Mastering Technology Commercialization
By
Steven D. Overholt
Copyright 2012 Steven D. Overholt
Smashwords edition
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Copyright 2011 Steven D. Overholt. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including by photocopying or by any information storage and retrieval system, except by express written permission from the publisher.
Note: Because a person reading an e-book cannot leaf through it to find subject matter of interest, this e-book contains a detailed Table of Contents with over 375 internal links to content. This ToC is provided at the end of the book so that it does not take up the bulk of the free preview offered by many e-readers. For convenience, an abbreviated ToC is provided at the beginning of this book.
TABLE OF CONTENTS
INTRODUCTION: THE REALITY SHOW
CHAPTER 2: SECURING SWEET SUCCESS
OVERHOLT’S COMPLEX, CONVOLUTED FORMULA FOR SUCCESS
CHAPTER 3: WHY RESEARCH MARKETS?
CHAPTER 4: INTELLECTUAL PROPERTY
PROTECTION OF SOFTWARE INTELLECTUAL PROPERTY
LICENSING OF INTELLECTUAL PROPERTY
ASSIGNMENT OF INTELLECTUAL PROPERTY
WHAT TO WATCH OUT FOR IN ASSIGNMENT AND LICENSING
INTELLECTUAL-PROPERTY STRATEGY
CHAPTER 5: BUILDING A BUSINESS
THE BEST FIRST DOLLAR YOU CAN SPEND
BUILDING A BIG-LEAGUE BUSINESS PLAN
BUSINESS STRUCTURE CONSIDERATIONS
THE CRITICAL IMPORTANCE OF VENDORS
CRITICAL COMPONENTS OF YOUR DISTRIBUTION CHANNEL
IT’S NOT WHAT YOU KNOW, IT’S WHAT YOU DO
SHORT-TERM VS. LONG-TERM ISSUES
START BY RESEARCHING MARKETING
CONSUMER NEED VS. MARKET DEMAND
MARKET STATISTICS AND MARKET RESEARCH
MARKETING FOR CORPORATION VS. A STARTUP
RECRUITING AND MANAGING INDEPENDENT SALES REPS
CHOOSING AN ALLURING NAME AND LOGO
SECURING ENDORSEMENTS AND TESTIMONIALS
HELPFUL CLUBS AND ORGANIZATIONS
COMPETITION: WHERE DOES IT LURK?
FOCUS ON A DISTRIBUTION CHANNEL
BASICS OF SELLING TO THE GOVERNMENT
HELPFUL TRADE ASSOCIATIONS AND PUBLICATIONS
CHAPTER 8: PRODUCT DEVELOPMENT/COMMERCIALIZATION
RESEARCH ASSISTANCE FROM FEDERAL LABORATORIES
FUNDAMENTALS OF PRODUCT DESIGN
SELECTING MANUFACTURING PROCESSES/MATERIALS
YOUR HEADACHE IS READY FOR DELIVERY
IMPORTANCE OF BACK-UP SUPPLIERS
CHAPTER 11: INTERNATIONAL TRADE
IP ENFORCEMENT IN FOREIGN COUNTRIES
ASSISTANCE FROM THE U.S. COMMERCIAL SERVICE
SMALL BUSINESS DEVELOPMENT CENTERS/SCORE
ASSISTANCE FROM STATE TRADE OFFICES
DON’T GET BURNED– GET A LETTER OF CREDIT
FOREIGN-EXCHANGE RATES AND YOU
FUNDING FROM THE EXPORT-IMPORT BANK OF THE U.S.
THE HARMONIZED COMMODITY DESCRIPTION AND CODING SYSTEM (HS)
COMPLYING WITH FOREIGN REGULATIONS
CHAPTER 12: FINANCING YOUR BUSINESS
CONCEPTS AND TERMINOLOGY OF FINANCING
THE EVILS OF UNDERCAPITALIZATION
HOW DO I KNOW HOW MUCH MONEY I WILL NEED?
