The Inventor's Mind

Part 6: Philips Enters the Picture

In the summer of 2006, I got a call from the president of Power Sentry to tell me that they were being bought by Philips, the Netherlands-based consumer electronics giant. My initial instinct was that this would be a mixed bag. They were just too large. He reassured that it would be great for the PowerSquid, with the awesome brand and marketing power of this giant, worldwide corporation suddenly behind our product. What really ended up happening was that the huge corporation barley noticed that it sold PowerSquid, since it had thousands and thousands of other products. The lack of focus quickly became evident as the relationship began to unfold. Most notably in their responsiveness to our needs as Flexity, which usually amounted to, “bad news delivered late.” Nevertheless, we continued to push Flexity. Philips agreed to let us distribute their other power products to our customers, so we became a distributor of the original non-surge PowerSquid, as well as their lower-end (UL Listed) surge protectors.
We successfully sold the Calamari into Dell’s and Apple’s online stores, which were two of our major targets all along. Unfortunately, they both sequestered them to the last page of their surge protector sections. We had no “pay-to-play” money to get higher placement. With no special attention drawn to them and backwoods positioning, neither venue proved as successful as our own site.

We went to the CES show in January 2007 with a bigger, fancier exhibit booth and hoped we would renew interest in our products. It was a huge expense for us, but one we felt would pay off. We were wrong. Our booth was in an awkward spot where traffic flowed all around us, but very little came to us. We were hidden in plain sight. We emerged with only one promising lead – a satellite dish installer company with a fleet of 6,000 vans that was willing to sell the PowerSquid out of their vans. They placed several large orders, but then they were purchased by a private equity firm which immediately ended the practice of selling stuff to customers. They wanted to refocus on their core business, installations. We suddenly lost our one big client and we were devastated. We spent the next year trying to get more major customers to no avail and adjusting expectations to the new reality that Flexity was going to be a much more modest company than we had imagined.

On the other hand, Philips’ sales of PowerSquid were still going strong. The initial agreement we had negotiated with Power Sentry was ending, so I was in position to renegotiate terms of the license or go elsewhere. Working with a brilliant negotiation expert I had met, I approached other industry players and received significant interest, but, in the end, Philips made an offer we couldn’t refuse and we extended the agreement for the life of the patent. For no apparent reason, Philips waited six months to send me the signed renewal contract, leaving me in an agonizingly stressful limbo. When it finally did arrive, however, the new deal was lucrative.

So that brings us to today. I moved back to Columbus in 2007 and restarted my design consultancy, funded by PowerSquid royalties. We have been busy developing a line of gourmet cooking gadgets in partnership with RSVP, a small company based in Seattle run by a dear friend of mine. Our Onion Goggles have been a hit (they were reviewed here on CrunchGear not that long ago). We launched six more gourmet products with RSVP this year. I have just recently started manufacturing and marketing another one of my inventions, the Thirsty Light, a device that goes in houseplant soil and blinks when the plant needs water. And there is more on the way: a star clock, a new innovative power strip, and a glowing rock. We still operate Flexity, which is now building slowly into a nice business. Anticlimactically, MET Lab finally passed the six-armed Squid in 2008, but the specs were changing in 2009 so the certification was only good for six months. Philips still sells a lot of PowerSquid and sends us a royalty check every month.

The PowerSquid has been a long, amazing journey full of excitement, opportunity, disappointments, struggles, failures, and successes. It has been the best learning experience of my life and the greatest opportunity. It has opened doors and made me fairly well-known in the invention industry, giving me enough credibility to earn an audience with most manufacturers. I am thankful for the journey’s experience and rewards.

Stay tuned for the next exciting innovation from… the amazing SQUIDBOY!!

Christopher Hawker, an inventor specializing in innovative consumer products, is founder of Trident Design, LLC in Columbus, Ohio. He is the author of “Inventor’s Mind: 10 Steps to Making Money From your Inventions”, a free e-book available at Invent-Shop.com. He will be hosting his first InventShop Inventor’s Workshop in October 2009 for serious inventors who want to learn his inventing system.

