Cash for Ideas & Patents

You don’t always need a patent to get your invention idea reviewed by a top company, and get it sold for cash.  

For inventions that are not yet patented, or that contain trade secrets or features that are additional to the patent, I recommend considering the following procedure for submission to companies. (I am not giving legal advice, and you should always contact your attorney when you are dealing with legally binding contracts.) 

I typically meet many company executives, especially at trade shows, and many are very willing to offer to sign a confidentiality agreement. They typically ask that one be sent to them at their office after the trade show. This is all fine and good, however it is my experience that 1 in 10 of these executives ever follow through with their promise. This, by itself, is not necessarily an indicator that the company is not a worthwhile candidate, for reason that I will explain later. 

After returning from the trade show, I would send the company executive a confidential disclosure agreement and give them an opportunity to return it.  If, after 30 days and one verbal reminder, they have not returned the confidential disclosure agreement, and if it is still part of the strategy to submit the invention to this company, then I would do so with a cover letter of confidentiality.  The reason I would do this is because since the company already indicated that they are willing to receive the invention on a confidential basis, receiving a cover letter of confidentiality is not out of the realm of what they should expect.  

In my cover letter to the company I usually state the invention is being submitted under the understanding that all submitted information shall remain property of the inventor, and the company shall not commercialize or use the invention without a written agreement between the parties. As long as I get this term, it usually doesn’t matter so much to me if the company also agrees to confidentiality, as I have never had a company abuse this in my 33 years in the invention business. 

Attorneys have advised me that if I submit my invention to a company under these terms, and if the company accepts the submission without taking exception to the terms, then the procedure becomes and offer and acceptance, thereby potentially making the terms legally biding. (Again, no legal advice here, always consult your attorney) 

If critical patent time bars are an issue, then I would lean on the confidential aspect. The book, The Inventor’s Bible, has more detailed information about submitting inventions to companies. 

This vastly differs from the submission policy of large multi-national companies whose policy is either to not except non-patented inventions, or to receive inventions only after a non-confidential disclosure agreement is signed.  One reason for a large corporation to not agree with confidentiality is because they may be compromised if the company were working on a similar idea simultaneous to the inventor’s submission. A confidential agreement may bring undeserving legal liability to the company. This may welcome a lawsuit from the inventor against the company; something companies want to avoid.  I have heard several horror stories from corporate executives who have experienced this from unreasonable inventors.

However, for those smaller manufacturers who are interested in seeing inventions, submitting your invention under the premise of confidentiality without them actually having to sign an agreement helps to bridge the gap and lets some progress happen, especially for those executives who are liability or written contract adverse. This tends to be the case early in a relationship, especially when they don’t know you yet, and when they are not even sure whether they want to proceed with the invention at all.  

Granted there is inherent risk associated with this method of submitting to a company, however it is my belief that the advantages of potential progress far out weigh the small chance of plagiarism.  Further, I generally revert to this procedure especially when the invention is in a small enough niche market that there is likely not justification for any type of lawsuit concerning it. Thirdly, I tend to do this with companies that I have already pre-qualified, had some experience with, and/or have talked to the executive and so forth. This is not to suggest that it is 100 percent safe to submit to a company just because I have spoken with someone in the company.  Lastly, I do not use this procedure if the premature public disclosure of the invention is an issue for either US or foreign patent filing. The inventor/client must always make the final decision as to how lenient they want to be with their submission policy. 

If the potential market in the next 10 years for the invention were over $50 million in retail sales, then the inventor may want to be a little more conservative regarding their procedure for submission to a potential manufacturer.  I use this as a arbitrary figure for the sake of example.  If the total market were worth $50 million retail, then the manufacturing company that you license may gross $25 million.  If the inventor were to receive a 5 percent royalty then this would amount to $1,250,000 over a ten-year period, or $125,000 per year, minus whatever commissions you paid for negotiation of the license. 

Therefore the net income to the inventor may be in the range of $100,000 per year.  When you consider that it costs on average over $1.2 million per side for just the expenses of a patent infringment lawsuit, it would be highly inefficient and not a prudent financial move to consider a lawsuit because the potential reward would not sufficiently offset the cost for bringing the lawsuit.  

As such, there has to be quite a bit at stake, such as $100’s of millions before even considering going into the litigation realm.  If litigation is not a reasonable alternative, then the next best thing is to make sure you are working with a company that is trustworthy, based on their track record and previous treatment of inventors.  

Nothing is written in stone so at some point the inventor has to take a leap of faith and hopefully companies have been pre-qualified enough that this leap is being made into the hands of a good company.  This also emphasizes the need for the pre-qualification and interviewing at places like trade shows, during in-field market research, and with interviews with executives in the company and people in the industry.

So, you want to sell your idea for a patent?  Here are some factors to bear in mind.

The companies who are your potential purchasers have different criteria for accepting new ideas.  Typically, larger companies demand that you have either a patent or patent pending prior to even looking at your invention.