WHERE TO FIND MONEY AND HOW TO SECURE IT
SECURITIES & COMPLIANCE ISSUES
CROWD FUNDING: A HOT NEW SOURCE OF MONEY
CHAPTER 13: PERSONAL CONSIDERATIONS- DO YOU HAVE IT IN YOU?
APPENDIX: INVENTOR PROTECTIONS
INTRODUCTION: THE REALITY SHOW
Congratulations on your commitment to pursue your dream–the Great American Dream of turning a new-technology idea into a dominant business. You may dream because you have seen others achieve, and perhaps you come here somewhat spurred by envy. Whatever the reason, you have stepped toward quite a journey.
It’s an adventure filled with thrills and fraught with danger. I wish I did not have to say the last half of that sentence, but the fact is there are both thrills and danger. Fortunately, you are here to learn the ropes. Knowing the hazards, you can avoid their aftermath, and that makes for a lot more thrills. Many have bogged in the mud, but countless others have achieved their great dream. With the end in mind and a friendly smile, I will be your guide.
In writing this book I am offering to toss my coat onto any mire in front of you. For your benefit I will dig deep into my trove of knowledge and experience, unearthing potent strategies the winners have used to prevail. For my benefit I ask that you also dig deep, revealing potent assets you may not know you have.
Together let’s really rock your world!
Your dream is a wonderful thing and it can seem motivational. But a dream is just high-test gasoline–a powerful fuel waiting for the spark of ambition to unleash its power in the engine of persistence. Martin Luther King had a dream, but he got the job done through strategy, planning, and persistence.
Wisdom: Persistence is wrought from unbounded optimism.
Against your aspirations there will always be antagonists–among them doubters, distractions, downfalls, and defeats. Driven by that dream, take to the offense and remain relentless–the goal line; the end zone; the sweet the roar of the crowd.
A sage poet once said: “Hold on to dreams, for when dreams die, life is a broken-winged bird that cannot fly.” I want you to hold on to your dream–quite literally. Write that aspiration on the sleek handle of a 12-pound sledge hammer. Then when you need to bust through barriers or break down boulders of disappointment, setbacks, and despair, grab hold of that dream like a convict with the whip at his back and labor away. That is how you turn dreams into realities.
Throughout this book I have tried to bring you the best of what you need to know to get the job done, and I trust I have reached my goal. Prepared for you are a variety of little secrets, big rants, and in one instance I have even revealed: “The Secret Sauce.” (Really… it’s actually a sauce!) ;-)
Packed in here are powerful, practical tools and a wealth of advice how to use them. This is counsel that others have used in entering Amazon.com’s global contest judging the best business model, pitch, and plan among 2010 technology startups–competing against 1,700 entrants, presenting against six finalists to Silicon Valley’s top VCs–and winning it all. Of course it was not solely the advice–it just sits there. It was the acceptance and commitment of those who received it, as it will be for you.
Self-test number one is to really delve into this book–and that hangs on your appointment of time. Foremost from there you must critique your engagement: Do you consult others for help, deliberate your destiny, lay out plan?
The excitement you feel as you prepare your new business is a connection between us. I have been there and of course while I was there I have also “done that.” It’s fast; it’s furious; it’s fun. (Although I must admit that the fun is sometimes like the mirth derived from an icy sidewalk pratfall–not always so fun at the time!) ;-)
Surprisingly, progress is very often invented from reversals. Good fortune gathers great momentum as you conquer defeats and from them you learn and grow. I have seen it. Believe it.
Resilience and determination can get you through.
Like Dickens’s ghosts of Christmas, both good luck and bad will visit as you work toward your goal. You cannot avoid this; it happens to everyone. Remember that luck flows from elements outside of your control; in this world a great many things are outside of your control. The best response is to take what you get and from it forge triumph.
Wisdom: Sometimes good luck comes in streaks; sometimes bad luck comes in streaks. Surviving a tough streak of bad luck puts you in a position to–when the good luck later comes along–revel in it. Persistence matters!
If you are like most who seek to develop a new technology, you have tenaciously mulled the idea for quite some time. In fact, several inventions may hang out in your head, and you could be fretting which to pursue. One thing is certain; you are wondering how to move from where you are to where you want to be.
