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| Have you built a better mousetrap? If so, you need to figure out how to sell it before you patent it. |
People
are unquestionably ingenious and many believe that such ingenuity can lead to
great financial rewards. Indeed, most of
us have heard our entire lives that “if you build a better mousetrap and the
world will beat a path to your door”.
This combination motivates countless people each year to expend the time,
effort and money needed to file and obtain a US patent on their idea. In recent times, the number of patents filed yearly
has approached 400K, with about 20% of these estimated to be filed by small
businesses (as this term is defined by the Small Business Administration) and
individual inventors.
As a
highly experienced patent attorney, I have benefited greatly from the perceived
need to protect innovative ideas with patents.
But after years of writing patent applications that created little to no
business value for my clients, I have decided that at this stage of my career I
will only take on patent matters that are a critical aspect of capturing a
significant aspect of the value available in a well thought out and executable
business plan. In other words, in my
role as co-founder of the Lean Legal Team of Michael / Hutter, I will only
obtain patents for clients if there is a realizable opportunity to make money
from the innovation.
What do
I mean by realizable business opportunity? First and foremost,
licensing is not one such opportunity. While a strong majority of inventors believe that they can license their
idea upon obtaining a patent, the reality is that almost no patents are ever
licensed when the sole aspect of the license is the patent itself. Certainly, there is much press activity addressing
the problem of “patent trolls,” the patents that are suitable for “trolling”
only comprise a small minority of the total number of patents in force
today. Notably, however, the reason that
such patents ever get licensed is that an existing or soon to exist business
model infringes the patent owned by the “troll,” and the license is entered into
to avoid litigation.
If
another company’s business model does not infringe a patent, the other common
way they might wish to take a license is to obtain access to an idea that can
be sold as a product or product feature within a product line. For example, individual inventors are very
good at finding solutions to their own problems by creating new product or
coming up with new ideas for toys. These
types of inventions form the basis of tens of thousands of patent filings each
year.
So,
there must be a market for such patents, right?
Unfortunately, not so much.
Indeed, the largest invention licensing firm—you know the one that
advertises non-stop on the radio—reports on its website that only about 1 of
every 200 of its clients makes more money licensing than they spent on the
company’s services. They also don’t
report how much more they make. If it was a great number, don’t you
think they’d be shouting it from the rooftops? Notably, this company has what we call a “hot
Rolodex” with the names of the buyers at companies with which it deals
regularly. If their clients can’t do better than 1 out of
200, what do you think the probability that you will be successful in your
licensing endeavors. With the cost of
obtaining even a basic patent ranging usually being greater than $7500 through
issuance, people should expect the odds of more than breaking even to be better
than 1 in 200.
Of
course, there are people who make lots of money on products. We see them all the time on late night TV infomercials. Some
of them have patents, certainly, but most others do not.
What
sets such successful patent owners apart from those who don’t have anything to show
for their effort and expense is a validated business model. It can be their business model or someone else’s but for any
patent to have value, but for there to be a real opportunity to make money on a
patented idea, there must exist validated and reproducible methodology to
create and capture value. In other words, if you can prove that
someone is going to pay you for your product and that you can make a profit, then
it may make sense to get a patent. But if you cannot do that, then
you need to rethink your plans. At a
minimum, I will not be interested in obtaining a patent on your behalf. (However, there will be lots of patent
professionals who will because filing a patent application validates their
business model).
I will
close with a statement that I do think that patents are significant aspect of
many businesses, and when the situation dictates that patent protection is
critical to the success of a venture, I am the first to suggest that we move
forward. Moreover, I am highly skilled
and efficient in drafting and, as a result, I can prepare strong patents at a
fraction of that price charged by a traditional law firm. It’s not that I don’t want to get patents for
you, I want you to get patents only if doing so is right for you. I look forward to working with those who
understand the value of the Lean Legal Team’s perspective that focuses only on
providing legal services that add business value for our clients.
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