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

When many Inventors think about licensing their idea/invention they think of Exclusive and non-exclusive as the only options. What may be overlooked is the way these can be used to your advantage. Example, if I licensed my idea to a toy company and they wanted an exclusive contract it can say that I am exclusive to the toy industry but open to any non toy markets. So I can go to the pet industry and get an exclusive deal there and not violate the contract with the toy company.

This can work well in your royalty percentages because most companies want an exclusive deal for their industry to keep their competition at bay and will give a better royalty percentage for that deal. And this allows you to seek other markets that do not affect the company you already have a deal with. Now you can still go after multiple non-exclusive deals in a particular industry but the percentage is normally lower because they know they will possibly have competition. Going the non-exclusive route can also have its pitfalls.

Lets say you go to SpinMaster toys and get a non-exclusive deal for 3% royalty.But had it been an exclusive license they would have paid you 5% royalty. And now you approach Lego with the same non-exclusive deal and they have interest. You have to disclose to them you already have a non-exclusive deal with SpinMaster Toys. This information may cause Lego to pass on the deal because they know they already have competition in the market and SpinMaster already has a leg up getting to market since they are already in the process of making the toy. So does Lego take a chance they can still grab a large portion of the market or do they pass because of the competition?

This will be the challenge for every company you approach after getting the first deal.

If you sign a exclusive deal with a company that states they are the only licensee, you can not go after any other industry even if the other industry is not in their competition area.

If you have a technology that can jump to other markets make sure you indicate this once you have interest from a company. You do this for a couple of reasons. One to let them know you will be pursuing markets outside their area and it needs to reflect this in the contract and it also lets them consider it for other markets they may be in you are not aware.

There are many companies known to consumers for being in one market, but are also in a diverse multiple of markets. So, by doing your research and knowing the other markets they are in you can tailor your pitch to show how they can possibly get multiple market sales off of one product idea and grab a larger market share before the competition. And you can be prepared to negotiate the type of deal that works best for you and your idea/product.
Here is a good example. Look at the Newell company. Were you aware they are in all of these markets?

I don’t know any Inventor that has submitted an idea for review by a company that has not gotten a rejection. The question is how do you react to that rejection? Below are things that Inventors have done when they received the dreaded rejection. Do you see yourself or any of your fellow Inventors falling into these traps?
Rejection is part of the business. No matter how good your ideas are you WILL see rejection. Learn from it and make informed decisions. Don’t let anger ruin what could be turned into success with more research or going in a different direction.

Are these things you might do?

Do you rant and rave to yourself at home or to anyone that will listen about how stupid the company is for turning you down?

Do you send a nasty email to the company telling them they will be sorry for turning down your million-dollar idea? Because you will now sell it to their competitor and destroy their company.

Do you teach the company a good lesson for turning you down by not submitting anything else to those stupid people?

Do you toss your idea in the trash and just forget about it ever again?

Do you wish the company was closer so you could go there and give them a piece of your mind?

Do you call and email the company daily telling them they need to reconsider your idea because they are passing up the opportunity of a lifetime?

Do you send them even more information on the rejected idea to try and change their mind?

Do you look for someone else to blame for them not “Getting” your idea?

Do you tell the company you are going to tell all your friends not to buy any of their products since they were stupid enough to pass on your idea?

Do you now hate anyone that has succeeded in getting their product to market and you have not?

Do you get friends to write the company and tell them they would buy your product if the company made it?

Do you toss away all your other ideas because no company is going to be smart enough to see your genius?

Do you decide you will show them and pay a company to make your product for you when you have no idea where to go next?

Now, these next two have to be the top winners for what not to do when you get rejected by a company. I was speaking to a couple of Inventors this weekend and was surprised when one of the Inventors told me her plan to get back at a company that rejected her idea. She said she had sent her product to a company that was a perfect fit since they do most of their products in plastic and hers was a plastic product. She was devastated when they said it was a decent idea but just wasn’t what they were looking for and with a limited R&D budget to work with they were going to pass.