Fortunately, the pathway for taking an idea from concept to functional technology flourishing on the market–a process known as technology commercialization–is well trodden. You must learn from others before launching your own journey. The “early explorers” have drawn the map; use it as your guide.
Early explorers are in more than one way relevant. The most famous early American explorers are of course Meriwether Lewis and William Clark. Noted author Stephen Ambrose wrote a renowned history of the Lewis and Clark Expedition, entitled Undaunted Courage. In it Ambrose details how expedition members pushed large heavily laden rafts against the roiling current of the Missouri River in months of grueling labor. Map-less, they then trudged broiling plains and slogged mountains waist-deep in snow, always expecting the ocean in short order but again and again stubbing hard into reality.
Upon finally reaching the sea they framed a rough fort and spent dismal winter on the verge of starvation. Undaunted courage got them through their three-year journey to triumph and adulation–an excursion that started in Pittsburgh with perhaps the first-ever incarnation of a Great American Dream: “From sea to shining sea.”
Another story of an explorer with mind-blowing courage against complete hopelessness–in my opinion far more astonishing than that of Lewis and Clark–is the story of Sir Ernest Shackleton’s Antarctic expedition. Read it.
How will reading histories of early explorers help you achieve your fortune-filled dream? Take my word for it; sooner or later you will envy their steel, re-reading their stories seeking solace. How did they, against such odds, hammer their dreams into realities?
Dreams are docile. Reality rocks.
After reading histories of those who explored the geographical world, study the most esteemed explorers of the business world. Stories recorded by The American National Business Hall of Fame http://www.anbhf.org/laureates.html, teem with hard luck, hard work, and victory–literally exuding inspiration and better yet: Motivation.
Having climbed the stairway of technology commercialization, I have seen many highs and lows. Straight-up I will tell you I have learned far more from lows than highs. I have guided a host of others travelling the commercialization pathway and in them I have seen both failure and success. Through it all the lines on the map have become clearer. “Terra Incognita” is now laced with superhighways. It’s like the Age of Enlightenment!
The good, the bad, the bliss–hang on like a rollercoaster while I reel off the whole story.
The Great American Dream?
No…
Welcome to the Great American Reality Show.
Whether developed by an independent inventor, small business, or major corporation, a great many new technologys have aspects that the developer(s) either can or would like to patent. For this reason, this book details the invention pathway and the book’s perspective is focused on an inventor seeking to profit from an invention, whether that inventor is independent or is a principal in a small business. This book will be equally useful, however, to someone developing a technology but who will not seek a patent, as well as to those developing and marketing software products.
So let’s start at the top; a very good place to start. This is the so-called “30,000-foot view.” Hanging out at 30,000 feet can be very scary and inhospitable… higher than Mt. Everest, bone-chilling cold and leaving you gasping for air. From the shiny warm comfort of a 747, however, it is an awesome view. I’ll bring you a bit of both.
As I contemplate the writing of this book, I ask myself what are the overarching concepts that you must firmly grasp–to the point of absorbing into your very soul–if you are to succeed. What are the things that I know that you may not? If I were to go back and start all over again, what do I wish someone had told me? Through the process of assisting hundreds of others in starting and growing their businesses, what have I observed and learned?
First, I have found that people without experience in bringing a new technology to national or international markets usually do not realize how incredibly difficult it is to do so. The process is long, large, expensive, and complex. Many people can handle all of those problems and more, and maybe you can too. However, the real key to your success will be in understanding the “big picture.”
Basically, the big picture is pretty simple and it is this:
You may have what it takes to succeed in commercializing your new technology, but you must realize that a great technology is just the start.
New-technology entrepreneurs succeed by their:
-Market
research
-Sales & marketing
-Execution of sound business
strategies
-Analysis, judgment, foresight, and adaptability
-People skills
-Financing
-Financial management
-Ability
to seek and accept help
-Ability to set and achieve important
goals
-Persistence
Of course you need a great technology, but what you do to support that technology is the key.
