November 2010
“I don’t
get no respect” – Rodney Dangerfield
Sound
familiar? Getting past the gatekeepers
to someone who can license your invention can be a challenge. Gus Bigos (product scout for Evergreen IP) explained why that is, and
how a new-product development company (NPD) such as Evergreen IP, Big Idea Group, Edison Nation, Inventor Institute,
inventRight, Pelham West, or The Carey Formula can ease your way. (A list of other
inventor-friendly resources is available.)
The problem
Most
companies don't like to license an invention directly from an independent
inventor. Receiving disclosure of an invention
(patented or unpatented) can harm a company’s efforts to patent its own similar
inventions. Licensing an invention
untried by the market is riskier than buying a small company that has strong
sales. Optimal timing of a license
agreement is hard to predict. Coordinating
expectations of a company and an independent inventor may require extensive
negotiations and adjustments. Legal work
of licensing is expensive and time consuming.
As a result, no one in a company wants to be responsible for the
licensing process, which thereby becomes indefinite, vague, and slow. Licensing companies and inventors lose each
other as productive partners in innovation.
The solution
An NPD adapts
the independent inventor to the licensing company. It selects a promising invention then submits
it to licensing companies. If no license
results, it may decide to improve, patent, produce, and market the inventive
product or method before trying again for a license. The NPD benefits from payments it receives
from the licensing company or inventor. The
inventor benefits from professional product development, credibility, and
communication; from decreased risk in bringing a product to market; from no
haggling; from transparency; from a quick decision on whether an NPD or
licensing company will invest in the invention; and from a quick path to
profit. The licensing company benefits
from a standard screening process, from no haggling, from absence of disclosures
that might contaminate its intellectual property, from an expanded source of
creativity, and from an opportunity to introduce revolutionary products into
the market.
How it works
Submission of an invention
Inventors start
the development process by evaluating their own inventions (patented or prototyped),
which may be new products, new methods, or new uses of existing products. Is the invention what both a company and a
lot of customers would want? Is the
evidence for so thinking persuasive? Is the
invention a big improvement over what’s on the market now? If the answers to those questions are
encouraging, the inventor might opt to submit the invention to an NPD.
Screening
The
inventor may think that everyone will want to buy any product that solves a
problem. The NPD knows better. It refines the inventor’s reasoning by asking
how many people have that problem, how many know they have that problem, and how
many want to pay the inventor’s price to solve it. The NPD predicts the answers to those
questions by comparing the inventor’s invention to a model invention that the
NPD thinks would sell well. The degree
of similarity between the two is calculated using a mathematical formula (e.g.,
the Merwyn
Business Simulation [a specialized version of the Fourt-Woodlock
system of decomposition sales forecasting] or InventionScore). The formula may include variables that describe
customer benefits, evidence of those benefits, and size of those benefits
relative to the size of benefits provided by similar products already on the
market. If the degree of similarity is high,
the NPD tries to turn the invention into innovation.
Development
The NDP
tries to license the invention by persuading licensing companies that the
invention has a market. Persuasion may require bringing the invention to market
and showing that it yields high sales.
Bringing an invention to market typically costs the NPD about $250,000 in
design, patenting, production, and marketing costs. Of course, the NPD tries to recover its costs,
and to make a profit, by keeping a portion of a licensing payment.
Example – Evergreen IP (EIP)
EIP, a
United Inventors Association-certified patron, is interested in technologically
simple products (such as a recyclable popup trash
can) that have a large potential market. It provides
an inventor with transparent licensing and development processes, offering quick
acceptance or rejection of an invention and a standard deal for accepted
inventions. In the standard licensing
deal, EIP recovers its investment in the invention from the licensing payment
and splits the remainder with the inventor: 65% EIP, 35% inventor. The inventor pays no money upfront.
EIP is
actively seeking inventions (natural
cleaning compounds, agglomeration technologies, healthy foods, and disinfecting
technologies) from independent inventors for Clorox. EIP guarantees that it will get an invention
to Clorox within 30 days of submission and will get Clorox’s decision on licensing
within 60 days. Clorox pays EIP to
screen inventions using EIP’s Product Capitalist model (based on the Merwyn
Business Simulation model). This
standard licensing deal has 3 levels, based on patent status of the
invention. The inventor gets at least
$35,000 and 1% of net wholesale, and up to $750,000 and 3% of net wholesale. Again, the inventor pays no money upfront.
Thank you, Mr. Bigos, for helping us
understand the licensing process and for telling us about all the benefits that
EIP offers inventors.