Her reaction was that the company was worth millions, had enough of a budget to cover her product, they said it was a decent idea and was just turning her down because she is female. She wants to file a discrimination lawsuit against them. I tried explaining that a company no matter what they are worth generally has a budget they work within for R&D and the people running that budget are looking for the most bang for their buck. If they thought her idea was decent but not great and saw it as high risk on getting a return on investment I understand and agree they should not go forward with it. It has nothing to do with gender, it is a financial decision. She said I sounded just like the lawyer she talked to and stormed off. Glad I am not working with her. LOL

This is another example of why many companies are reluctant to work with outside Inventors.
Here is the second winner. Talked with an Inventor last week that wanted to take out an ad in their local paper blasting the company that rejected their idea. When I asked if they thought that would help or change the company’s mind about their idea she said “No, but I am so frustrated I don’t know what else to do.” After talking for a few minutes, she decided that was probably not in her best interest.

Are any of the above items options you think would help you or build a better relationship between you and the company that rejected your idea? I have gotten rejected by plenty of companies and I don’t like it any better than the next person but I have also licensed products to those very same companies that rejected my other ideas. You must be willing to take criticism, rejection, learn from it and improve your ideas if you plan to succeed.

Here is a perfect example of what I am referring to when I ask “Are You Giving Away Your Invention Ideas By Your Actions?” Inventors don’t READ what they sign up for and then later complain when it goes bad or they get rejected. Let me say up front I have no issue with the company used in this discussion. I am just using this as an example to prove a point.

Take a look at this statement you see before you even start to do anything with the company.

We’re always redesigning and reimagining our tools, and we love it when customers tell us they have ideas about enhancements and additions to the X company. But there are important things you should know before you submit your idea.
Most importantly, we cannot consider your idea until you have FILED A PATENT TO PROTECT IT.
Once you have filed a patent application, you can use the following link to submit your idea. We’ll begin a review that can last approximately 90 days.”

Did you notice the part that says “Most importantly, we cannot consider your idea until you have FILED A PATENT TO PROTECT IT.”

My contact at the X company has said that about 60% of those that apply HAVE NOT filed a PPA or patent as required.

Now, once you go past this page you have another statement that says

“Before submitting you must agree to the following terms and conditions:”
“I confirm I have read, understood and accept the terms & conditions for submitting my invention.”

As we know a large majority don’t read this and just click the box and click NEXT.

Take a look at what you are agreeing to for those that did not READ it. Do you see any issues that will come up for those that did not file a PPA or patent as it stated?

“By using this invention submission form and website, you (“you”) agree to be bound by the terms of The X Company Non-Disclosure Agreement (“Agreement”) listed below. Before you may submit any invention information, you must read and accept this Agreement. Agreement is effective upon acceptance for new users and terms and conditions may be updated from time to time without notice to user.
You hereby acknowledge:
The X Company (“Company”) has found certain precautions necessary in accepting disclosures submitted to it. Its employees have many ideas of their own for the improvement of the X Company’s products and the development of new products, some of which may be similar to your own. To prevent any misunderstanding as to what the rights and obligations of the inventor and the X Company are, the X Company’s policies as to considering inventions are set forth below.
The X Company cannot agree to hold your disclosure in confidence because it must disclose the invention to various employees and sometimes even to those outside of its employ, to determine its value to the company, and because agreements to hold in confidence have been found to entail other obligations not intended by either the submitter or the X Company. It is understood, therefore that no confidential relationship or agreement to compensate is entered into by reason of the fact that the X Company is considering your disclosure.
A full written disclosure, preferably the patent application drawing and specifications, or if there are none, a sketch or drawing (which can be a rough one, provided it illustrates the invention so one skilled in the art can understand it), must be furnished to the X Company, so that the X Company can tell or not whether it will be interested in your invention.
The X Company is not under any obligation to reveal to you information of its own in the general or specified field to which the disclosure relates.