This book provides a good general overview of the technology development, patenting, business-building, marketing, and financing processes. However, it is no substitute for further research or for expert advice. Many issues are so ponderous that they cannot be fully detailed in any one book. You should do your own research or seek other expert advice on many of these matters.
I wrote this book with the philosophy prescribed in the medical axiom: “First, do no harm.” By this I mean that–unlike many authors selling books to entrepreneurs–I will not try to “get you all hopped up” with bravado and feel-good on how rich you will be if you would only follow my sage advice. Instead, my modest but much more important goal is to dissuade you from sinking your hard-earned money into a new technology and later find that you have limited potential to generate a return on your investment.
Yes… I will help you succeed, but often by ensuring that you do not fail.
On the pathway to success there are many diversions, traps, and pitfalls. I will do my best to point these out to you so that you may avoid them. 90% of your battle will simply be to avoid learning the hard way the lessons that have already been learned by someone else through that thoroughly disgusting method.
At the outset, it is essential to be realistic about the time and money required to develop and patent a technology and bring it to market nationally. A good rule of thumb is that it often requires more than a year and hundreds-of-thousands to millions of dollars. You may, however, do it for less if yours is a simple product and you are extremely astute.
Although you may begin the process while working a “day job,” eventually you will need to spend full time on your project. Most of the entities that you will be dealing with are only available during business hours. However, do not quit your day job based on speculation! Be sure that you have adequate financing already in the bank. Do not depend on investment promises, as they often do not materialize. Realize that you may not just be quitting your job; you may be quitting your career! If you are out on your own for perhaps three or five years and then have to go back into the workforce, it can be a whole different world for you by then and not so easy to just jump back in.
It is much easier to contemplate a product than it is to actually produce it commercially and economically–many inventors fall down in this regard. Be sure to take this into account.
There are several companies that advertise on the Internet or late-night television with claims of helping inventors get their product patented and marketed. Be extremely careful about sending your hard-earned cash to one of these companies. Do your research and be sure you are going to get your money’s worth. The U. S. Patent & Trademark Office and the Federal Trade Commission warn that an extremely small percentage of inventors ever receive profits to offset the money they spend with invention promotion firms. I have received several complaints from entrepreneurs who felt that they were deceived by such firms, and not so much as one good report.
Also, books are available that claim to help you “patent it yourself.” As the patenting process can cost $5,000 - $50,000 or much more through a patent attorney, this is a tempting thought. However, trying to obtain your own patent can be compared to do-it-yourself brain surgery–it saves a lot of money, but the results are generally not worth it. It is very helpful to buy such a book to learn about the patenting process, but you must pay an expert to write the patent application. I reiterate: You MUST pay an expert to write your patent application. To do otherwise is foolhardy in the extreme.
No matter who helps you or how much they help, you control your destiny; you are the beast of burden. In this book I have alluded several times to the necessity of hard work–some references covert and others more overt. Well here is where I do not lay it, but smash it on the line:
Get ready for grueling, grinding, gargantuan work or get ready for great failure.
Studies show that colossal entrepreneurs did not reach the top by working harder than everyone else. They got there by working much, much harder than everyone else. This is absolutely true of the clients I have helped. Some have made it and some have not. The exceptional can show me long email strings from 3:00 in the morning and tickets for back-to-back-to-back bleary plane rides for meetings from San Francisco to London to Dallas.
My highest-achieving client did not attain his success until several years after I began working with him. His first business crashed at the cusp of greatness. Many lost faith. “Ben is a go-getter,” I observed. “Never dismiss a go-getter.” Unstoppable, nobody now dismisses Ben.
Wisdom: Big and bold, brash and brazen–the decisive dominate.
It is my opinion that success in technology commercialization is also largely a result of avoiding pitfalls that could at a minimum lead you astray; at worst, they will swallow your plans and smash them. Of course hard work is required, but you can blow the whole thing up by making mistakes of ignorance or arrogance. If you avoid the landmines, you may be around long enough to succeed. As your guide I am focused on pointing out pitfalls and how to avoid them. By this I am trying to instill for the process not fear, but respect.
