Common Sense Inventing - Educational articles to help Inventors make informed decisions

Watch most Inventor shows on TV and you will likely see people on the edge of disaster financially. You hear story after story of people that took out a second mortgage on their house, used every bit of savings they had, were living in their car and on the brink of bankruptcy. These were the ones that made it on camera. They had thousands of entrants and only a few made it as far as being televised. Just think if even ¼ of the people who auditioned and didn’t get on T.V spent as much money as the ones you saw. The other thing you need to consider is that all of those that did not get on T.V. were looking for someone to produce their idea and get it to market.

There are a number of invention submission companies out there and now there are even more that have sprung up offering help, for a price and feeding off of everyone’s enthusiasm to make it rich. Unfortunately, not all of them have your best interest at heart. Some of them are only out to empty your bank account and really don’t care if your item gets to market as long as your check clears the bank. You have to understand no matter who you pick to use, they provide a service and that for every service you use you will have to pay a price.
If you come to them and say I have idea X and I want to have a patent search done, I want to file for a patent; I want to get a prototype made and have my idea sent to companies for possible licensing. They will be more than happy to do all those things….for a fee. It is not their job to tell you your idea stinks. They are providing the service you requested. They want to provide you with the services you said you wanted…for a fee.

Think of it this way. If a company that cuts grass as a service was working across the street from your house and you went over to them and said “Can you cut my grass?” They are most likely going to say “Yes, we can do that for X amount of money.” If you say I want you to cut my grass every week whether it needs it or not. They will set you up on a schedule and cut your grass every week whether it needs it or not. Because, you are the paying customer and you are asking them to provide you with their service. They also know that if you are determined to get your grass cut every week whether it needs it or not and they turn you down you will just go and find another company willing to do it every week. So, is that company a bad company for giving you what you want even when you don’t need it?

When you go to a Patent Attorney’s office and say I want you to do a patent search for me on my idea should the Patent Lawyer say “Have you gone to or the patent office website yourself first to see if anything else is out there?” When you go to a design firm and say “Can you build this for me out of titanium?” Do you expect them to say “What are your plans for this? Have you looked to see if anything else is out there like this?”
When you go to a manufacturer with your designed product and say “ I want you to make me 5,000 of these in red and blue”. Do you expect them to say “We won’t make these for you until you can prove to us that these will be marketable and you will make your money back on them?”
If that is what you expect to happen you will be severely disappointed because the chances of that happening are slim to none. Why? Because they are in business to make money and they are selling you a service and you are asking them to perform a service. Whether you feel it is morally wrong on their part to do as you ask, even if they know you are wasting your money. It is not illegal for them to provide you the service. It is your job to do your research up front and to be as informed as possible to make sure you are making a sound decision.

Don’t get me wrong I feel horrible for anyone that loses their shirt and goes severely in debt, gets ripped off or just has bad luck with a product that is a great idea. I am trying to make sure you know up front what you are getting into and make you ask the hard questions to determine if you need these services. As I have said before I have several items on the market that I spent less than $100 on and never set foot in a patent lawyer’s office, or hired a design firm, or contacted a manufacturer to build me X amount of prototypes. So, it can be done.

When you come up with an idea that you think is great. You need to stop and do this exercise before you approach any company and ask for any services. Take off your Inventors cap and put on your Consumers cap. You can’t think of your idea as YOUR idea anymore. You have to think of it as something you see on the store shelf when you go shopping and are spending YOUR hard earned money to purchase it. I can’t emphasize this enough. You need to REALLY look at your idea from the consumer’s point of view and ask these questions.

• Would I REALLY buy this item if I saw it in the store?

• Why would I buy it?

• Would people that bought one buy another later? Is your idea a one-time purchase?

• Is this an item that more than just your family and friends would buy because they like/love you?

• Which companies do you think would sell this type of item?

• Are there any items like yours on the market? If yes, how is yours better and why would it sell better than theirs? Are theirs selling at all or just taking up shelf space?

• Will the consumer GET your product when they see it on the shelf without the advantage of having a commercial built around it?