Part 5: On the Market and the Birth of Flexity, LLC

Now in stores, the PowerSquid easily lived up to my expectations. The next few months were heady, as Wal-Mart, Target and Bed, Bath & Beyond agreed to carry the product. Then it was a huge hit on television-shopping network QVC, where the PowerSquid became a regularly-featured item. Sales boomed and royalties flowed. Everyday there was a dose of good news. I was ecstatic.

Then we hit a bump in the road. UL contacted Power Sentry and said they had to retract approval for the PowerSquid! Someone had reviewed the file and decided that, in fact, it should have been tested as an extension cord because, well, it ended in cords. According to UL, we had to remove the switch and only have three outlets! I was outraged! Power Sentry was also furious and threatened UL with legal action, as the decision would cost them millions. Faced with a lawsuit, UL looked more closely at the situation and ultimately ruled in our favor. Disaster was averted, again.

In the clear and with sales of the original PowerSquid model booming, I began encouraging Power Sentry to develop a surge protector version of the product, but they said they weren’t ready to take the risk. A friend of mine, who had become a minor investor, suggested we start our own company to sell premium PowerSquid surge protectors that he would fund and Power Sentry would manufacture and warranty. Power Sentry agreed to our deal, saying they would give us a one-year lead in the market on PowerSquid surge protectors. We could have exclusive markets which they weren’t interested in, but we could not sell to their customers. We started a spin-off company called Flexity, LLC, to market our models, which were designed with a full range of features. They were premium units. They had six outlets instead of five. The flagship was called the Calamari Edition, which featured glowing plugs. It was super cool.

Flexity was humming. We developed brochures, packaging, a cool e-commerce site (PowerSquid.com), a tradeshow booth, and issued press releases. There was palpable excitement. We received our first samples and they looked great, but then we submitted to our friends at UL and, surprise, that’s where the trouble began again.
UL said they had written the specifications for the “new and unusual” PowerSquid as a five-armed beast, and there was no way to make it with six. I was incredulous. The electrons didn’t care! I thought the sole purpose of UL was to confirm a product was safe as designed, not to dictate design. Was it revenge for the earlier threat of legal action? Stuck at UL, Power Sentry said there was another lab we could use, MET Lab, which was also OSHA certified. We pushed on with MET. However, while waiting for MET, Power Sentry reconsidered giving us our one year of exclusive lead on surge protector PowerSquid sales, and decided to develop their own models of surge protectors, copying our design almost exactly, only with five cords. With only five cords, their product was sailing through UL. I was disappointed, but powerless because I had not gotten this piece of our agreement in writing.

Meanwhile, the 2006 CES in Las Vegas was approaching and we planned our launch. We were told by Power Sentry to expect to have MET Listed product by February, shortly after the CES Show. We applied for the CES Innovations Awards, the biggest award in the industry, as did Power Sentry. Results were announced the November prior to the show – and we won! In fact, we won three awards: Honorable Mention Audio Product, Honorable Mention Computer Accessory, and Best Innovation in Home Office Product. It was a HUGE victory for a little startup founded on a few thousand dollars! No one would have expected it. We were elated.

We showed up at the CES full of optimism due to our big win. Our reception was overwhelming. Press and buyers came by our booth in droves. We handed out PowerSquid like Halloween candy. It was exciting and exhausting. There was a People’s Choice Award, and we campaigned heavily. We had a blast, but there was one troubling issue. We had to tell the majority of the interested stores that we couldn’t sell to them due to our deal with Power Sentry. We hadn’t realized at how limiting that truly was going to be. We sent countless potential customers to their booth. Nevertheless, we still had tons of interest. Finally, on the last day of the show, it was announced the Flexity PowerSquid won the People’s Choice Award! Our little tiny startup claimed the biggest prize at the industry’s largest trade show! We thought our future and fortune were set.

