Intellectual property strategy for independent inventors.
Full disclosure: I am not a patent attorney and this is not legal advice. I am a businessperson who has licensed many products with and without patent protection, and that is where my perspective on patenting inventions comes from.
Will Your Invention Be Stolen?
If you’re fearful that your invention will be stolen from you, you’re not alone. Most people who come up with a new idea are at least a little bit afraid that a person or company will steal it.
So, how can you protect what you create?
Every day, I hear the same questions from inventors.
“Do I need a patent?” “Do I need a trademark or copyright?”
I get these questions from inventors constantly! In most cases, I don’t think inventors should be nearly as worried as they are. Most companies today know that a positive social media presence is incredibly important, so it makes little sense for them to risk their reputations by stealing your product idea.
Can you imagine reading reviews or articles about a company stealing ideas and how quickly that would spread throughout the Internet? I’ve heard of very few situations where a company has actually stolen a product idea that was submitted to them. Has it ever happened? Yes? Does it happen often? No — emphatically no.
“I can tell you at least as far as I know, not during my 17 years with Conair but even before me, I don’t know of an instance where we’ve stolen an idea from an inventor or even been accused of it.”
-Lawrence Cruz, Chief Patent Counsel at Conair Corporation, the $2 billion maker of small appliances, personal care products, and travel accessories.
There’s another reason why it’s unlikely that a company will steal your product idea. Today, most companies have embraced open innovation. They want — actually, they need — our ideas. If a company were to steal someone’s idea, the inventing community would quickly dry up in terms of product submissions, and ultimately that would render a company less competitive.
“50%-60% of our portfolio started as an idea from the outside.”
-Brian Chapman, President and Head of Global Design at Hasbro, one of the world’s largest toy companies by revenue.
“35%-40% of our items are coming from inventors.”
-Corey Talbot, Vice President of Marketing and Product Development at Hyde Tools, which sells more than 1,200 products in the hardware industry.
My takeaway after interviewing dozens of companies looking for ideas for my book Become a Professional Inventor, as well as my personal experience over the years, is this: Intellectual property is a difficult subject to lay out in black and white terms.
Most companies nowadays acknowledge that it’s pretty difficult to protect anything from being copied. Some of the bigger companies that are market leaders may use patents or other intellectual property tools to stop a major retailer from carrying a copycat item. The really, really, really big companies may use litigation to protect their products; after all, they can afford to! These cases are few and far between.
It’s true that some inventions with a potentially long lifespan and that will cost a considerable amount of money to produce benefit from patent protection. Certain industries tend to employ this strategy, and they include medical devices, packaging innovations, automotive changes, aerospace, and other highly engineering-oriented industries like energy and computer hardware. It is a cost-benefit analysis made by the company comparing the potential life of the product versus the capital investment required to bring it to market and protect it.
Smaller and midsize companies, particularly in consumer-oriented categories, have a different perspective. Their strategy is to keep innovating to stay ahead of the competition. In the long run, speed to market is more important than a patent.
Of course, intellectual property helps keep some people honest.
The best broadscale patent policy for inventors that I can recommend is that you protect your product ideas with what is necessary for your industry and what is necessary to get a licensing contract.
When it comes to patents, there is no “one-size fits all” formula! For example, consider the following quotes from companies that work with independent inventors.
“I don’t mind if it’s patented or not, because we have the opportunity to get it produced into the market fast.”
-Luke Berry, Head of Innovation at Halfords Group, a UK and Ireland-based automotive retailer with over 450 outlets and 350 repair centers.
“Patents are nice, but not essential.”
-Nick Mowbray, Co-CEO Zuru Toys, one of the fastest growing toy companies in the world.
“Intellectual property doesn’t matter to us.”
-Sam Hurt, Cofounder of novelty gift company SUCK UK
“It would be in your interest to get a patent filed, so we don’t have a motive to cancel the license.”
-Lawrence Cruz, Chief Patent Counsel at Conair, the $2 billion maker of small appliances, personal care products, and travel accessories.
“Patents are massively important.”
-Barron McKillip, research scientist at Multicolor Corp. and former VP of R&D at CCL label, one of the world’s largest packaging firms.
See? There is no one “correct” path to take when it comes to the decision of whether to patent your invention.
Furthermore, inventors need to understand that patents are not the only form of protection for our ideas.
