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Evaluating Inventions

Evaluating Inventions —

By Jeffrey Dobkin

 Inventor Question 1:  What state is your invention in?

Napkin drawing
Tight drawing
Mechanical
Prototype, made from available material
Working Prototype, professionally made
Manufacturing Prototype, all standards and processes defined and refined and specified exactly how it will be manufactured
Finished and produced.

Inventor Question 2: What is your personal ultimate goal for your invention?
Would you like to license it?
Manufacture it yourself?
Market it yourself?
Start your own business and manufacture and market it?

These first two questions determine how you will proceed with the rest of your marketing.

Remember, an idea is a snapshot – a single moment in time. You’ve had that EUREKA moment, now it’s over.

Now, there is a much different set of skills needed
1. to bring an idea to a working prototype,
2. to a manufacturing prototype, then
3. to a well designed commercial product.
Next, there is a whole other new set of skills needed to
4. start and
5. successfully run a small business – or
6. license your product by selling your product concept in some fashion. These last two avenues – starting a business or licensing your invention are quite independent of the inventing moment. Different skills are necessary for each.

Patents

Kindly remember: A patent doesn’t protect you, it gives you the right to protect yourself.

A patent doesn’t stop a thief from stealing your idea – and in fact, doesn’t even slow him (or her) down.

There is not a sheet of paper in the world that will stop a thief.

Are you planning to patent your invention?
Utility patents cost $4,000 – $5,000 to start and can cost $10,000… and up.  Consider 1. not only the cost to patent your invention, but also 2. if you would be willing to invest the money – and the time – to prosecute someone in a court of law – possibly in another city – who infringes on your patent.

Some large companies – if they like your idea – will move forward and bring the product to market even if it infringes on your patent. They’ll set aside a legal fund to tie you up in court. If the fund runs out of money before you do, they’ll give you back your idea or innovation and say “Sorry – we didn’t think our product infringed on your patent, we won’t do it again.” never even admitting they were wrong or admit their real act of trying to steal your idea through the court system. If you run out of money before they do, well… they’ll just continue to market your invention… and sleep well at night.

Do you think you can get a patent?

Here are the four qualities of patents as defined by Jeffrey Dobkin:

1. A Great Patent is one that keeps others from manufacturing and marketing the same or similar products. This is a broad patent with broad yet enforceable claims that are readily apparent – so that no one even tries to knock you off.
2. A Worthwhile Patent is one where you can send a copy of the patent and a notice “To cease and desist” to a competitor and successfully keep him from making or selling your product. Your competitor recognizes he won’t easily be able to circumvent your patent claims.
3. A Lousy Patent is one you have to defend in court to prove your claims – your patent rights – have been infringed upon.
4. A Terrible Patent is one where you lose this suit, and the shirt off your back defending it.

The actual types of patents as defined by the USPTO are

Utility patent. Protects the concepts. This is the usual patent people try to get. Based on the claims of originality. Each claim will be accepted or denied by the patent office. If accepted, these are the areas of protection you receive, a competitor who violates a claim can be prosecuted.

Design patent. Patent protection is limited to the product design or shape. Prevents others from using your design. Usually not nearly as strong as a utility patent, but in some cases all you can get. Sometimes better than utility patents, for example: the curve of a Coke bottle is protected by a design patent.

Patent pending. This is the status you get after you apply for a patent, which can take up to 2 years from initial filing. This status gives you a patent number, which has value in itself. Your patent claims and drawings are shrouded in secrecy which is a tremendous benefit in itself, especially if your patent is weak.

When a patent is issued, patent circumvention specialists will take a good look at your claims and try to figure a way around them. However, while your patent is pending, other companies won’t know where you have made your claims or what they are, so if they introduce their own product to market, they may find they have violated your claims if and when your patent issues: so they may have an exposure for an infringement suit.

Provisional Patent. This really isn’t a patent. You can file this provisional patent yourself with the USPTO for about $250. This offers you proof of an early date of filing, and can be used to prove the date of conception or invention. The patent is held in confidence, and not reviewed by the patent office – so it’s neither approved or denied.

After filing for this type of early patent provisional procedure, you have one year to file a regular patent. If you don’t file a regular patent, after one year the provisional patent will expire – along with all your claims – and your rights, including right to file a real patent based on those claims. This is important – because if you don’t file a patent within a year your right to file a patent based on your original claims is completely LOST. This, m‘dear, stinks.

Document Disclosure program. This isn’t a patent either.  You can send any drawings, writing, sketches – whatever – to the USPTO under their document disclosure program. They’ll hold your letter on file for a year – unopened, after which it’s trashed. This confidential disclosure is used to prove date of conception, and what your idea is. If there’s ever an argument of when you thought of something, this can be a savior to establish the date. And at ten bucks, it can be worthwhile.

What makes your patent valid?
A patent is only as good as its claims. What specific claims will your patent have that make your invention protectable?