The X Company wishes you to be satisfied that your interests are fully safeguarded. If an application for a U.S. Patent has not been filed, you should have the copy of your drawings that you retain signed, dated and witnessed.
Any disclosure to the X Company is made on the understanding that the X Company assumes no obligation to do more than consider the disclosure so far as in its judgment the disclosure merits and to indicate whether or not the Company is interested. It is understood that you rely only in your rights under the patent laws.
The X Company receives no rights hereby, or as a result of considering this disclosure, under any patent rights you now have or may acquire to the subject matter of the disclosure.
The foregoing applies to any additional or supplemental disclosure relating to the same subject matter.”

Now the question is did you find anything in that agreement you would have a problem with if you did not file a PPA or patent? And once you fill out all the info required and submit it who is at fault if they use the information?

Inventors, do the boring work and READ what you sign.

Had a discussion last week with an Inventor that has had a string of rejections from company Y even though based on the ideas he has shown me you would think they would have shown interest. His presentation is short and concise. He has great graphics that show his ideas and possible packaging aspects for all of them and even has short demo videos of each product showing them proving proof of concept. He even has some good gap analysis slides. The ideas answer the “Better Than” question.

Everything looks as prepared as you can get, so what is the problem? I was as confused as he was until he showed me a listing of the companies he had previously sent the material to for review. He had disclosed at a different meeting we had that he had a deal with company X and had signed a memorandum of understanding outlining what both sides had agreed to but changed his mind at the last minute and decided to pull the product from the company. They had spent a significant amount of money testing and doing a focus group study on his product. So they were not happy with this decision. I know the person he was dealing with at company X from my dealings with company X.

What the Inventor did not know is shortly after this issue happened with him the person he was dealing with at company X left company X and is now working at company Y doing the same position. So how do you think his ideas went over with this same person he burned at company X?

As in any industry people get promoted, fired, quit, move to other similar markets looking for work. So, the bridge you burn at one company can follow you through a number of companies. So it does not take long for your name to be bounced around until you are known as trouble. The same goes if you have a solid reputation for getting things done, providing good ideas and having realistic expectations. Word gets around in this industry. What will they think about you when your name comes up?

Invention posting sites are gaining popularity, but do you gain any benefit from them? In my opinion these sites feed off of the Inventor’s hopes of getting discovered by a major player in their particular target market and making millions.

The web is flooded with these websites all claiming to be the place every Inventor should list their idea/product to get noticed, receive funding, and make sales. They say list with us for free or they charge a monthly fee and companies and investors will find your product. Some offer paid services to build your presentation page, make a pamphlet, sell sheet or other material.

Some make the pitch saying they are an international marketplace, as if they have this special connection no one else has. There is nothing special to being international anymore. You get international exposure just by being on the internet. I get contacted by people all across the world that find my site using Google or some other search engine. I didn’t do anything special that makes me stand out over the next website or buy a spot on Google so that I show up first in a web search.

Ask yourself this, do you really think that Stanley Black and Decker, Kraft, Mattel, Craftsman, Rubbermaid, and all the other mainstream companies spend their time surfing these idea posting sites? I put in the search topic on Bing “invention Buyers” my results were 1-10 of 748,000 results. I know a number of them are repeats of the same companies so lets say you only have actually 748 of those as the correct number of sites worldwide offering these services. Do you think any business like Stanley Black and Decker has the resources or cares to have their staff look through 748 websites for a new product they can sell? Why should they even bother when they have Inventors contacting them daily wanting them to review their ideas? The answer is they don’t.

I looked at one of these companies website and they had 18 categories of products you can look through. If they have a minimum of 10 ideas/products listed per category you have 180 products to review for just this one website. Now multiply that by the 748 companies offering this type of service and you get 134,640 products to review. So, how would a toy company find you out of this large pool of ideas/products that cover such a wide variety of markets?

Plus, that number will not stay static since you are adding new products as more Inventors join these sites. So, again I ask does any one company have the resources or need to review these products, even monthly? Your chances of getting picked up from one of these sites are small at best. You would be better served pushing your product yourself and targeting the companies you want to go after. Lets not forget that Inventors will post their unprotected ideas on these sites not realizing they are doing public disclosure.

I have my own website that I include in my emails to companies or can tell them when talking with a company. I can direct them to it easily and don’t have to worry about them sifting through other websites and advertisements.