These are simple questions YOU can answer without paying a soul. If you get more negative answers to these questions than positives you need to reevaluate your idea.

As an Inventor you do have rights when it comes to working with an invention submission company. Many people get ripped off because they don’t know the right questions to ask or what the invention submission company is required by federal law to tell you before you sign on the dotted line with them. If they are unwilling to answers the questions required by law, that should be a huge red flag to you; run and get away from them as fast as possible with your wallet still intact. If they are legitimate they have nothing to hide and should be happy to show you their successes and failures. Many have their successes posted on their website for you to check out.
The American Inventors Protection Act of 1999 is there for your protection. Use it. Companies that fall under this act are required to tell you the information below BEFORE you sign a contract becoming a client, not AFTER you have already spent the money!
Below is a portion of the act and its list of rights you have. READ IT! This is for YOUR protection!
Note: This is what was current as of this printing. You may need to look up a current version which can be found online easily. This is just a portion of the law that I have posted. As I stated you can find the full law online. I thought this section would give you a good basis to start with and you could look up the entire current law.

American Inventors Protection Act of 1999
This title may be cited as the `American Inventors Protection Act of 1999′.
Subtitle A–Inventors’ Rights
This subtitle may be cited as the `Inventors’ Rights Act of 1999′.
(a) IN GENERAL- Chapter 29 of title 35, United States Code, is amended by adding at the end the following new section:
`Sec. 297. Improper and deceptive invention promotion
`(a) IN GENERAL- An invention promoter shall have a duty to disclose the following information to a customer in writing, prior to entering into a contract for invention promotion services:
`(1) the total number of inventions evaluated by the invention promoter for commercial potential in the past 5 years, as well as the number of those inventions that received positive evaluations, and the number of those inventions that received negative evaluations;
`(2) the total number of customers who have contracted with the invention promoter in the past 5 years, not including customers who have purchased trade show services, research, advertising, or other non-marketing services from the invention promoter, or who have defaulted in their payment to the invention promoter;
`(3) the total number of customers known by the invention promoter to have received a net financial profit as a direct result of the invention promotion services provided by such invention promoter;
‘(4) the total number of customers known by the invention promoter to have received license agreements for their inventions as a direct result of the invention promotion services provided by such invention promoter; and
`(5) the names and addresses of all previous invention promotion companies with which the invention promoter or its officers have collectively or individually been affiliated in the previous 10 years.
`(b) CIVIL ACTION- (1) Any customer who enters into a contract with an invention promoter and who is found by a court to have been injured by any material false or fraudulent statement or representation, or any omission of material fact, by that invention promoter (or any agent, employee, director, officer, partner, or independent contractor of such invention promoter), or by the failure of that invention promoter to disclose such information as required under subsection (a), may recover in a civil action against the invention promoter (or the officers, directors, or partners of such invention promoter), in addition to reasonable costs and attorneys’ fees–
`(A) the amount of actual damages incurred by the customer; or
`(B) at the election of the customer at any time before final judgment is rendered, statutory damages in a sum of not more than $5,000, as the court considers just.
`(2) Notwithstanding paragraph (1), in a case where the customer sustains the burden of proof, and the court finds, that the invention promoter intentionally misrepresented or omitted a material fact to such customer, or willfully failed to disclose such information as required under subsection (a), with the purpose of deceiving that customer, the court may increase damages to not more than three times the amount awarded, taking into account past complaints made against the invention promoter that resulted in regulatory sanctions or other corrective actions based on those records compiled by the Commissioner of Patents under subsection (d).
`(c) DEFINITIONS- For purposes of this section–
`(1) a `contract for invention promotion services’ means a contract by which an invention promoter undertakes invention promotion services for a customer;
`(2) a `customer’ is any individual who enters into a contract with an invention promoter for invention promotion services;
`(3) the term `invention promoter’ means any person, firm, partnership, corporation, or other entity who offers to perform or performs invention promotion services for, or on behalf of, a customer, and who holds itself out through advertising in any mass media as providing such services, but does not include–
`(A) any department or agency of the Federal Government or of a State or local government;
`(B) any nonprofit, charitable, scientific, or educational organization, qualified under applicable State law or described under section 170(b) (1) (A) of the Internal Revenue Code of 1986;
`(C) any person or entity involved in the evaluation to determine commercial potential of, or offering to license or sell, a utility patent or a previously filed non-provisional utility patent application;
`(D) any party participating in a transaction involving the sale of the stock or assets of a business; or
`(E) any party who directly engages in the business of retail sales of products or the distribution of products; and
`(4) the term `invention promotion services’ means the procurement or attempted procurement for a customer of a firm, corporation, or other entity to develop and market products or services that include the invention of the customer.
`(1) RELEASE OF COMPLAINTS- The Commissioner of Patents shall make all complaints received by the Patent and Trademark Office involving invention promoters publicly available, together with any response of the invention promoters. The Commissioner of Patents shall notify the invention promoter of a complaint and provide a reasonable opportunity to reply prior to making such complaint publicly available.
`(2) REQUEST FOR COMPLAINTS- The Commissioner of Patents may request complaints relating to invention promotion services from any Federal or State agency and include such complaints in the records maintained under paragraph (1), together with any response of the invention promoters.’.
(b) CONFORMING AMENDMENT- The table of sections at the beginning of chapter 29 of title 35, United States Code, is amended by adding at the end the following new item:
`297. Improper and deceptive invention promotion.’.