The Ejector Plug Adapter also launched at the show, having finally received UL approval, in the Power Sentry booth. Unfortunately, it received little attention. People didn’t get it. However, it was picked up by both Walgreen’s and Target, where it then performed very poorly. After a short run, both stores discontinued the product and so did Power Sentry. Despite our earlier hopes for the product, we chalked it up as a failure. We are still trying to find the right partnership to make the Ejector Plug a success.
After the show, we began following up with the media and the buyers, but we still didn’t have product. Power Sentry said there were delays at MET with the testing and we wouldn’t have product until April, which also turned out to be wrong. Articles, and lots of them, started appearing in mainstream and niche publications. Sound and Vision, Playboy, the Wall Street Journal, the New York Times, Popular Mechanics, Popular Science, and many, many others ran stories. People loved the PowerSquid. It was extremely exciting! We drew enormous traffic to our website, but had nothing to sell. We collected email addresses and told everyone that we’d get back to them soon. In the meantime, Power Sentry started selling their surge protector while we waited on the sidelines.

Finally we couldn’t wait any longer and placed an order without UL approval. It turned out that our customers didn’t care. Only the big box retailer would not sell without UL certification, and they were off limits to us anyways. We were finally in business by October 2006, but it was way too late. Early interest had died down, we were being called vaporware, and the media buzz had quieted. Plus, Power Sentry was already on the market with a cheaper model. We made some sales and the website was doing fairly well, but our huge expectations were falling short. Flexity struggled, but we kept our heads above water thanks to the royalties on Power Sentry’s sales. More stores kept adding the Power Sentry models and bloggers loved the PowerSquid. It was still a heady time, but tempered by our frustrations with Flexity.

Christopher Hawker, an inventor specializing in innovative consumer products, is founder of Trident Design, LLC in Columbus, Ohio. He is the author of “Inventor’s Mind: 10 Steps to Making Money From your Inventions”, a free e-book available at Invent-Shop.com. He will be hosting his first InventShop Inventor’s Workshop in October 2009 for serious inventors who want to learn his inventing system.

Part 4: Engineering

With signed licenses in hand, Power Sentry began developing the products for production. They decided to start with a non-surge-protecting outlet multiplier version of the PowerSquid, and an adapter version of the Ejector Plug that could retrofit existing cords. They worked with a factory in China to translate our design concepts into real products that could be manufactured. We were sent occasional updates on the PowerSquid as the engineers tried various methods for handling the interior wiring, which was complicated by the fact that there were so many cords coming into the enclosure. Six cords (one coming in and five going out), each with three conductors, meant there were 18 cords that had to be soldered in a very small space, with consistent quality and reliability. We suggested a bus-system, where the wires would be soldered to three metal bars. This was eventually chosen as the most cost-effective method. This problem sorted out, the tooling process began. Four months later, we saw the first sample. The Ejector Plug went through its own engineering process in parallel. We received samples of it shortly after the PowerSquid.

Next, the products had to go through Underwriter’s Laboratory (UL) testing. UL evaluates products based on established specifications for each type of product to determine the design is safe and won’t kill or injure users if operated correctly or incorrectly. Many items you buy at the store have a UL sticker, as most major retailers will not accept certain products (especially high-voltage items) without certification. Many people think that UL is a governmental organization, but it is a for-profit business. The PowerSquid became the unfortunate center of an internal dispute, as different offices of UL argued over whether it should be tested as a power cord or as a power strip, having features of both. The answer to this was very important, as the power cord specifications called for no more than three outlets and precluded a switch! We insisted it was a variation of a power strip, and that the specifications were supposed to help determine what type of product is being evaluated, not control the design of the product itself. To call it an extension cord would be a serious case of specious logic.

In the end, wisdom prevailed, and the PowerSquid was tested as a “new and unusual” power strip, the “new and unusual” designation adding many thousands of dollars and months to the process. And a process it was, as the product had issues with cord strain relief. When the cords were yanked, it would cause strain to the internal solder joints. It turns out the clamping force of the shell, which was sufficient when there was only one cord, like in a normal power strip, was not enough when spread over six cords. So more engineering needed to be conducted, ultimately leading to a redesign where the five outgoing cords were molded together with a block of plastic that was trapped inside the case. This made the product a little larger, required modifying the molds and added several more months, as the testing had to start over. Eventually, a year and half after testing began, the PowerSquid received UL certification.

