastics News recently published an article about Trident Design and Chris Hawker our president. We here at Trident incorporate the use of plastic into almost every single one of the products we develop. Plastic is the most easy, affordable and moldable substance to work with and is a very crucial element in our product development process. Besides what they say that any press is good press, this is just a really nice article about Chris, Trident, and some of the things we have accomplished. Here is the link to the article, feel free to check it out.
Fun, Impact, and Profit: their first initials together spell FIP, and they are the ideal qualities of a “perfect“ product. FIP is a term, motto, and lifestyle that Chris swears by, and it has given him a lot of success. This business we are involved in isn’t a walk in the park, it is a demanding and difficult industry to break into. Once you’re in, it’s just as difficult to maintain. Persistence, motivation, and determination are key. Combine that with some creativity and a good team and now you’re rocking.
One of the main qualities that make a product successful is fun. The product has to be fun and appealing, interesting to the customer so that they can enjoy their purchase and feel good about the money spent. Impact lays the foundation for fun and relates directly to the design of a product. Mediocre designs have very little impact, these are the things that you have seen a thousand times and never considered buying because no matter what the features it just didn’t have the appeal. You want your product to have purple cow factor, it being the product wants to be seen and understood immediately from the design and look. The impact of the design has a direct relationship to price (or Profit) because once someone falls in love with your product they will not so much care about how expensive it is. On another note, it is also important to be realistic when manufacturing a product. You have to cost out (remove) certain features that drive up price, manufacturing to a specific price point will allow you to retail for reasonable rates. You can’t dream up a trillion dollar bicycle and then expect Schwinn to license it just like that. Fun, Impact and Profit. These three elements come together to form FIP, or the Perfect Product Pyramid as Chris sometimes calls it. They are the necessary characteristics to creating a great product.
I just returned from the National Hardware Show in Las Vegas where we observed the soft launch of our new product, the Straptor. The Straptor is an innovative bungee cord that we licensed to Olympia Tools, Inc.. It has some cool features and a cool look and will show up later this year (on our site and hopefully in stores!). I was there with my Vice President of Sales, Andy Welty, and Abe Alexander, who is a project manager here at Trident… and also my realtor!
We met up with Allan Thorne (and his lovely wife Lacey), who is the inventor of the Straptor. We helped Allan develop his product and license it to Olympia. Allan is a guy who had an idea and believed in it and went for it. He came to us with amazing prototypes that won me over immediately. Very few people actually take it all the way, but Allan executed.
Olympia is a California (and China) based hand tool company. They are lean and mean and of a nice size to do business with. Big enough to get some work done, but you can still meet with the president. He is a very obviously sharp guy, as is everyone there. Hopefully they will have success with the Straptor and we can work with them to expand the product line. That’s how it works: you can’t expect a company to get whole-hog behind your product without establishing a track record first. You may want them to launch with 10 models, but realistically, they will usually start with one. And it makes sense. They want to test the waters before they jump in.
Plus, there are always issues when you first launch a product. You ALWAYS learn something in the first few runs that makes you want to change something. Better to not have to change 10 sets of tools! The market will give you feedback about which path to pursue next. Of course, it is still helpful to conceptualize the potential future product family. This helps show your partner the potential value of your invention should it succeed enough to warrant further development. You want to spend just enough energy developing these line extensions that you can show a nice picture of something, but you shouldn’t sweat too much over the details until it appears there will in fact be further development.
Anyway, the Straptor was well-received, which means people said “That’s interesting. Let me know when you have pricing”. And then, of course, it will be time to try and write actual orders. So wish us luck!
When looking to license an invention to a company, the inventor’s first instinct is usually to go after the market leader, with the idea that the biggest company is going to deliver the best royalty stream. However, in my experience, the biggest company is usually not the best target. I have licensed products to companies with annual revenues ranging from $10 Million to $35 Billion. Here are ten reasons why I prefer the smaller end of the scale:
1. The market leader is less hungry for a new innovation to help them gain market share. They already have market share and typically are playing defensively and will resist innovations that endanger the status quo. Smaller companies will see a new innovation as more important strategically, as it may help them gain on the leader. They are hungrier and faster.
2. Big corporations are a royal pain to deal with. They have protocols for how they conduct business, most of which are very unfriendly to the individual inventor, or any human for that matter. The people working in them are often not trying that hard and just want to get their job done. Something new just creates more work for them with no reward.
3. Big corporations are greedy. They don’t want you to make money and don’t care if they are unfair. They will do whatever they can to reduce their royalty payment to you, pay late, and cheat if they can. They will also avoid paying you anything if they can.
4. Big companies make you sign disclosure documents. As an inventor, you want to get the companies you are presenting to to sign non-disclosure agreements, which protect your rights and obligate the other party to not steal your idea. The disclosure agreements from big companies (which are often found on their websites. Here’s a link to one from Black & Decker) are very draconian and heavily favor the corporation. I would never sign one of these documents unless I had exhausted all other possibilities.
5. Big companies are hard to negotiate with. Instead of negotiating with the president of the company who is concerned with driving the business, you’ll be negotiating with either a lawyer, who is definitely not going to take it easy on you, or a mid-level manager with no decision making power. This leads to dramatically drawn out timeframes and frustrations, as well as less generous deals.
6. Big companies often lack focus. A smaller company with fewer products will be able to focus on your invention in order to drive business. A really big company might have thousands of products, and yours will be just another item in the line, given no special attention. Therefore it won’t necessarily enjoy the benefits of the big company’s wide distribution or PR efforts. People in the company may not even be aware of your product after several years!
7. Small companies usually have more passion. Big companies rarely have the kind of entrepreneurial spirit that generates the kind of breakthrough results that the inventor would like to see. Small companies are much more likely to be staffed by people truly excited about their industry and the products they are selling.
8. Big companies have lots of internal friction. There can be competing individuals and factions inside a company, and your invention could be the victim of circumstances having nothing to do with your product. It could be cancelled even if it’s doing well, because much of what happens in large corporations has nothing to do with the common interest or rational decision-making, and everything to do with self-interest.
9. Small companies have more fun. Corporations are driven by the bottom line almost exclusively, and therefore it is harder to create and nurture relationships, which make doing business much more pleasurable. In small companies, you can make friends with the people you work with and have much more satisfying interactions, which is important to your quality of life.
10. Small companies are more likely to treat you as a partner. A big company doesn’t see you as an equal, whereas the president of a smaller comapny may see you as a partner and resource for future inventions, and treat you like they care if you’ll want to do business with them in the future.
Obviously, all these points are not true for all companies, big or small, but for the independent inventor, it is usually going to be much easier to deal with a smaller company. Of course, if the company is too small, that’s no good either. They need to be large enough to have the resources to develop, market and finance your product. It’s always important to remember that a license is a long-term relationship, and there are things equally important to financial considerations to take into account, things that will affect your quality of life and long-term satisfaction with your licensee.