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What happens next if you have an idea or you have an invention? What do you do? My name is Stephen Key, and I’m going to take you through some of the steps. This could get fairly long, but I’ll keep it fairly short for you.
Well, if you’ve got an invention or if you’ve got an idea, what do you do first? I’m here to tell you, take a deep breath. Relax. You need to educate yourself. Don’t rush out, call a patent attorney and file a patent, or build a prototype — any of those things. I want you to educate yourself. And that’s why these blog articles, I think, are really going to help you.
Okay. So, you’ve got this idea. You’ve got this invention. What do you do? The first step is to really determine, “Do I have a new idea? Is it new?” And the way to do that is by what I call, “studying the marketplace.” That’s step number one. You’re going to do a Google image search or a Google shopping search on the internet to determine if you have a new idea.
Now, what’s going to happen is that you’re going to find a lot of ideas out there and you might find yours, or you might find some similar ones. And if you find some similar ideas, that’s perfectly fine, because what you’re really trying to find is your point of difference. Does your idea have enough of one to go forward with it? To spend the time and money to see if people truly want it? So, that’s step number one. Studying the marketplace is really important.
Now, once you’ve gone online and you’ve looked around and maybe you’ve found some similar invention ideas and you still aren’t quite sure if someone else has already invented your idea, I would do a Google patent search. I’d go to on Google, type in Google patents, and learn how to do a search for prior patents.
Now, this sounds complicated, but it’s really not. There are YouTube videos explaining how to do this. You can take some classes on this. You can even hire someone to do this, but start by looking around, typing in some words. You won’t find everything, because there are just too many prior patents out there, but you’re going to learn how to search to see if you are the true inventor of this idea.
Now, please realize there will be a lot of prior art — prior patents — and you’re not going to find them all, and that’s perfectly fine. Personally, I’m not really worried about finding prior patents. I’m really more concerned about whether my idea is on the market yet.
All right, so you’ve done step number one. You looked around and you found some similar ideas on the market. Maybe you looked around and you did your prior art searching, meaning you looked for published patents that describe a similar invention. You found some similar inventions using Google patents, but you really determined that your idea is new. You have also determined that your point of difference, the benefit of your idea, is indeed pretty cool and no one’s really done it yet. And so, now you’re thinking, “Okay, I want to spend more time. I want to go forward. I like my idea. I like my invention.” What should you do next?
Okay. So, step number two is really all about further determining your point of difference, and deciding whether you’re going to go forward. And if you do that, fantastic. For step number three, you have a couple options. You could manufacture the invention yourself, which that means you’re going to raise money, maybe do a Kickstarter campaign, build a prototype, do the manufacturing, do the marketing. You’re going to do all that kind of great stuff.
Sometimes, that’s warranted. But for me, there’s another business method that I truly like, which is called licensing. This requires that I find a company that’s looking for ideas. And if I can show my idea to them, and if they like it, they’re going to take my idea and they’re going to bring it to market for me, and they’re going to do all the heavy lifting, and they’re going to pay me a royalty on each and every unit they sell. It’s called licensing, and I love that business model. The reason why I like that business model? It’s great for someone like me who doesn’t want to do some of the other work or take on the financial risk. Instead, I leverage the power of these big companies. So, that’s why I like licensing. But you do have a choice. If you have an invention or an idea, how do you commercialize it? You’re either going to venture it yourself, or you’re going to license it to a company to bring it to market for you.
So, which path to market is right for you?
I want to talk about some of the benefits of the licensing business model to help you make sure it is really a good fit for you. Now, I’m an idea person and I don’t like to take on a lot of financial risk. I like the licensing business model because the benefits are huge. Number one, you’re going to collect a royalty on each and every one they sell. They’re going to take the risk and they’re going to do the manufacturing, the marketing, distribution. Wow. They’re going to do all the heavy lifting while you get typically probably a 5% royalty on the wholesale price.
So, every time they sell one, you’re going to collect a royalty. There are some other benefits to the licensing business model. Number one, it’s speed. Today if you have a great idea, you will get copied. I will guarantee it. And if you license it to a big company that maybe has the ability to defend it, to protect it, that might be a good thing. But today, it’s really speed to market. And that’s why I like licensing so much.
Because if you find that company that already has shelf space, they can bring your idea, your invention to market very, very quickly. So, that’s what you have to determine. What better suits your personality? Am I going to venture it, or am I going to license it?
Either way, when you go forward, you have to determine, “Hey, I need a little bit of protection,” or at least perceived ownership. And the best way to do that if you’ve got an invention or an idea is to file a provisional patent application. We call it a PPA for short.
Now, what’s really great about a PPA is that you can write it yourself and you can file it yourself because it doesn’t require really any legalese. Now, the other thing I like about a provisional patent application, it gives you one year to put “patent pending” on your marketing material or on your prototype. I like it, because one year is a long time. It allows you to shop your idea around to see if anyone’s even interested in your idea. If you come up with something new or if you make some changes, you can file another provisional patent application and bring them together within that year if you want to file a non-provisional patent application. PPAs a great tool. You should learn how to take advantage of this form of intellectual property.
