Natural Entrepreneur: The Business Decision to File a Patent

this is a layer

Market

Ralph Waldo Emerson once said, “Build a better mousetrap and the world will beat a path to your door.” But today we know that building the better mousetrap does not in fact guarantee customers. One of the first issues to consider is whether you have a market for your invention.

With few exceptions, independent inventors invariably believe there is a market for their invention. Unfortunately, it is all too common for inventors to test their ideas on close associates and other supporters who have nothing to risk by giving positive feedback and promises to purchase. This feedback can easily encourage the inventor but offers little or no indication of actual market size. Inventors who come armed with reports of comparable products grossing ten million dollars can also be mislead as to the market opportunity for the invention. The key is knowing where and how your product will enter the market and a reasonable assessment of the revenue expected from that market entry.

Sometimes the greatest challenge is identifying the best way to put your invention before the customer. One client of mine developed an invention he expected to be distributed through a regional chain of retail apparel stores in New England. Generally, if you can get your invention sold through a chain and your target audience is individual consumers, you are in a better position than most independent inventors. However this particular product was not related to apparel, which I questioned whether possible consumers would think to go to an apparel store to buy his product, particularly when these stores did not sell comparable products.

A second client had a similar challenge when attempting to sell a software product. We first considered selling the product through the PC Connection catalog. PC Connection is fairly open to selling any software product, within certain standards and for a fee. The first question was whether PC Connection sold comparable products through their catalog. In fact they did, but at a cost significantly higher than my client’s product. When we inquired about the volume sold, we learned that only two units had shipped in the past year. Since PC Connection ships high volumes to a wide audience, it was fairly evident that catalog sales were not an appropriate channel for my client’s product.

One last anecdote on this point involves a client who received an unsolicited offer from Home Depot who had heard about his particular invention. They agreed to fly him to Atlanta for a detailed product evaluation and to discuss placing the product in their stores nationwide. This independent inventor clearly had a market.

Capital

Another important consideration is capital. Many independent inventors believe that by showing their invention to enough investors, one of them will see the financial promise in the invention and will bankroll the business. The investment market does not work this way. Investors want to see that you have formed a great business team, you have identified a ready market, and that the business team is fully capable of bringing the invention into the market and maximizing the value of the product.

While investors will look at the quality of the invention, they would much rather invest in a great business team with an above average idea than an above average business team with a great idea. Most independent inventors miss this point and often end up wanting for capital. Still, there is money available to help finance the business, including small business loans, grants, and investments from friends and family. It is always recommended that the new venture operate on a modest scale until it can be shown to operate profitably. Many small businesses fail in the first six months of operation because they raise insufficient capital to enter the market.

Goals

While understanding the market for an invention and how to finance it, independent inventors must certainly determine and embrace their goals for the invention. Is the goal to operate a business well into the future? Or is the goal to license the patent to one or more interested parties? Is the goal to sell the invention to the first buyer that comes along? Before investing in a patent, an independent inventor should have a strategy for how he or she intends to exploit the invention.

Independent inventors Todd Lizotte and Orest Ohar formed NanoVia in Londonderry around a handful of patents. They operated a successful business for over four years. While operating the business, Hitachi was a major licensee and recently, Hitachi became sufficiently enamored with NanoVia’s technology to buy the business from Todd Lizotte and Orest Ohar. Most independent inventors dream of doing so well.

I know a few of you reading this are thinking, “Gee, thanks for the words of discouragement.” I do not like to sound like a pessimist. Patent law is not an emotional roller coaster like family law or criminal law. But to me, there is nothing more exciting than helping an independent inventor get a business started and there is nothing more depressing than watching an independent inventor go belly up. There is money to be made out there for someone who can develop an invention, protect the invention, and bring the invention to market, but that type of undertaking requires significant planning and research before venturing forth. Dean Kamen succeeding in building DEKA Products Limited Partnership through independent inventions, as did Todd Lizotte and Orest Ohar. There are many other successful independent inventors in New Hampshire and there will be many more, and their successes will be marked by a commitment to advanced and detailed business planning.

Todd A. Sullivan, an associate with Hayes Soloway, is a New Hampshire Patent Attorney and graduate of Franklin Pierce Law Center. Todd and Hayes Soloway will be contributing a series of articles over the coming weeks directed toward patent information for the independent inventor. He can be reached at tsullivan@hayes-soloway.com

Upcoming Events

Feb 21 (8-9:30a): NH Forum on the Future, NHHTC, CR Sparks, Bedford, NH

March 1 (6:30-8:30p): Women's Business Center and MicroCredit-NH Networking Event, Bank of America, Portsmouth, NH

March 6 (10a-noon): Growth Capital Resources in New Hampshire, City of Nashua, Office of Economic Development, Daniel Webster College, Nashua, NH

March 8: (12pm -1pm) Break the Rules and Close More Sales, Amoskeag Business Incubator, Manchester, NH

March 16: Peak Pitch (pitch your plan to invstors on the chairlift), Mt. Sunapee, NH ($)

March 22: Breaking Trends in Web Develoment, UVCIA, Hanover, NH ($)

View Ads