While we are on the subject of “big-picture” tips on how to scale the mountain, here’s some cold, blunt advice from 30,000 feet: In the business of commercializing your technology, you are first and foremost a marketer; a salesman. If you do not accept this, then re-think your plans; you probably don’t have a snowball’s chance. Why would I say this? As you delve into the chapters ahead, your answer will dawn with a deep sense of discovery.
You will find throughout this book many blunt “blanket” statements such as the above. These are made to drive home a point about the real world. I know about exceptions, and such statements do not apply 100% of the time. However, if you expect to be the anomaly you are depending for your success primarily on luck. Lottery tickets have much better odds and you do not have to expend any effort to lose your money. That to you should sound like a much better proposition! ;-)
-Chapter end-
A Plea From Me to You
I wrote this book for you to help you achieve your dream. I feel we are partners on a journey. You have the desire and the right to profit from your creation and I am honored if my book propels you to financial reward. Toiling away in front of the computer, I spent many evenings and weekends researching, writing, considering, and re-writing. Thesaurus in hand, I sometimes spent hours agonizing even just the right cadence for a single sentence. Especially I have tried to achieve the perfect level of detail so that I neither bore you out of your mind nor leave you out in the dark. Unable, really, to refrain from it, from time to time I threw in some levity to keep this tedious subject a bit entertaining. My friends know I have a sense of humor ranging from dry to odd. (Learn to deal.) ;-)
Please respect my creation in the same way you need others to respect your creations. I am asking that you please do not share this document. Illegal sharing prevents me from receiving fair compensation for my creativity and labors. In advance I would like to give you a very sincere Thank you!
I have made this book available to you without copy protection. In doing so I am inspired by Mr. Dale Johnson, a teacher I had for my high school woodworking class. On the first day of class many boys asked about bringing in locks to secure the small lockers in which we were to store our personal tools, etc. “No locks,” replied Mr. Johnson. “We trust each other here.” For the entire year nobody lost a thing.
CHAPTER 2: SECURING SWEET SUCCESS
Sweet success shines at the end of a long tunnel. Often elusive, it is always difficult.
Yet, would you believe me if I told you that to ensure fruitful technology commercialization you need follow just one overall formula? The problem, however, is that it is an incredibly complicated formula–one that can take years to comprehend and implement. It definitely takes incredible discipline and tremendous fortitude to stick with and actually follow to its fruition.
My credo is so complicated that many businesses find its implementation to be impossible. Yet you will find it detailed right here in this book. Are you ready? Here it comes:
OVERHOLT’S COMPLEX, CONVOLUTED FORMULA FOR SUCCESS
1) Find out what your customers want.
2) Offer it to them.
I have seen many fancy mission statements that were developed by teams of executives over several days at expensive resort hotels. However, if the resulting statement says anything but the above, then those leaders are on the wrong mission or are more concerned with rhetoric than mission.
The trick is not so much to follow the formula; rather it is to get rid of all the other stuff!
Get rid of the distractions and dead-ends that come from ego and vanity, stubbornness and greed, fear and timidity, laziness and inattention to detail. The result will be a spear-point attack on the goal: Finding out what your customers want and offering it to them.
I will help you do this.
Here is another key point about securing sweet success: It’s sweet!
Hard work combined with enthusiastic application of the principles laid out for you in this book can produce great success, which many entrepreneurs will tell you can be a whole lotta fun! You should attack this endeavor with the desire to win. Here’s a big secret: Winning is fun. ;-)
I will help you do this as well.
-Chapter end-
CHAPTER 3: WHY RESEARCH MARKETS?
As soon as you have an idea for a new technology, you must start researching the market for it with as much diligence as you put into developing the technology itself. Please read that statement again and truly absorb it, because I have found that no matter how many times I say this to many entrepreneurs, they ignore it.