In my experience, inventors are too quick to assume that their product idea has been intentionally ripped off. When you submit a product idea to a company for licensing consideration, there is a chance that they are already working on something similar. This often leads to confusion and frustration on both sides. (And it’s a reason why some companies chose not to work with independent inventors.)
It is important to realize that companies sometimes might be working on a product that is similar to an idea that has been submitted (Maybe your idea!). This often leads to confusion for both sides.
If you watch Shark Tank, undoubtedly you have heard that you “need” to protect your product ideas with a patent. But this is simply not true for many products.
And if you ask your friends and family about your new product idea? They’re probably going to tell you that you need a patent as well. Everyone has heard of patents and has the general notion that a patent allows you to “own” your product idea. Now, clearly your friends and family have your best interests in mind, but they don’t have real-life experience transforming an idea in their head into a product on the market. I do.
Many patent attorneys will also tell you that you absolutely must have a patent or some type of ownership of your intellectual property to get a licensing deal. Again, this is not true in most situations today. Please understand that patent attorneys have a unique set of skills which exist to help you get a patent, but not necessarily to help you get a licensing deal. Getting a patent is NOT the same as getting a licensing deal.
Don’t take business advice from your patent attorney.
Now, don’t get me wrong. Patent attorneys are very valuable and necessary. I’ve worked with the same patent attorney at Carr & Ferrell, LLP for more than 25 years. I know when to ask for his advice and when not to as well.
On the topic of protection, my business partner Andrew Krauss adds, “An incredible form of protection is licensing your product idea to a company that is first-to-market, so other similar products become “me-too-products” and your licensee (along with you) make the most money. When you license your product idea to a big company, you are that big company! When you try to sell a product idea yourself, you can get crushed quite quickly. It can be as if you never even existed. So, no — making money is not about patents. Success is more about distribution and being first-to-market fast and in a big way.”
I couldn’t agree more.
“If you’re successful, 99% of the time you will be copied. You will be a victim of your own success. But you don’t make money by suing people, you make money by selling products.”
-Jonah White, inventor of the smash novelty gift hit “Billy Bob” fake teeth, 22 million units sold
What is a patent?
A patent is formally defined as a legal property right granted to the person or entity that designs, invents, or cultivates a new and original product, process, technology, or service for monetary value. A patent holder is granted the exclusive rights to make, sell, and use the invention for a specific period of time. During that time the patent holder can sell or assign the invention to another person or entity, or authorize a license to another person or entity to manufacture, sell, or use that invention.
Patents are issued by a government agency of the country in which the patent application is filed, and they only offer protection in that country. In United States, patents are issued by the United States Patent & Trademark Office (USPTO).
Why You Might Not Need a Patent to License Your Product Idea
I see a licensing deal signed almost each and every week. Most of the time, no intellectual property has been issued for the product that is being licensed.
Patent attorneys hate hearing this, because it’s bad for business.
97% of patents never recoup the cost required to file and obtain them.
This is not surprising, as there are more products on the market than ever and the lifespan of most products is very short. If a product is only going to sell for 2-to-4 years, the time and cost of getting a patent is not justified!
There’s also the problem of online copycats.
Even if you can afford the countless hours and massive financial resources required to fight infringers, you might not get the chance of defending your intellectual property in federal court because of recent changes to our patent system. You may end up dealing with the Patent Trial and Appeal Board (PTAB) instead. And if you end up in PTAB, it’s going to cost you hundreds of thousands of dollars to defend your patents. Your odds of success aren’t that great either. Many patents get invalidated by the PTAB (about 50%) which means the inventor loses everything. Even if we had stronger patent rights for inventors, it would still be very difficult to fight an opponent that is better equipped financially.
The reality is that completely protecting an invention requires much more than just a patent. It requires a significant amount of time and money. It’s not about who’s in the right or wrong. Anything can be argued in court.
Companies can work around your intellectual property by making slight changes or variations to your product idea. They can reverse-engineer your product idea to find information that will make it hard for you to argue that their product infringes on your intellectual property in federal court. Patents are just words. And those words can and will be interpreted differently by patent examiners, judges, and a jury. I learned this firsthand in 2003 when I fought the toy company LEGO in federal court. After three years, the case came down to an argument over just two words.