Other small to medium size companies may be willing to look at your ideas with no patent pending and without a prototype.

In fact, one notable U.S. hand tool manufacturer accepts ideas without a patent and without a prototype. If they like it they will build a prototype, test market it within the company, and you still have the opportunity to potentially patent it on your own, AFTER you know that a company sees value in your invention and wants!

See how dramatically different these two approaches are.  One suggests that you at least initiate the substantial expense of applying for a patent, PRIOR to even submitting your invention to a company, and the other approach allows you to forego this expense until AFTER you at least get some indication as to the potential marketability and interest in your invention.

With the United States being on the ‘first to invent’ system, you may have up to a one-year time period to do this type of market due diligence, PRIOR to filing a patent.

So, how do you find out whether your situation would apply to the first scenario, or the second one?  The answer is simple.  You simply have to communicate with the right people in the right companies.  These people are the ones who would be your potential purchasers or licensees of your invention.  The right people can tell you what it is the company would like to see from you, in what format, (email versus regular mail), and with what kind of proprietary protection they expect you to have prior to the submission of your invention to their company.

The good news is, you can identify the right company – and even pre-qualify them WITHOUT ever revealing the patentable subject matter or trade secrets of your invention.

Now the question becomes, why wouldn’t you do this do diligence, IN THE BEGINNING OF YOUR PROJECT if you have an opportunity to do so?

In this way, you can establish your development process and decide how much you need to budget, when, and for what.  It enables you to answer questions regarding patenting, prototyping, and more.  Will you need a ‘works – like’ working model or ‘looks-like’ sample and etc?

Inventors can easily do their own initial market research to identify whom these right companies are and talk to the right people who can give you these answers.   For more information and to learn how to do this, read The Inventors’ Bible:  How to Market and License Your Brilliant Ideas, which has two chapters dedicated to instructions about how to learn this information, and it has a workbook included with the third edition with specific questions to ask and who to ask them of.  Additional information is found on www.docie.com and www.dimwit.com.

The National Hardware Show, and Lawn & Garden Expo will be held May 4-6, 2010 at the Las Vegas Convention Center. This is an international trade show, and the major US show for consumer, do-it-yourself (DIY) products sold in Lowe’s, Home Depot, Menard’s, Ace, True Value, and hardware stores throughout the USA and even internationally.

If you are an inventor of new products relating to: Hardware & Tools; Lawn, Garden & Outdoor Living; Paint & Accessories; Homewares; Plumbing & Electrical; Storage & Organization; or need help with International Sourcing, this National Hardware Show is place to be.

Most inventors think that they need a patent and a prototype before attending such a trade show. NOT TRUE. The fact is, I’ve attended these shows, while representing inventions, for over three decades – so I’ll let you in on the secrets.

First, you attend the show, you do not pay the big bucks to have an exhibit booth. This allows you time to walk the entire show, which will take a day or two, and see every exhibitor, talking to those with promise.

Second, the attendance price is normally free, or under $100, airfare and hotels are cheap, so for a budget of $300 to $1,000 you can attend an entire three day show, all expenses paid. Why pay $5,000 for a patent, or for expensive prototyping, when you may find a manufacturer who can potentially help you fund your invention project, and save you the risk and investment?

Third, at the show, you are there to listen, not pitch your invention. Therefore, you never have to show anyone any trade secrets or patentable subject matter relating to your invention. All you need to do is be able to talk briefly about the potential benefits and advantages of your invention, just to get in the ballpark of conversation.

Forth, follow the teachings on Docie.com, Trade Shows webpage, and you will learn how to find the markets for your invention, the distribution channels, who the potential manufacturers are, the right contact people, the companies idea submission procedure, their track record of working with other inventors, pricing for your product, potential sales revenue, competitive information, risks and obstacles you may face, and much more important information that you would otherwise never be able to obtain at one location, and in such a short period of time.

If you are working with a marketing company, and they are not attending this trade show, get someone else, because they are not seriously in the game.

Fifth, the United Inventors Association is hosting a one-day seminar for inventors on May 3, the price of which includes admission to the show.

If you can not attend this show, contact some of these reputable companies who plan to be in attendance: America Invents, Docie Marketing, and Lambert and Lambert, all of whom have experience in hardware, with working this show, and are seasoned marketers. Some charge a fee, and others charge commission only.

Good Luck!

• We’ve launched DIMWIT.com Self-Help for Inventors, a site with tons of helpful resources for inventors and an application (coming soon) to help them get customized invention advice and build a professional marketing presentation
• We’ve updated Docie.com with new information and a new look, and we’re working on improving our free evaluation submission process to make it more convenient for you
• We’ve launched a Twitter account (@DIMWITInventor) and Facebook page so we can better connect with our friends and fans
• And now we’ve launched a blog so we can share what’s going on with DIMWIT, Docie and The Inventor’s Bible

We hope you’ll join us by subscribing to the blog and connecting on our social sites. We can’t wait to talk inventions and patenting with everyone!