The Ejector Plug’s adventures at UL changed it, too. After we sent it in, it was sent back and we were told that it had to be redesigned so that the lever was larger, in order to completely cover the top outlet of a wall outlet, if it was placed in the bottom outlet. This prevented a partially blocked outlet which someone could try and still use, which is a fire and shock hazard. This required a redesign which made the final unit bulky and unattractive, but Power Sentry decided to push forward with the new design and resubmitted it, once again as a “new and unusual” product.

Many other events transpired during the certification process. First, the U.S. Patent and Trademark Office (USPTO) rejected the application for the PowerSquid name! There was a large company called Thomas and Betts, which already owned the trademark “Squid” for a power connector. Thomas & Betts makes transmission equipment for power stations and cross-country power lines. Its “Squid” was a similar device to ours, except it was for 10,000 volts and had cords thicker than ropes. We didn’t tell Power Sentry this news while we spent months trying to come up with an equally good name, but we couldn’t hit on anything we liked. We had settled on “Power Spider”, though we truly felt that it wasn’t nearly as good of a brand. When we shared the new name with Power Sentry, we were told that without “PowerSquid” they would renegotiate our contract! The name was part of the deal. They were not happy, and neither were we.

Desperate, I called Thomas & Betts. I figured it was hopeless. This was a huge and probably heartless corporation. How was I going to get to the right person? Nevertheless, I had to try. So I called the main line and asked for the legal department. Two minutes later I was on the phone with the chief legal counsel, and, 10 minutes later, I had an agreement to use the name! Unbelievable! Thomas & Betts even signed a contract for us to submit to the USPTO. Disaster was averted through a stroke of luck and a healthy dose of goodwill. Thank you Thomas & Betts!

Next, the USPTO rejected our patents for both the PowerSquid and Ejector Plug. This is not unusual. The majority of patents are rejected on the first pass because they are written as broadly as possible and then whittled down based on feedback from the patent examiner. Our contract with Power Sentry stipulated that if the patents were ever to receive a final rejection, our royalty would be dramatically reduced, so we were motivated to obtain them. We adjusted our applications and re-submitted them. This revised PowerSquid patent was eventually granted and issued. The Ejector Plug patent had to go through the process twice more! Legal fees were piling up.

While all of this was happening, my business stalled. We had struggled for years, fighting both a sagging economy and our own inexperience. We were trying to survive until the PowerSquid and Ejector Plug were on the market and generating royalties. But then we lost a contract on a major project with our biggest fee client, and that was the last straw. I had to lay off my staff, shut down the office, sell the furniture and equipment, and move back into my house to avoid bankruptcy. They were scary and stressful times.
Fortunately, I had enough revenue from the algae scraper business to nurse my wounds and slowly pay off my debt. I continued to work smaller projects with another designer (who worked on spec) and waited for the PowerSquid and Ejector Plug to launch. Without the overhead and business to run, I started to relax and enjoy myself. During this time, I went to Maui for a two-week meditation retreat, and there I met my future wife, Sommer Renaldo, a graphic designer who was living in Florida. We fell in love and decided to move to Santa Cruz, Calif., together.

We were in Santa Cruz when the PowerSquid finally came to market: five years, many struggles, numerous delays and a near bankruptcy later. Oddly enough, the first store in the country to carry the PowerSquid was a local independent hardware store just down the street in Santa Cruz. I knew from Power Sentry that some had been sold to a few stores in my area, and then a friend told me he’d seen them on the shelf. I immediately went down and there they were!

At last! I bought three. I still have one in its original package. This is my favorite moment as an inventor – walking into a store and buying one of my products. It’s a profound and private moment for me, as it closes a process that can take up to five years. One of my frustrations with my job is how long it takes to find out if the years of effort invested in a project pay off. The cause and effect relationship is often hard to grasp and the results of decisions are delayed by months or years, making it difficult to adjust course as needed. Buying one of my products for the first time “in the wild” is the ultimate in delayed gratification.