Let me again be clear that it is the responsibility of the Inventor to check out a company before you use them. As I have said there are a lot of good legitimate invention submission companies, Design companies and patent lawyers out there. You just need to be very careful and thorough when you pick one, decide whether you need their services and understand what you get for your money. The odds are high that you might get burned if you just go in with your eyes closed and your wallet wide open.

Inventors have a huge issue of letting go of their baby. It is so bad that most Inventors end up ruining their chances of success because they just can’t let go. Until you can see inventions as “things” you will never feel confident when others have your “Baby” in their arms – and the “I’m married to my idea” syndrome doesn’t help either. Being emotionally attached to your idea causes you to second guess everything you do or decision you make to the point you hinder your progress more than help it.
I have seen companies drop an Inventor with a great product just because they can’t deal with the Inventor’s insecurities. The Inventor would not stop bugging them about the changes they made in the design to make the product more marketable. The inventor felt the changes were insulting to their original design.
In one case the company dropped the product 4 weeks before it was supposed to go into production.
The Inventor was stunned. They simply could not understand why the company pulled out. After showing me the letter the company sent, it was clear. The letter plainly stated the reason they dropped the product was the inventor’s difficulty to adapt to the new design elements the company felt (in their experience) were critical to the commercial success of the product. And let’s not forget the company licensed the product form the Inventor, which means they have the right to change the product if they see if to make it fit their target market.
I tried several times to explain what happened and all the inventor could grasp was the company was stupid for dropping it. In the end they never did realize it was their behavior that caused the company to turn away – and because of that, it’s unlikely they ever changed their behavior.

In a perfect world your product would look exactly like you envisioned it, consumers would flock to it in droves and buy every one of them off the shelf. In the real world the rest of us have to deal with this happens very rarely. Most of the time there are revisions, material changes, packaging changes, design changes, name changes, it happens. If these changes are something you absolutely can’t deal with you need to produce and sell the product yourself. Because in the licensing world change happens.

(Excerpt from the Ebook “Common Sense Inventing”)

Getting an idea is not hard. Finding one that is profitable takes a lot more effort and research than most Inventors want to pursue. Almost daily I get emails from Inventors asking me to review their ideas and give them my opinion on them. The main problem I see is the Inventor has not thought out the idea to the point they can see its value or lack of value. They seem to only be concerned with how they are going to spend the millions of dollars they assume they will receive from this idea.
When you come up with an idea there are numerous questions you need to be answering before you spend any money in its development.

Here are just a few of the questions that you should be asking yourself:

• Have you done any research on your idea to see if it is already on the market?

• Is this something that adds value, solves a problem or will make a consumer happy?

• Is it something mass consumers would use?

• Who will be your end user?

• Is it a niche market product?