The process of protecting your intellectual property has always been a very expensive and time-consuming problem. Apple, one of the largest companies in the world, can’t protect their innovation from being ripped off despite an army of attorneys and tens of thousands of patents, let alone billions of dollars. If they can’t do it, how can we expect to?
Perhaps I am a bit jaded from my experience in federal court, but I believe you truly don’t “own” anything — even if you have a patent. (Maybe a trademark or copyright, but of course even these can be debated in court). When I first came to this opinion, I was so upset and disappointed, it really shook my worldview. I was one of many who believed that if I had a patent, that meant I “owned” something. Well, I had six patents and I still had to go to federal court to defend my ownership. The judge issued a ruling based on two words just a few days before the case was to go to court. After that ruling, my adversary LEGO and I agreed to settle the case.
What if the judge’s ruling had been different? Would I have lost? I had spent literally hundreds of thousands of dollars obtaining those patents, and their future came down to one person’s interpretation of two words?
Here’s what’s real: Patents are a collection of words and drawings. Words and drawings that can be argued about…. and the side with the most skillful attorneys and deeper pockets is the most likely to win the argument. That’s the way our legal system works. I accept this reality, and you should to.
Here’s the good news. Everything that I’ve just shared with you doesn’t matter in terms of your ability to license your product ideas onto the market and make money.
So, what protection IS really necessary before you submit a product idea?
The answer depends on the nature of your product idea and who you’re asking!
“Sell first and sell fast!”
-Michael Weinstein, past President of Digital at Bluewater Media and former Chief Marketing Officer for Allstar Innovations, the “As Seen on TV” company.
As I discussed earlier, companies need product ideas from us to stay competitive. They are trying to get good product ideas to market, not steal them or wage protracted legal battles over ownership, so you shouldn’t spend more resources on protecting your product idea than necessary. Don’t think that filing a patent on your invention is always a necessary step towards getting a licensing deal.
Instead of thinking about patenting your product idea so that you “own” it, I suggest you consider establishing what I call “perceived ownership.”
Let me explain what I mean by that phrase.
How to Create Perceived Ownership of Your Invention
Make sure your product idea is new.
Do thorough research online. Know your point of difference. To me, this is probably one of the most important things you can do. Too many licensees have told me that a simple Google search often reveals that a submitted idea is not new or original. Don’t waste their time or yours.
Do a “prior art” search.
Make sure you know your point of difference versus issued patents. I highly recommend you learn to do this yourself. There are classes online that will teach you how.
It’s impossible to find everything, but learn as much as you can and have fun. You can hire a firm that specializes in prior art searches, but ultimately, learning to do this yourself is a valuable skill. When a potential licensee asks you about patents or products that are already on the market, you want to have an answer. You can turn those questions into selling points if you know your point of difference very clearly.
Find inventor- friendly companies to work with.
Look for companies with a proven track record of licensing ideas from independent developers. Working with inventor-friendly companies is the best protection you can have because they value you and your product ideas.
Make sure the company’s product submission requirements are fair. There are companies that claim they’re open to outside product submissions, but have submission agreements that are unreasonable. Run from these companies! As a rule of thumb, stay away from companies that don’t have any invention submission process in place. Working with companies that don’t have experience with outside inventors typically takes far more time and effort then working with companies that consistently license ideas.
File a robust provisional patent application (PPA).
I think a well-written provisional patent application (PPA) is one of the best tools that inventors have to protect and commercialize their product ideas. A PPA is a fast and affordable way to protect your product ideas while you take the time to refine it, test the market, figure out manufacturing, and generate interest from potential licensees.
You can file a PPA without an attorney and the formal documentation that a non-provisional patent application requires. For 12 months, a PPA will give you the same legal protection you would get with regular utility patent application. It allows you to include the “patent pending” notice on documents, your sell sheets, and prototypes that you present to potential manufacturers, vendors, and customers. Also, a PPA will give you or your licensee the option of filing a non-provisional patent application later on.
Most individual inventors will be able to file a PPA as a “micro-entity” which reduces the filing fee to $70. This makes filing a PPA a very affordable option!
For more information on writing a PPA that you can use to license your product, I recommend reading my book Sell Your Ideas With or Without a Patent.
I go into far more detail in this book, explaining exactly how to write a well-written PPA that has value.
Another affordable resource if you are considering getting assistance writing your provisional patent application is SmartIP by inventRight.