Christopher Hawker, an inventor specializing in innovative consumer products, is founder of Trident Design, LLC in Columbus, Ohio. He is the author of “Inventor’s Mind: 10 Steps to Making Money From your Inventions”, a free e-book available at Invent-Shop.com. He will be hosting his first InventShop Inventor’s Workshop in October 2009 for serious inventors who want to learn his inventing system.

Part 3: The License Hunt

Armed with our handmade prototypes and fancy brochures, we set about searching for a partner. We felt it would be easy. We thought we would call up the companies, tell them about our revolutionary products, and they would line up to see them. Then they would immediately recognize the beauty of the products and fight over the right to be the exclusive distributor. As you might guess, we were wrong.

We identified our first targets: Black & Decker, GE, Belkin, Monster, Woods, APC, and Kensington. They were all high-profile companies with excellent brands and distribution. We researched the companies to find numbers to call. We began reaching out and left messages, but could not reach anyone. We submitted the inventions through the “front door” formal design submission processes at the bigger companies such as Black & Decker, but got no response. We tried to network our way into others with no success. Now desperate, we booked a trip to the Consumer Electronics Show (CES) in Las Vegas in January 2002 to see if we could attract interest.

The CES was an eye-opening experience. There were an overwhelming number of booths for the technology companies and the display of money and resources was audacious. One company, maybe Microsoft, had set up a fake ski hill in the parking lot, where professional skiers and snowboarders performed aerial tricks as techno music blared. We stepped into the show with our list of targets and went booth to booth to speak to those in charge of new product development. This worked much better than cold calling had. We discovered nearly every target had a high-level person on hand who was either the right person to talk to or knew that person. Furthermore, despite the struggles of trying to reach them by phone, there were all eager to talk in this venue.

Still, we were quickly dismissed by all but Monster and Belkin, both who expressed guarded interest. We kept getting the same response: “This will cost more to make than a normal power strip or outlet and no one is going to pay twice as much for this.” We repeatedly discovered the power delivery industry was very conservative, dominated by players who viewed it as a commodity business that had no room for innovation or good design. No one wanted to take chances and no one cared about fresh ideas.
Then, by chance, I was leafing through the show guide and came across a company I had never heard of that had a promising name: Power Sentry. We visited its booth and discovered the company was the number two player in the power strip industry, behind Belkin, by virtue of owning the category at Wal-Mart and Target. We were also told that their new president spoke often of innovation and that they were definitely interested.

So then began the process of negotiating with the potential licensees. I had licensed one other product in the meantime, a cooking gadget called the Chef Scoop, so I had some experience with the process and terms. The key terms to negotiate in a patent license are royalty rate (typically 2 to 6 percent of gross revenue for products), annual minimums (important in case the product doesn’t sell), upfront monies (which licensees hate), and length of deal (you want a chance to renegotiate after a few years if you get a homerun!). Of course, there are other points to be negotiated, and the language of each can be argued, too. The final document can be more than 20 pages, so there is plenty of opportunity to run up a large legal bill. But if you can agree on the first four points, you can agree on the rest.

The royalty rate and term discussions are relatively straightforward, but it is difficult to argue for upfront fees or annual minimums unless the product has an established history. Therefore, you really have to guess and see what the market bears. I learned quickly that it wouldn’t bear much, and my outsized expectations for the PowerSquid and Ejector Plug were not held by manufacturers. I was in disbelief in how pessimistic they were. Of course, I ended up being wrong, so far at least, about the Ejector Plug, so I have learned to be more cautious in my own expectations and more understanding of the manufacturers’ position. I had to quickly adjust my expectations in terms of upfront fees, and tried to use the lower-than-hoped for fees as a negotiating chip to get a higher royalty, a tactic which worked fairly well.