• How many end users do you think would use the product? (and don’t say everyone will because that is not realistic. Example: even if you
invented a car that got 70 MPG is everyone going to immediately throw their current car away to get yours? No they will not)

• Is it a onetime purchase or a recurring purchase such as toilet paper?

• Does it stand alone and make a new category or will it be competing against products already established and on the market?

• If it stands alone how will you get the company to see this as a profitable venture since they would be breaking new ground?

• If it is going against established products with a long history of sales what makes yours better and not just another of the same old thing
on the shelf?

• Is it unique to a certain gender/age demographic such as a training bra?

• Is your idea a really small niche market? For example, left handed males between 18 and 25 that live in desert climates working on oil rigs?

• If needed, how much do you estimate it will cost you to build a prototype, make a Sell Sheet, or CAD drawings?

You may be thinking why am I asking all these questions up front? Because most of these can be answered without going into debt and can help you get a big picture of where you will need to focus your efforts or should you stop before you go any further.
I want you considering all the factors of your idea. You can’t inflate the figures and expect to get a reliable answer.
Granted you may not know the answer to all the above questions, but it should get you thinking before you start putting down money and further time into the project. If you do as a number of Inventors have done before you and go into automatic mode and rush to your nearest patent lawyer you are doing yourself more harm than good. You are also needlessly putting yourself in debt.
Companies look for products that have mass appeal because they are more profitable and secure a larger customer base. You need to consider your ideas value and what you realistically (not what you want it to be) see it selling for in stores. You can do this by simply looking at what is currently available to get an idea of what the public is accustomed to paying for such a product. If you see the majority of them selling in the $5 to $12 range and you feel yours should be selling in the $89 range, you need to be able to justify this higher expense. Is your product so superior that the consumer will see that difference and be willing to pay the extra money or would they see it as a bunch of features they would never use and not worth the expense?

A good example would be; if you are wanting a knife that you plan on only using to spread peanut butter on bread. Would you buy a plain knife or a Swiss Army knife? The Swiss Army knife has several attachments that can be used to cut, slice, saw, and more. It is also more expensive than a plain simple single blade knife. For that matter you could use a plastic knife you got for free at McDonald’s. So, sometimes bigger and better are not always selling points.

Once you have an idea what your competitors are selling for in the market take that price and divide it by 4. This will give you a very rough idea what you need to be able to make your product for in order for it to make it to the consumer. Because once you have a licensing agreement the company pays X to have them made. Then they sell them to a distributer or store chain for X. Then the distributer sells them to a chain or if the manufacturer sells directly to the store, the store then sells it to the consumer for X. Each stop along the way adds cost to the product as they each add their cost and profit margin to the price. These additions happen until the product reaches the store and the consumer. So, by the time your product reaches the store it can be 3 to 6 times the original cost or more.
You are the first link in a long chain of events that have to happen for it to go from an idea to a finished product. And they each want to get paid for their efforts. So make sure you do your research up front to know your product and its industry as well as you can so you are making informed decisions along the way.

A common mistake Inventors make when sending out submissions for their new product idea is timing. No matter what category your invention falls into every industry has buying and selling seasons. It is a continuous circle of conventions, trade shows, meetings with potential buyers, suppliers and manufacturers. There is a possibility a trade show or convention for your particular product market is going on somewhere in the world right now.

As an example in January most toy companies are gearing up for the February Toy Fair in New York. They have just returned from the Toy Fair in China the middle of January. So, sending them ideas now will only get you put on their desk in the wait pile.

When they return from Toy Fair the last thing they want to do is go through that large stack of mail sitting on their desk. They also have to return calls, answer emails and touch base with all the contacts they made at the convention.

One way of knowing if your contact is on the road and not just ignoring you is if you call and it says their voice mail box is full or you get emails bounced back. I can tell you that a number of them will read the most recent emails when they get back and mass delete the rest. They figure if it is important that person will write again.

So, knowing when to send your material can be just as important as the material itself. The internet is a valuable asset looking for this type of information. Some companies even list when they will be appearing at certain events. This information is crucial when you are getting your material together for submittal. Try to give your contact person at that company at least a week after an event to get things back to the normal hectic pace.