Created by patent attorney and IP expert Gene Quinn, I believe it’s the best program to help you write a well-written provisional patent application on the market today. Gene is one of the leading IP strategists in the world and the founder of IPWatchdog.com.
Use Non-Disclosure Agreements.
To help you set a professional tone, consider using non-disclosure agreements (NDAs). Don’t ask a company to sign an NDA at the very beginning of your conversations. Show them the benefits of your product idea first. If they seem interested in your product idea and want more information, then sign their NDA — but make sure you read it very carefully. If a company’s NDA doesn’t seem balanced, have an attorney make the necessary changes. NDAs can also be used if you have trade secrets. If you do, I highly recommend working with a patent or licensing attorney to draft a strong NDA.
There are many types of NDAs. I do not recommend piecing together your own from the Internet. Also, you can use an NDA that has “work-for-hire language” when working with a vendor or anyone else that you’re consulting. That way there’s no co-ownership. Also, if working with a Chinese manufacturer, make sure you have them sign an NNN (non-disclosure, non-use, non-circumvent).
However, please understand that NDAs are not federal. There are different rules state by state.
The best protection is working with a company that has a great track record of working with inventors, and filing a PPA first.
There are basically two types of NDAs.
Mutual NDA: A mutual NDA is one in which both parties are exchanging confidential information. For example, you provide your product idea to the company to evaluate and they provide you with secret information about their marketing strategy.
One-Way NDA: A one-way NDA is used when only one of the parties is disclosing confidential information. For example, you share your innovation with a company and they don’t share any confidential information of their own.
File a trademark.
There are many examples of shameless counterfeiters online, especially on Amazon. These scams are often word-for-word replicas of your product name, features, and benefits. Trademarks can be an easy tool to prove rightful ownership to a retailer.
The USPTO defines a trademark as “a word, phrase, symbols or design or a combination of words, phrases, symbols or design that identifies and distinguishes the source of the goods of one party from those of others.” Note the language, “source of the goods.”
Trademarks are used by businesses more than individuals to protect the investment made behind a brand or company.
Sometimes, a trademark is a combination of words and a design. The Coca-Cola trademark has a particular type of font and style. “Just Do It” is Nike’s trademark slogan, and the Nike Swoosh (stylized checkmark) is the company’s trademark logo.
The above examples are in fact registered trademarks. The trademark registration process involves making sure the trademark is available, filing an application, paying the USPTO a fee, and waiting for the registration to be processed. Registering your mark gives you the right to put “R” next to it, and enables you to prevent and stop others from using your mark for identical or related products and services.
Not all trademarks are registered. In truth, you can put the little TM symbol next to your name, tagline, or logo that you create for your company right now and for free, providing no one else in your category and or territory is using it.
The unregistered or “common-law” TM simply establishes certain legal rights of ownership, but it’s main purpose is to give the public notice that you claim the mark as your own and that anyone who uses it or copies it will be liable for damages.
Some businesses never register their trademark, but I think you should, if not before you start selling your product, then certainly after it’s been available for a few months and you have some cash flow. Most competitors, retailers, and customers take registered trademarks more seriously than they do a common-law mark. Regardless of whether you register your trademark or not, you must make sure it is available before you start using it. I highly recommend getting further details from a trademark attorney.
Please note that most of our inventRight students do not file trademarks for their product ideas or their companies.
Trademarks are fairly easy to file. I have filed over 13 myself. The most important part of your filing is that you request the correct classification.
Consider whether you have trade secrets.
The Uniform Trade Secrets Act defines trade secrets as, “information, including a formula, pattern, compilation, program, device, method, technique, or process that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
Trade secrets can be extremely valuable and important. I recommend reaching out to a patent attorney for further advice.
File a copyright.
This is another affordable tool to deter online thieves. Copyrights protect your photographs and images. They are also a great tool for any type of instructions pertaining to a game.
U.S. copyright law protects the intellectual property rights to any published or unpublished “original works” of authorship in artwork that is fixed in a tangible medium of expression, which means it has been documented, recorded, or exists and some tangible form.
Things that can be copyrighted include websites, television commercials, movies, audio and video recordings, graphics, pictorial, and photographic images.
Copyright protection for an individual, such as an artist, remains in force from the date of first publication or registration (whichever comes first) until 70 years after the creator’s death.
If the work is created for a company, copyright protection extends for 120 years from the date of creation or 95 years from the date of first publication, whichever is shorter. Note that copyrights do not last forever, although they certainly last for a very long time. The laws change from time to time.