Monster dropped out of the race quickly, citing a perceived lack of potential. Belkin dropped next because it wanted to focus on a new product line. That left me with Power Sentry and a weak negotiating position. I played it well, though, and got a fair deal. My negotiating method with much larger companies is to insist on fairness. Most people don’t want to be seen as unfair, and it’s definitely to the smaller guy’s advantage to strike a fair deal. (I recommend reading Getting to Yes by William Ury and Robert Fisher. It’s a fabulous take on negotiation strategy.)

So now I finally had an agreement with Power Sentry based on the key terms. It then took another six (anxious) months of talks, mostly among lawyers, to seal the rest of the deal. All of the points are important with serious repercussions. Each deserves its proper attention. But, boy, it’s a tedious process, especially the first few times, when the language seems foreign. The process was also costly. I had a lot riding on both the PowerSquid and Ejector Plug.

Christopher Hawker, an inventor specializing in innovative consumer products, is founder of Trident Design, LLC in Columbus, Ohio. He is the author of “Inventor’s Mind: 10 Steps to Making Money From your Inventions”, a free e-book available at Invent-Shop.com. He will be hosting his first InventShop Inventor’s Workshop in October 2009 for serious inventors who want to learn his inventing system.

Part 2: Development

With the PowerSquid concept in the house, we began our development process by researching the market, to see if a similar product was already out there. We did our own patent and internet searches and combed through mail-order catalogs and hardware stores. We ordered catalogs from manufacturers and searched them with baited breath. But nowhere did we find another PowerSquid. In fact, there were no interesting power strips on the market at all at that time. They were all just rectangular boxes with outlets.

We brainstormed for weeks about the form of the PowerSquid. We wanted to stand out on the shelf, so we determined our new product should be biomorphic, looking like an actual squid as opposed to something more traditional and square.

We experimented with how many cords there should be (we settled on five) and different configurations (we settled on a V-shape). We made foam models of the body and wired a working prototype with materials from a local hardware store. We explored ways to make the inner wiring easy to manufacture considering the number of conductors that needed to be spliced. We considered additional features. We wanted to add glowing outlets and different mounting attachments. One of the designers even came up with a whole new invention to serve as a bonus feature: the Ejector Plug, which utilized a small lever to assist in unplugging devices from cords.

While developing the PowerSquid, I began debating with my advisors how to best monetize the idea. We decided it was out of my league to manufacture the PowerSquid. It was high-voltage (110v), and thus would require Underwriter’s Laboratory certification to be sold in major retailers. This was an expensive process and beyond my knowledge and experience. We decided we needed to license the idea to a partner already in the industry, someone established, experienced and with resources. That required a patent. At the time I didn’t know anything about patents, so I interviewed local patent attorneys, finally settling on a firm that specialized in intellectual property (IP). I borrowed a few thousand dollars from my brother, Jon, and his wife, Lisa, to pay for the patent application. We also applied for a patent on the Ejector Plug, which we felt might have even more potential because it could be used on any device with a plug.

We weren’t getting enough fee contracts to cover overhead because the economy slowed due to 9/11 and the dot com crash, and I ran out of cash. I worked on a business plan, and then went looking for investors in Trident based on the PowerSquid and the Ejector Plug. I first approached friends and family and managed to raise enough money to keep the business afloat while I looked for more, eventually scoring with one of my father’s business associates. I had met him at a party and suspected he might be interested in investing, so I contacted him and made a pitch. He had me negotiate with his chief financial officer, a process that took several months, and eventually we struck a deal that required me to give up a significant share of my company, but which kept us alive to pursue the PowerSquid and Ejector Plug.
I formed Trident into a Limited Liability Company and, funded for the first time, I hired a business development professional and a full-time graphic designer. We set out to create professional brochures for the PowerSquid and Ejector Plug, and then went fishing for a licensee.

Christopher Hawker, an inventor specializing in innovative consumer products, is founder of Trident Design, LLC in Columbus, Ohio. He is the author of “Inventor’s Mind: 10 Steps to Making Money From your Inventions”, a free e-book available at Invent-Shop.com. He will be hosting his first InventShop Inventor’s Workshop in October 2009 for serious inventors who want to learn his inventing system.