Are your claims broad or narrow? Broad claims – which are better – offer a wide area of protection; narrow claims limit the parameters of infringement – what you can sue someone for to protect your invention. For example, if you patented a shower curtain rod that is bowed (or curved) outward to give you more room in the shower, this would be a utility patent with a broad claim – no one could make any shower curtain rod with a bow in it.

If your claim was for a shower curtain rod with a curve in it that was 3 to 4 inches in depth, this design patent would be easy for other shower curtain rod manufacturers to circumvent simply by making their curtain rod bow to a greater or lesser depth. This would be a poor patent, easy to circumvent.

Are your claims easy to get around?
Keep in mind there are patent circumvention specialists!

Here’s help for seeing what’s out there
Have you ever looked-up similar products on the Internet patent search sites? You should. Looking up similar patents serves three functions: 1) to see similar patents and designs – to see if there are any ideas you can incorporate into your product to make it better. 2) to make sure you are not infringing on someone else’s patent, and 3) to make sure your product is patentable – that there is not prior art that will prevent you from getting a patent.

A patent isn’t necessary to manufacture or sell your product; and sometimes is actually not desirable. However, it will make your invention more salable if you intend to license it.

MONEY – Budget

No matter what you want to do with your invention, it takes money. Maybe not a lot, but you should know what you are willing to spend, and what you want to get for it.

Budget Considerations
What is your total investment?
If it’s $500,000, $10,000, or ten bucks – you need to know what you are going to spend right now, in the next few months, and over the course of the next year. Write down a figure.

Is it realistic? Is it realistic for your goal? Even if it’s not realistic, you need to know what it is.

Of your budget, how much money do you have to spend on product development? On making a prototype? On getting a good design? How much for market research? How much for a patent – or protecting your patent? On manufacturing an initial test run? On marketing your product? Whatever your figures, you should have some kind of knowledge of what you are willing – or going to – spend.

Prototype –

Do you have a prototype?
How much time are you willing to spend creating a prototype?
How much money do you have to spend on a prototype?
How much money do you have to spend on corrections to your prototype
How much money do you have to spend on a “manufacturing prototype”?

Sales/Marketing

What are your sales goals?

How much are you going to spend on marketing and promotion? Remember, you’ll need to research the market, ads in several sizes – made for several different markets, several versions of press releases, photos, brochures and literature, order forms, sales letters, direct mail packages (response to ads); and if you don’t have it letterhead, envelopes, mailing labels, and business cards.

Advertising: Magazine and Direct mail

What is your revenue goal per year?
If you say it’s $10,000, then you need to have a budget that can generate that target. If it’s $100,000 – your budget will increase to 10 times what it was for a $10,000 sales goal. If it’s one million dollars, let’s talk.

What is your manufacturing cost? Your markup? Keep in mind distributors mark up your price 28% to 35%, then retailers like to double their cost. So your product that costs you $6 and you sell for $10 to a distributor, he sells for $13.50 to a retailer, who sells it to the public for $27.

If licensing, is your goal:

What % do you want to get for yourself? Is this realistic?
What is your budget for finding a licenser? The value of your product will depend not only on the product, but what state it’s in. If it’s a napkin drawing it’ll be worth a lot less than if it’s in a finished and ready to go final production (with all the design issues and costs figured out)

If manufacturing your product yourself is your goal, how much will you make on each sale, at each different price point. What will it list for. What are competitors selling theirs for?

Does it go to a well-defined market?

Unlikely as it sounds, one of the most difficult marketing problems is to have a product everyone can use – like a telephone – unless you have exceptionally deep pockets. It’s just too expensive to reach everyone – you need to focus your marketing on a specific target – a select group of individuals who are the MOST LIKELY TO BUY RIGHT NOW. If you can’t figure out – and section out – that group of likely purchasers from the rest of everyone else in the world, you’ll have a tough time marketing.

Can it be sold through dealers and distributors?

When your product goes through traditional marketing channels it will sell for 4 to 5 times your manufacturing costs. To sell at wholesale means your manufacturing costs are low enough that you can have a distributor add 33% your price; then have the retailer double that price, and still be able to sell it to the consumer for a reasonable cost. So if your product costs you $6 to manufacture, and you sell it to a distributor for $10, he’ll sell it to a retailer for $13.50 – $14, and your list price will be around $25 to $28.

It’s very expensive to market directly to consumers, there is a cost associated with reaching each person to deliver your advertising message. It’s much cheaper – and more focused – to reach a limited number of distributors and let them sell to retailers who in turn sell to consumers. When selling to distributors or retailers your orders will be larger and for more units for each sale – but will be sold at less of a price.

Is your product different enough?

What makes your product unique? Can you actually differentiate your product from the field? Will the market perceive a big difference in your product from the rest?

