Or at Least Conduct a Thorough Patent Search
By Jack Lander
Advancing an invention from concept to licensed patent that pays you royalties is expensive – about $10,000 for the typical low-tech product.
If you produce and market it yourself, the typical cash requirement is substantially more due to machine tooling and other startup costs.
Finding a financial sponsor to pay for the patenting and prototyping costs – a common dream among many inventors – is next to impossible. For most of us the burden of early stage finance is on our own shoulders.
The reason is simple: Undeveloped ideas are essentially worthless. No one, not even relatives and friends, is likely to finance them. Financing is a huge hurdle even for well-developed, patented inventions.
So, we’re facing a Catch 22. We can’t get the money until we have the patent and the prototype, and we need the patent and prototype to get the money.
The possibility of angel financing emerges when you can demonstrate that your idea really is an invention as proved by your issued patent. Angels are interested in capital growth from a startup business based on a novel product that has significantly greater benefits than whatever previously took its place. They aren’t interested in the trickle of income from shared royalties.
So, what’s the answer to this riddle if an outside investor is not in the cards? Savings, credit cards, selling the old coin collection – maybe these will get you started. Patents cost a lot of money. Most of the fees must be paid upfront.
I know that you’re eager to license your invention, but your patent, not your invention, is the essential basis for licensing. Your invention is presumed to be in the public domain until you prove its novelty with your issued patent. And unless you’ve got the next Xerox process or MRI machine, potential licensees are not going to be interested before you have your patent in hand.
Why? Because they don’t know what they’re buying until your patent issues. Your patent’s claims cover features of your invention that give it its commercial value. And the claims filed in your application can be watered down, or even outright rejected by patent examiners. Worst case: your entire patent application is rejected, and that happens more than half the time.
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Waiting two years or more to attempt to license your patent is risky, of course. If your invention is in a hot field, another inventor may come up with same invention. It happens. Elisha Gray and Alexander Bell filed papers at the U.S. Patent and Trademark Office for the same telephone patent on the same day. That can leave you with the trouble and legal expense of disqualifying the contender.
You can, of course, try on your own to license your anticipated patent with a “conditional” licensing agreement. Have your attorney draft an agreement that proposes sliding royalty rates that depend on the strength of the issued claims.
For example, a 5 percent royalty if the patent claims issue as drafted in the application; 2 ½ percent if the claims are somewhat diminished in strength; and a 1 percent “design rights” royalty if the patent is rejected, that is, none of the claims is allowed.
Such a proposal may be too complicated to be practical by a potential licensee unless it is desperate for your invention. But, it points out the difficulty in licensing before the patent issues.
Now for the punch line: The easiest way to finance your invention is to abandon it. What? That’s heresy. Burn Lander at the stake! But wait; even heretics were allowed a defense.
Here’s mine: The sad fact is most of our inventions have already been invented, and we stand little or no chance of getting a meaningful patent. There’s no point in settling for a design patent or a utility patent with trivial claims. These are very seldom licensable.
You’re certain, of course, that you have a novel, million-dollar idea. Maybe you do. It’s easy to find out by doing an existing-product search, and possibly a patent search.
Go to www.amazon.com, and key in a variety of words that describe your product.
Recently an inventor came to me for evaluation of his laundry product. I typed in the two words that described it, and up came 23 such products. No more that three or four of these would likely be found at Target or K-Mart, so a search of the stores alone is not adequate.
And a subsequent patent search revealed a patent that was identical to what he thought he had invented. Even my own “unique” weed puller dream was shattered. One of the 10 such products on amazon.com was exactly the same. This happens most of the time.
If you don’t find your invention on amazon.com, go to: www.google.com/patents, and enter some key words. I prefer using the advanced search option.
Again, type in key words that describe your invention. Also try key words for the problem your invention solves. Usually several patents will come up that cover inventions similar to or even exactly like yours.
Print out and review these patents and the patents that are referenced, which represent the inventions that the patent examiner found pertinent during the examination process. Some of these you can ignore based on their titles. But call up each of the others, and compare them with your invention. Look first at the drawings, then read the abstract.
This is a tedious process, and it’s possible that your search – or even a professional search – won’t turn up a patent that the patent examiner will find if you file your application.
As the late Carl Sagan once said, “Absence of evidence is not evidence of absence.” Even when you’re sure that no prior art, in the form of a product or a patent, exists, you should follow up your own patent search with a professional search. A professional search is a lot less expensive than having to revise your patent because the patent examiner has found a patent that you missed.
The majority of us stumble across our inventions rather than discover them as a result of a purposeful search for unfilled needs and wants. Thus, our inventions tend to deal with seeming opportunities. But it’s probably that thousands of other creative people have thought of the same or similar solutions. Only a few have acted, but the odds are that at least one was granted a patent.
Our eventual success in this business depends on having a lot of great ideas, disqualifying those that have already been done, and spending money only on those that survive our rigorous disqualifying process.
Meanwhile, set up a saving account, and begin depositing systematically, just as though you were paying off a loan. When you finally hit pay dirt with that one invention that passes all of your tests, you’ll be ready to file your patent application and make your prototype.
Jack Lander is the author of How to Finance your Invention or Great Idea.
Editor’s note: This article appears in the October 2010 print edition.