As a matter of fact, you should think of the research & development phase of your project in exactly that order:
1) Research the market
2) Develop the product
It is very easy to put a lot of thought and effort into your new product but not much into the market for it, and most people do this. To illustrate this point, let’s take a look at patented inventions: The U. S. Patent & Trademark Office (USPTO) has done studies showing that the percentage of patent-holders who make money on their invention is only 2%. For every 50 inventors receiving a patent, only 1 makes money. 98% of inventors fail to make money on their invention. To drive home the message I have said that three different ways. You now see why it is so important to fully read this book.
Note that in these 98% of cases the inventors did not fail to generate a patent, they failed to generate a profit.
Market research and product development can be done in tandem, but be careful how much money you spend on product development before you ascertain that:
1) There is a market for your product.
2) You can capitalize on this market.
Note that 1 and 2 are not at all the same.
Research All That You Are Selling
A great many entrepreneurs make the mistake of thinking too narrowly about what they are selling and therefore, which markets to research. Here is a crucial case in point:
Most inventors plan to seek investment capital. Whether they know it at the beginning or not, they will almost always need hundreds-of-thousands or millions of dollars. This means that they will probably at some point be soliciting sophisticated investors.
As is pointed out more fully later in this book, securing large amounts of capital from sophisticated investors requires a strategic sales process. You are selling an investment opportunity. As with the market for your product, you must comprehensively research the market for your opportunity. Believe me, there really is a “market” for your opportunity and it can deteriorate or blossom rapidly for many reasons. If you fail to understand the market for your investment opportunity and that market’s dynamics, you may well find yourself stuck in the mud for long periods when you try to raise capital or worse yet, you may find there is just no interest among sophisticated investors for your proposition.
Alternatively, you may find in your market research that there would be interest if certain things were done differently than you are initially planning. If so, this information will help to set you on the right track to be attractive to investors when you seek their money.
By the time you reach the end of this book you will have a firm grasp of how to research the market for your investment opportunity.
–Chapter end–
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CHAPTER 4: INTELLECTUAL PROPERTY
Enough already with those “big pictures!” Let’s get down to some nuts and bolts.
Your intellectual property (IP) refers to the ideas or concepts that belong to you. You must take steps to protect your intellectual property or you can lose your right to exclude others from using it. There are several different types of IP that you may currently have or may develop in the future, and the six types of IP that are relevant to technology commercialization are:
1)
Patents
2) Trademarks and service marks
3) Copyrights
4)
Trade secrets
5) Domain Name (URL)
6) Manufacturing Know-how
These are discussed in general below, but remember that these are complex issues and you must get expert legal advice as you proceed in order to ensure that your rights are fully protected.
I will provide here a basic overview of patents and the patenting process. The information provided is not intended to be sufficient to entice you to attempt to write and prosecute your own patent application. As previously mentioned, I strongly recommend that you hire competent counsel for this purpose.
Patent protection is enshrined as a right in Article 1, Section 8 of the U.S. Constitution. The Patent Act (Title 35) established the U.S. Patent and Trademark Office and governs patents. Through history, there has been a tug-of-war between those who advocate giving inventors exclusive rights to new developments and those who argue strongly against this. This has basically been a conflict between those advocating communal properties vs. those advocating private property rights. Fortunately, the modern world has adopted patents as a means of protecting new developments as the private property of the developer.
However, governments have established a quid pro quo for the inventor and it is this: You tell the public how to make your invention and we will give you the right to prevent them from making, using, or selling it in competition with you. The government’s goal here is technological progress. Rather than have new developments shrouded in secrecy, they are out there for all to see, stimulating further innovation.
When you think about it, if you are an inventor you are really in a “Catch-22” situation here–don’t patent your invention and be completely vulnerable to theft of your idea, or do patent it but disclose it fully to the public. In the latter scenario you are still vulnerable to theft. The government will not defend your rights; you must do so, and this can require a lot of money in attorney fees.