For example, if you market a chocolate chip cookie with almonds – even though no one is doing so – it will still be categorized as a chocolate chip cookie. But, if you came out with a special chocolate chip cookie dough that didn’t need to be baked to rise and it still makes delicious cookies, it would be in its own category. It would be best to have a product so very different that it is recognized in its own different category.

Is your market hardened off to tales of wonder.

Let’s take our chocolate chip cookie example and expound: suppose you’ve created the world’s best tasting chocolate chip cookie – and the proof was: every single person who has ever tasted it has said the same thing, “This is the world’s best chocolate chip cookie I’ve ever tasted, bar none!” Could you sell it easily? The answer is… no – because every time you told people that you’ve created the world’s best chocolate chip cookie, you’d have to get in the back of the line of all the other people that have made that same statement, which is pretty much every chocolate chip cookie maker. Every consumer has heard “We have the world’s best-tasting cookie!” hundreds of times, from every other person who has create a chocolate chip cookie, and from every firm that markets chocolate chip cookies. And don’t even think that you’ll give everyone a sample – it’s too expensive.

Another example. Supposed you’ve created a way to make money, and anyone could easily make $5,000 a month to start, with minimum work. Don’t you think this program would sell itself? Nope. If you’ve ever been involved in the MLM industry (multi-level-marketing industry), you know the stories about how much you can make. Stories abound – every program shouts “You can make $10,000 to $25,000 your first month with our program!” There’s no way to differentiate your program – that really does throw off that kind of cash – from the hundreds of other programs that don’t but say they do, too.

Are there high entrance barriers to the industries you are marketing to?

Is it a consumer product, or an industrial product?
Consumer products go to market segments of consumers. They’re expensive to reach, and most are tough to convince to purchase… most consumers have a few thousand advertisements thrown at them each day. High entrance Barrier: advertising to consumers is $$$.

Industrial markets are generally easier to reach, taking a more focused effort to reach each customer within that group = lower entrance barrier.

Is there a major player – or several – marketing a similar product to that market segment? = High entrance barrier.

Some markets are harder to penetrate than others. Some have bigger volume requirements, other industries are very price sensitive. Some markets are so competitive that smaller companies – with their accompanying smaller marketing budgets – can only get lost in the aftermath of the larger companies advertising backwash. It takes a very clever low-cost promotion to compete with large-budget campaigns. And always remember, while there may be low cost campaigns, nothing is free.

Did you create the “everyone will buy one” product?

They won’t. It will be a tough sell, and you’d better go into any marketplace realizing this. But – like most of my clients, you won’t. But you should.

Pricing
What is the final retail price of the product?
Every product has a price range of what it will sell for. Under it, and you lose trust and the perception you have a quality product. Over it, and customers will buy your competitors brand.
What are your competitor’s price points? What prices are your competitors selling their products for? Their highest? Their lowest? Where does yours fit in? Their prices will determine – to a good degree – what you can charge.

Certain price points make different types of marketing mandatory. If your product sells for under $20, you’ll most likely need to sell through dealers – because even if your profit per sale is $10, this doesn’t leave a lot of room to sell by onesies and twosies. If you’ve got to talk to 100 people a week to sell 50 products at $20 each, you’ll burn out pretty quickly.

What are your costs? For labor? For material? Packaging? Shipping? What is your profit on each sale?

What are your costs?
What is your first production run (how many)? What will this cost? You need to cover this cost in your first sales. But to figure our your real costs, what will the price drop to when you make your product in larger quantity? If your product costs you $10 each when you make 1,000, what does it cost to make 20,000? 40,000. When you get quotes, eventually you’ll reach a cost just won’t get any lower no matter how many more you purchase. You need to find out that number – because once you start selling your product, someone will ask for a quote of 10,000 or 100,000 – and you better have an idea of your cost – and their price.

Will your product stand out on a shelf?
Will the product sell itself from a shelf.

I know a guy who created a great product, but it wasn’t readily apparent what it did unless he explained it to you. So the product just sat on a shelf at Home Depot… and didn’t sell. Do you need to explain to each person what your product does?

Do customers need a lengthy explanation of what your product is, what it does, or how it works? Remember, your product will sit on a shelf in a store… right in-between 2 other products, in the midst of hundreds of other products… on hundreds of other shelves. You won’t be there to describe it to anyone. Will they know what it is, what it does? Will it still sell?

Is there a “WOW” factor?
Do people look at your product and say, “Wow – I gotta have one of these?” Then, will they take out their wallets and buy one?

Is there a line extension?
Lots of products aren’t profitable as a single item sold to a particular industry. But if you offer several items to the same industry you have synergy — you can now cross sell products to customers, and to attract more buyers without significantly raising your marketing costs.

These are just a few of the thoughts on a product self-evaluation.  Hope they are helpful.

Jeffrey Dobkin and the research and evaluation team at the American Society of Inventors.