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EXCERPTS FROM INVENT SECRETS™

Invent Secrets > Excerpts

 

"Whenever I consult an inventor who just developed a new product, almost always, they think that their next step is to file for patent protection.  Patenting or developing an intellectual property strategy is certainly a step in the process.  However from an investment or entrepreneurship perspective, since the patent can be the most expensive part of the process, I believe filing before having the product evaluated for commercial or licensing feasibility is simply illogical.  I liken it to an entrepreneur who has an idea for a product or service and decides that the first thing he needs is a location for his business.  As a result, he gets a loan and purchases a four-story office building before even researching if there is a market for his product/service or evaluating if his business can operate profitably.

 

Inventors must consider this as they craft their strategy in moving forward after conceiving a new product.  Evaluation is a critical step to the eventual success in commercializing or licensing your invention and if it is ignored or done half-heartedly the product is doomed to fail.  The reason is obvious; if you do not know what you have it is impossible to capitalize on it.  That is, without understanding the competitive landscape, similar patents that may have issued, industry or market niche’ trends, major players, consumer demand, appealing product features, etc., you will lack the knowledge that will enable you to succeed."

 

By: Trevor Lambert

From Chapter 2 of Invent Secrets

Copyright © 2009 All Rights Reserved

 

 "If I were to compare this to golf, licensing your product is like a very long par-five hole with a dog-leg left.  Thus far all of your preparation in the past chapters represents your initial drive and long iron shot that puts you in striking distance to the green.  The actual contact with a new company is the approach shot, and negotiations, which we will cover in the following chapter, is like putting.  In your approach shot, if you don’t consider the hazards, pin location and slope of the green, you will create much more work for yourself.  In the same way, detailed consideration is needed when approaching, qualifying and making a license pitch to a company.  Miscalculate and you will be in a sand trap; come in too strong and you will find yourself in the back fringe; and if you come in too weak you won’t reach the green at all."

 

By: Trevor Lambert

From Chapter 6 of Invent Secrets

Copyright © 2009 All Rights Reserved

 

"The “Executive Summary Proposal” is simply business-speak for a shortened list of major terms and conditions of an agreement that can be easily reviewed prior to formulating the more extensive and lengthy contract.  Sometimes this can be referred to as the “List of Terms” or “Terms Sheet”, but it is basically the same thing.

 

The reason that its use is so effective is because it lays out the main elements of the agreement as a collective whole in a short workable form, both of which are very important.  Having the terms as a collective whole prevents a company from negotiating the agreement terms separately, which usually will result in a worse deal for you.  It is important for the company that you are working with to understand that the terms are interrelated and if they want a worldwide exclusive license that will have an effect on performance requirements, minimums, royalty rate and various other terms.  Additionally, having the terms in a short workable form allows for convenient review of the terms by executives that is not time-consuming or confusing.  By making it simple you increase your odds that the proposal will be reviewed and acted upon by the executives of a company in a timely manner.  Furthermore, coming to a consensus (in principle) on the major terms during the proposal phase will make constructing and executing the contract much swifter."

 

By: Trevor Lambert

From Chapter 7 of Invent Secrets

Copyright © 2009 All Rights Reserved

 

"THE POWER OF SILENCE:

 

In many cases there comes a time in negotiations where the parties are discussing various terms of an agreement and they get stuck.  Each party then sits quietly considering the options and the room is filled with an uncomfortable silence.  For extroverted folks like me, you will be tempted to say something… but don’t!  It is amazing how much information can be gathered during negotiations when you remain silent and let the other person talk.  They are likely to tell you background information of their position, providing you with further insight into their company, and sometimes they will actually suggest a solution that favors you.  The silence acts like a catalyst to get them talking.  As a general rule-of-thumb, the more talking that they do the better.  Consequently, embrace the silence and see what happens – usually you will be happy with the result."

 

By: Trevor Lambert

From Chapter 7 of Invent Secrets

Copyright © 2009 All Rights Reserved

 

"License agreements can be divided into two major categories: Exclusive and Non-exclusive.  An exclusive license means that the company who has the license is the ONLY one that can manufacture, advertise and distribute your invention for the defined territory, market and distributions channels.

 

For example, ABC Company may have a stronger presence and areas of distribution in the US while XYZ Company is relatively stronger in Canada.  As a result, it is possible to give an exclusive license for the US to ABC Company and an exclusive license to XYZ Company for Canada.

 

That is the more obvious example of splitting up a license by territory however more complex arrangements certainly exist and may make strategic sense depending on your product and the opportunities that may exist for licensing.  For instance, if ABC Company’s core customers are mass-discount retailers and XYZ Company distributes to regional specialty retailers, it is possible to give each an exclusive license for their areas of distribution, especially if the two companies are not major competitors.  Furthermore, another company may be excellent at Direct Response Television (DRTV), commonly referred to as infomercials, and another might distribute heavily through catalog.

 

These are critical considerations when identifying your list of potential licensees for your product as well as how to divide and assign value for each of the markets, distribution channels and territories in the license agreement.

 

If a company wants your invention, you should expect that they will request an exclusive license.  Having the sole right to a product insures that they have a relative monopoly on the licensed patent(s), thus giving them an edge over their competitors.  Commonly an exclusive agreement allows you to get more favorable terms since you would be putting all of your proverbial eggs in one basket.  The royalty rate is usually higher on average; some sort of guaranteed yearly minimums or performance requirements are included; and you are more likely to get money at signing."

 

By: Trevor Lambert

From Chapter 8 of Invent Secrets

Copyright © 2009 All Rights Reserved

 

 

 

 

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