You may have an invention that could be patented, but are wondering about the more important question: Should I get a patent? The answer to this question is highly complicated and cannot be answered in a book by any author. If you do find someone who answers this question for you without a very thorough investigation and understanding of all of the facts involved in your particular situation, then run–don’t walk–away! You must make your own judgment, after careful consideration and input from others, as to the ultimate value of seeking a patent. However, please do not make this decision before you have read this entire book. You should find in the whole of this book the information that you will need to make a decision, but of course there is no substitute for speaking with experts as well.
An ancillary question to: “Should I get a patent?” is the question: “When should I seek a patent?”
Pitfall: Ready; Patent; Aim
I created the above pitfall adage as a take-off on the saying: “Ready; Fire; Aim.” If you are familiar with the latter, you know that it refers to a situation in which someone takes an action before they have properly evaluated the situation or prior to preparing themselves for the action.
A great many naïve inventors follow the Ready; Patent; Aim scenario, burning through tens of thousands of dollars and ending up cratering for one or more of myriad reasons, most having to do with lack of understanding of the commercialization process and lack of the preparation that is required on many fronts.
Do not fall into this pit. Read this entire book; know about the process; make a wise choice regarding when to seek a patent.
The USPTO received over 480,000 patent applications in 2010. According to the U.S. Small Business Administration, small businesses not only are the main engine of job growth in the U.S., but they produce about 13 times as many patents as do large corporations. However, the percentage of patents secured by independent inventors has dropped from 21% in 2000 to just over 13% in 2010. Some attribute this drop to the cost of securing patents. Although the USPTO in 2004 cut the basic utility patent application fee, the ancillary attorneys’ fees dwarf the USPTO’s charges.
For small businesses of under 500 employees, the USPTO maintains a small-entity fee schedule in which most fees are half of those for large entities.
There are three basic types of patents: utility; design; and plant.
Utility patents cover inventions that have a utility, such as mechanical devices, software, and chemicals.
Utility patents can cost $5,000 - $50,000 or more including attorney fees, depending on complexity and other factors. The term of a patent is 20 years from date of application. It can take over two years (and sometimes up to four) to receive an initial response from the patent office on a regular utility patent application. As of 2011 the average wait was 35 months.
Design Patents cover the aesthetics or “look” of an item. They do not cover any functional aspect of the item, although the item can have a function.
Design patents can be obtained for $750 - $1,000 including attorney fees. Patent term is 14 years from date of grant. It can take 9 –12 months to receive an initial response from the USPTO on a design patent application. Design patent numbers begin with the letter “D.” A product may be marked “patent pending” after the design patent application is submitted.
It is possible to have both a design patent and a utility patent on an invention if both aspects are patentable under the relevant criteria.
Plant Patents cover asexually reproducing plants and will not be discussed here.
Basic filing fees for utility patent regular applications are $165 for paper submission and $82 for electronic submission, with additional fees added as the application becomes more complex. In addition, patent maintenance fees of $490, $1,240, and $2,055 each are required at the 3-1/2, 7-1/2, and 11-1/2 year anniversaries during the 20-year patent term to keep the patent in force. If these maintenance fees are not paid, the patent lapses and cannot be reinstated.
The fee for a provisional patent application (more on this below) is $110.
The basic filing fee for design and plant patents is $110, with additional fees for applications that exceed 100 sheets in length.
These are the maintenance fees for small entities, which are half of what large entities must pay. See the USPTO fee schedule at: http://www.uspto.gov/web/offices/ac/qs/ope/fee2009september15.htm#patapp
How to Cut Two Years Off the Patent Process
In February 2011 the USPTO announced that it would allow patent applicants to pay extra money and receive expedited processing through its fast-track process, called Track One and effective September 26, 2011. For a fee of $4,000, along with $430 in processing and publication fees, applicants can cut the patent processing time from an average of 35 months to just 12 months.
If you have an invention in a field of rapidly changing technology or in a rapidly changing market, $4,000 may be a very small price to pay in order to cut two years off of the patent process. Having an issued patent will also greatly improve your chances of securing financing for your venture, which is another very large incentive to pay $4,000 for the fast-track processing.
