A. Confidentiality Agreements
Prior to submitting your invention disclosure to anyone (except witnesses) for review, you should have them sign and date a paper which certifies that the information they are about to receive is confidential, trade secret information and that they agree to hold this information secret for a set time period. Such papers are referred to commonly as either a Confidentiality Agreement, a Non-Disclosure Agreement, or a Secrecy Agreement.
While the filing of a patent application relieves the danger of a premature disclosure which could adversely affect patent rights, it is still a good practice to get a confidentiality agreement signed. Most companies do not enter into confidentiality agreements. Indeed, be wary of a company that mails you a "Disclosure Agreement" for you to sign. Obviously, by virtue of the title alone, it is clear that a Disclosure Agreement cannot possibly be a Non-Disclosure Agreement! Be wary of Disclosure Agreements because, you are likely to be signing away rights. For example, a typical Disclosure Agreement says the company can use your invention and disclose it, but the company will respect any valid patent rights you may have or one day obtain.
There are two approaches to marketing an invention: licensing and venturing.
Licensing involves finding a company to make and market the invention, while the company pays you a flat sum or a royalty that is usually calculated upon sales. Venturing involves going into business to make and market the invention. Most inventors will seek to license their invention rather than go into business, because of the costs and risks associated with venturing.
Market research is essential before you make your decision. Find out what are the needs and wants of your potential buyers (either end users or licensees). How does the competition already address these wants and needs? Is the market for your invention increasing or deceasing? How does the competition get the word out on their product? Check out competing products in terms of price, features, packaging, etc. -- know where you fit in.
Learn about all the things you must do, and continue to do, in order to start and operate your own business. Alternatively, find out what a "typical" license provides for.
Know your invention in terms of its features and the benefits derived from those features. What are the unique features of the invention, and what desirable benefits do they confer? Know your marketplace and know how to persuasively argue how well your features/benefits fit into the real world.
Perform a test market, if possible. One technique is to consign some units at a local store. In doing so, be certain the marketing is done according to your control. Alternatively, conduct a poll using a questionnaire.
Successful inventions fill a need or solve a problem. The three "musts" are: 1) quality (how well it works), 2) synergy (how well it fits into a company product line), and 3) market acceptability (develop and follow a marketing plan).
C. The Standard Approach:
The standard approach to licensing an invention is a base line for inventors to follow. Deviations from this base line are of course possible, but should be carefully considered before doing so.
1. Be certain your invention is carefully worked-out. The invention must serve a purpose or fulfill a need, and must do so in a manner which is acceptable to the intended users. This may also involve having engineering drawings prepared, as well as a prototype. Some attention should additionally be directed to production costs and methods.
2. Take steps to protect your invention in advance of marketing. Prepare a witnessed disclosure and file a patent application. Note that not only is the patent application a legal document, it is also a fantastic submission document for marketing! Have any persons reviewing the invention sign a non-disclosure agreement.
3. Research the market to know where and how your invention fits-in. Go to retail outlets, go to websites on-line, etc., to see what is currently on the market. From this exploration, you'll see who is making what, where and how.
4. Obtain a list of potential licensees. This can be accomplished by recording manufacturers seen during your retailer explorations and/or going to a public library. A library reference of great utility is the Thomas Register [see Links], which lists manufacturers by category of product.
5. Research the background of potential licensees - obtain the address of the licensees, names of specific officers, and phone numbers. Of particular research help are corporate directories, such as those published by Dunn & Bradstreet and Standard & Poors. Your best bet is to find a "Vice President of Marketing", not "Vice President of R&D" (the R&D person might think your invention encroaches on his job, whereas the marketing person hopefully will welcome the new markets afforded by your invention).
6. Determine where and how your invention fits into the existing product line of the potential licensees. Potential licensees will be more likely to be interested in your invention if they are already making allied kinds of products, where your invention can form an integral part of the product line. Further, look into how your invention can give a potential licensee a competitive advantage.
7. Draft a submission letter customized for each potential licensee. The letter should begin by telling who you are by profession, trade or other relevant experience or education. Then paint a picture of the invention in terms of its benefits (not features; features are structural in nature and may give away too much confidential information about what the invention actually is). Finally, close by stating your request for particulars regarding submission of your invention.
8. Await their reply. If none, follow-up with a phone call to the person you wrote to. You should plan to wait at least a month, possibly longer. You must have their response before actually submitting your disclosure, lest you risk your submission being improperly routed, or worse.
9. Examine the reply to ascertain if there is any confidential disclosure procedure (CDP) for your submission. If not, you may wish to wait and see if any other potential licensees offer confidentiality.
10. Submit your invention disclosure to the potential licensee(s). This usually takes the form of the patent or patent application (usually without the claims), and may include pictures, a video, or even a prototype. In some instances, this may involve visiting the offices of the potential licensee. Sometimes there may be a strategic advantage to select one "best" potential licensee to submit to first; but, on the other hand, consider that competition among several potential licensees for your invention could be very beneficial.
11. Await the decision of the potential licensee(s). Don't be a pest by frequently calling or insisting on a quick response, because the answer will then almost invariably be "not interested". Don't give up if you hear anything negative. Persistence can save the day. If the decision is "not interested", then try to find out the exact reasons why, and address these issues in the future with other potential licensees.
12. If the answer is "we're interested", consult with an attorney. You may request a proposed licensing agreement be sent to you. Analyze the proposed licensing agreement and reply with proposed revisions. You will want to exactly define what is meant by "the invention", the royalty arrangement, minimum royalty and what happens if things go awry in later years.
13. Upon mutual acceptance, sign the finalized licensing agreement. Enjoy your success!
Copyright © 2000 by Peter D. Keefe
All rights reserved.