You will increase your odds of them giving your material a more favorable review over the hurried review you may get if they are leaving the state or country in the next day. Remember they are juggling a number of projects at one time. The easier you make it for them the better for you.

NEVER send a prototype to a company without them requesting you too. They know when they will be in the office, you don’t. Sending a prototype blindly will increase the odds of it getting lost or broken waiting for your contact to get back in the office.

Don’t take for granted the companies mailing address and place you need to send your prototype are the same. A large number of companies have satellite offices that handle specific functions such as legal, shipping, etc.

I have Inventors email me all the time saying the same thing “I sent a package to_________ a week ago and haven’t heard a word. Is this normal?” Most of the time, their contact isn’t aware they were sending them anything and is out of the office. Inventors don’t consider their contact has other meetings, conventions, sales trips, other emails, projects, phone calls to return/make, other Inventors sending product ideas, working on current products and occasionally taking time off. It seems that the majority of Inventors have the attitude that the company contact should magically know they are going to call and be sitting by the phone waiting for them to call. It just doesn’t work that way in the real world.

There isn’t a week that goes by that I don’t have several Inventors contact either asking if I would like to invest in their idea or can I direct them to someone that would invest. The thing that troubles me is the lack of understanding of what they are asking and what it will require. I have listed some questions and information below that you need to consider before asking for an investment. Can you tell me any other questions you would ask or information you would want if you were the investor?

1. Not knowing how much they realistically need in the form of an investment to get their product from idea to the store.

2. Not knowing the value of their product so they can break the investment down into percentages. The Investor will need to know what percentage of the product/company they will own for their investment. Example: Does a $50,000 investment get them 10% of the company?

3. Not having a business plan detailing how they plan on spending the money once they have the investment.

4. What ROI (return on investment) the investor can expect and how soon after the investment can they expect to see a return?

5. Will you need more than one round of investment money?

6. Do you have a distribution network for your product?

7. Do you already have other Investors?

8. Do you have a working model?

9. What protection do you have for the idea, if any?

10. Who are your competitors?

11. Do you know the regulations for taking an investor’s money for your state? (some states have limits on what can be invested and the person investing has to have x amount of worth before it is allowed)

12. Do you know how to administrate the shares certificates?

13. Will you be an LLC or Corporation?

14. Who will be on your board and what responsibilities will they have?

15. Do you have an exit strategy and what is it?

16. Are you selling strictly online, brick and mortar, combination of both?

17. Will your product sell local, regional, seasonal, national?

18. Are you compliant with the laws and regulations of your state for taking investments from outside parties?

19. If you are licensing it what is the lowest percentage you will accept?

20. Will you be asking for an advance and how large of an advance?

21. Will investors be reimbursed based using the net or gross income?

22. Will payment to investors be monthly, quarterly, annually?

23. Does the Investor add value other than just their money? Do they have contacts that could increase your companies value, get you more business, expand your distribution, lower your manufacturing costs, etc?

24. How has your companies money been spent up to this point? Are you frugal with your money or make poor choices wasting money? Investors want to see you use their money wisely and not spend it on items that do not add to the value of the process.

Another point about investors that Inventors need to consider is the fact that once they invest their money a number of them take a hands on approach to the company they invest in and want a say in the how their money is used to protect their investment. And your vision and theirs may not be in sync which can cause conflict in the business. So you need to have a clear understanding between you and the investor what their role is and your and their expectations before you take any money.
Have seen an Investor show up to the business and direct employees to do other tasks than the boss had assigned them. The employees were confused on what to do because they knew the person invested a large amount to the business and did not want to make them mad. The Owner of the business had a habit of leaving others in charge as he went out foolishly wining and dining his friends trying to impress them on the Investors money. The Investor ended up pulling out of the investment demanding all his money back. The owner ended up having to liquidate a majority of the company assets to refund the Investor. He tried for three months to get other Investors interested in his company but the original Investor made a point of letting other Investors in his circle of friends that the business was a bad investment. The business went bust a couple months later due to lack of funds.