Examples of things that cannot be copyrighted include ideas, processes, formulas, recipes, names, slogan/taglines, facts, research, and unrecorded speeches or presentations. But do not despair. Some of these items might be able to be trademarked.
It is no longer necessary to register a copyright or affix the copyright mark (the simple “C” followed by the owner’s name and date of creation/publication) on the copyrighted item. Having said that, I think doing so is a good idea because proving your ownership will be easier and faster.
Filing a copyright is simple and affordable. You can submit the application via the U.S. copyright office website. Electronically filed applications take about 90 days to process, whereas a paper application could take as long as 10 months. The application fee is currently $45. (Again, this price is subject to change.)
File a design patent.
Design patents are issued “for a reproducible change in the decorative appearance, configuration, ornamental design, or shape of a utilitarian item.”
Design patents are different from utility patents, which are the ones we think of most often. Just like trademarks and copyrights, design patterns are relatively easy and affordable to obtain.
Now, for some words of caution!
Be wary of crowdfunding.
Crowdfunding campaigns are like a catalog for copycats in the sense that you are showing your product to the world long before it will actually come to market. This is especially for thieves abroad. You’ve seen the countless fakes on Amazon. I think the dangers of crowdfunding outweigh the benefits if you’re ultimately trying to license your product idea.
Don’t get seduced by TV opportunities.
Yes, shows like Shark Tank are fun and the exposure can be fantastic. But I’ve heard too many stories about product ideas that were copied after appearing on TV. TV is more about generating advertising revenue for the network than licensing product ideas. I recommend you focus your energy elsewhere.
Here are some beneficial things you can do to protect and license your invention!
Tradeshows can be incredibly valuable for product developers. They are a great way of familiarizing yourself with other products in your industry. I do not recommend purchasing a booth to display a prototype of your invention, which is an opportunity some tradeshows offer inventors. Instead, you should walk the show to introduce yourself to potential licensees and get a better sense of the market, including where it’s headed. There’s an entire strategy behind using tradeshows to license your product ideas, which professional inventors do.
Get to know retail buyers.
Make sure your licensee is contacting all the retail buyers. You can also show the product and inform that you’re the original inventor.
Always do thorough background check before working with anyone.
Whomever you’re working with, make sure to look at their profile on LinkedIn.
Also, Google search their name plus “lawsuits and complaints.”
Avoid anyone and any company that promises to do all the work for you.
Unfortunately, invention success doesn’t work that way. Licensing an invention/product idea requires legitimate work, time, and knowledge. If something sounds too good to be true, it usually is.
Always create a paper trail.
After every conversation, summarize the important points of the conversation and highlight the next steps in print. This is also a great way to keep your project moving forward.
Create strong marketing material.
Strong marketing material that highlights the benefits of your product idea helps build your perceived ownership of your idea.
Leverage market demand.
In some situations, you can help create demand by bringing people together. This makes everyone appreciate you as an asset. It does not give them any reason to work around you.
Try to be an asset. Do not give anyone or any company a reason to work around you. Always be flexible and reasonable.
Tell your story on social media only after you’ve licensed your product and it is launching.
In the meantime, build a network of fellow inventors on social media platforms. Make sure you comment in support when they launch their product. The best way to protect yourself is to create an army of raging supporters who will come to your defense if someone copies you.
Here are some additional resources to educate yourself about patent strategy!
Ultimately, the question of whether you need a patent for your invention is never black and white.
“Patents are important, and they’re not. It’s a long, complicated question. They are important for some people. For me, they’re not. I’m happy to look at all inventions, whether they’re patented or not.”
-Elias Amash, President of GRIP Tools.
GRIP carries a product line of more than 1,500 specialty hand tools, sporting goods, household, automotive, air tools, woodworking, and general merchandise items.
“We will work on an item whether it has a patent or not. And if we decide to go forward, we will help the inventor get a patent in the US and China because that will benefit both of us.”
-Trish Dowling, VP of Merchandising at DRTV company Allstar innovations, the maker of hit products including the Snuggie.
“It would be in your interest to get a patent filed then, so we don’t have a motive to cancel the license.”
-Lawrence Cruz, Chief Patent cancel at Conair, the $2 billion maker of small appliances, personal care products and travel accessories.