The other benefit of a provisional patent application is that it just lets you test the waters to see if you want to go forward, to see if your idea has legs, and it gives you that little bit of perceived ownership while you do so. Patent pending status, that’s why I like it so much.
So, now you’ve filed for a little bit of protection at the USPTO with a PPA. Now, you want to market your idea to a potential customer, aka a potential licensee. A company that’s looking for ideas from people like us. You want to share your idea with a one-page advertisement. I call it a sell sheet. A sell sheet just basically shows the benefit of your idea. You can do this with a picture of your product or a prototype, or a 3D rendering. The point is to sell the benefit. And you do that by having a one-line benefit statement at the top, so people really understand, “This is the benefit of this idea, this invention.” It’s really simple to do.
Now, what’s really important is that marketing copy, right? Not just a pretty picture, but why someone would even care. Now, what you can also do to market your invention or your idea is a one-minute video showing a problem for maybe for 15 seconds, and then the solution for 45 seconds. That’s a great way to show a potential licensee, to show a company that’s looking for ideas from people like us, the benefits of your idea.
Okay, so you’ve protected your invention idea with a provisional patent application. You’ve got your marketing material. Now you’re going to reach out to try to find those companies that are looking for ideas from people like us. Now, please realize that not every company wants to work with us inventors, but a lot of companies do. So, this is what you should do.
Go down to the local store where you think your product could possibly be sold. Find that shelf, that exact spot where your product’s going to be. Take a look around. The companies that manufacture and distribute the products nearby are your potential licensees. That’s pretty simple to do. What I do is I take out my iPhone, turn the packages around, and photograph the marketing copy, because I’m planning on reaching out to those companies later.
Now, I could reach out to those companies in two different ways. There’s the old way, which I think is okay. I still do it this way. I just call their corporate number, ask to speak to someone in the marketing department, and say, “Do you work with inventors? Do you take outside product submissions?” Now, a lot of people don’t like to do this because you’re basically making a cold call.
Today, there is another way. I wrote a book called Licensing Ideas using LinkedIn, which teaches you how to reach out to companies on LinkedIn. It’s really quite simple to do, too. The reason why I like LinkedIn so much today is that you can reach out to any company in the world within seconds, within minutes, and make a contact and then ask them, “Do you work with inventors?”
I like it because there’s no gatekeepers. It’s fast. You can do it any time of day. You can do it anywhere in the world. We’re seeing more ideas get licensed using LinkedIn to make that initial contact.
Okay, so now you’ve used LinkedIn or maybe you’ve called the company and they do want to work with inventors, and you show them your marketing material and they think, “Wow, this is a good fit for our product line. Our customers are going to love your idea.” Now, what do you do? You want to tell them that you don’t want to be a manufacturer, that you’re looking for a licensing agreement. Pretty simple.
Now, some of these companies have done licensing before, so they can send you over a boiler plate licensing agreement. Some maybe not. You might have to explain what you’re looking for. But if you explain to them you want to license your invention for a fair and balanced royalty rate, that’s pretty simple for them to do.
Now, if they understand licensing, they’re going to send you over a licensing agreement and it’s going to be awful. I can tell you that it’s probably going to be boilerplate and you’re going to have to negotiate the royalty rate, which is a standard 5%. But there’s a lot of stuff in a licensing agreement that gets very, very complicated, and that’s why I’m going to recommend that you seek out some help at that time. I suggest that you get two people to help you.
First of all, you get someone who understands licensing, who has seen a lot of licensing agreements, who can help you behind the scenes negotiate a fair and balanced licensing agreement from a business perspective. Then, after you work out all the business terms, and you’re ready to sign it, that’s when I would bring in a licensing attorney to make sure there isn’t anything that you didn’t miss. Make sure that some of the liability is fair on both parties.
That approach to negotiating a licensing agreement, which is to say first from a business perspective, and then from a legal one, is the right approach in my opinion, and I’ve done this for many, many years. In fact, I’ve licensed many invention ideas and signed many profitable licensing deals.
It’s going to take a little bit longer than you think, and it’s going to be a little stressful, but at the end of the day, it’s a great business model to license your invention ideas. The companies are looking for ideas. But just be prepared, you’ll be pulling out your hair sometimes!
The steps that you need to do in order to commercialize your idea or invention are not as complicated as some would leave you to believe. So, if you have an idea, if you have an invention, look at some of these steps that I provided and start thinking about how to approach them.
Thank you for reading this article. Maybe you’re just starting out or maybe you’ve been doing this for a long time. If you’re not receiving the type of success you’re looking for, please keep on reading my articles and watching my videos on inventRightTV on YouTube. If you want to take it one step further, please give us a call at inventRight. We’d love to help you.