Note that the USPTO plans to limit to 10,000 the number of fast-track applications that it will accept in the first year of the program. As mentioned above, the USPTO received 480,000 applications in 2010, so 10,000 represents only 2.1% of all applications. Yet the patent office estimates that 10 to 20% of applicants will request fast-track processing. It sounds like a first-come, first-served scenario to me and if you are interested, you’d better be quick.
The Parts of a Patent Application
The four basic parts of a patent application are the Abstract, Specifications, Claims, and Drawings. In addition, you must provide to the USPTO the results of your prior art search. Each basic part is discussed briefly below, but the best way to understand these parts is to read a number of patents. If yours will be a process patent, be sure to read process patents; if yours will be a composition-of-matter patent, be sure to read composition-of-matter patents, etc., as various aspects of such patents are different. Some applications have drawings and others do not, for instance.
Abstract
The abstract is a brief (one paragraph) general overview of the invention.
Specifications
The Specifications section of the patent consists of several sub-sections:
-Background of the Invention including an elaboration of the Field of the Invention and a Description of the Prior Art. The Field of the Invention could be, for instance: starch-based packaging adhesives. A Description of the Prior Art would then detail the current state of starch-based adhesives in their application to packaging. Included here would be the references found in the prior art search.
-Summary of the Invention is a more-detailed discussion of the invention
-Brief Description of the Drawings gives a very brief general description of each figure in the drawings if drawings are included in the application.
-Description of the Preferred Embodiment including the Claims. The Description of the Preferred Embodiment gives the details of the invention. Here is where you get into the details of what the invention is and how it functions, using the drawings as a reference. This section also puts bounds on various aspects of the invention; for instance, in an adhesive composition, a statement may be made that it may comprise from 20 to 35% corn starch by dry weight. The preferred embodiment, however, may be given as 25 to 30% starch by dry weight. Sufficient detail must be given in this section so that a reader is able to make and use the invention.
The claims section begins with the words “What is claimed is:” This is the actual patented matter. If it is not in the claims, it is not covered in your patent. Nothing else really matters regarding the scope of your rights. The USPTO will assist you with drafting one claim if you submit your patent application on your own, but I very strongly discourage you from submitting your own application.
Drawings
The drawings must be prepared according to the specifications given by the USPTO. A good summary is provided at: http://www.uspto.gov/web/offices/pac/doc/general/drawing.htm
Patent Attorney and Patent Agent
Both a patent attorney and a patent agent are authorized to practice before the USPTO, which means that they can competently write a patent application and act on your behalf in shepherding it in the long journey through the USPTO. However, a patent agent is not able to litigate patent lawsuits in federal court whereas a patent attorney is able to do so.
Again, you must use either a competent patent agent or patent attorney to prepare your patent application. This is not a legal requirement; it is a common sense requirement. A good patent agent or attorney will keep up-to-date on the latest USPTO or federal-court rulings affecting intellectual property rights. If you have not done so then you will be simply shooting in the dark in trying to write your own patent application. You may, however, save money by writing a draft patent application for subsequent review and revision by an agent or attorney.
At the same time that I emphasize the necessity of hiring competent counsel if you do seek a patent, be aware that patent agents and attorneys make their money by filing patents. They have very little to lose if the patent office does not ultimately grant your patent or if patenting your idea is really not such a good idea. Try to find expert advice on the wisdom of seeking a patent on your invention from someone who is expert but neutral. Such a person could be someone from a government-sponsored economic development agency that assists inventors, for instance.
In order for an invention to be patentable, it must be novel, must not already be patented, must not be an obvious combination of existing patents, and must have utility (usefulness). Expired patents are considered in this analysis. Unfortunately, patent applications that are pending action by the patent office are also considered. The public has limited access to these applications for the purpose of determining if their idea is novel.
The invention also must not be obvious to anyone “skilled in the art” related to the invention.
Inventive Step
The patent office will not grant a patent on a development which is simply an engineering exercise or a series of engineering exercises. There must be an inventive step involved. This is rather difficult to define exactly–other than to say that it is not an engineering step. It is actually good if you discovered the invention completely by accident–known as serendipity. For instance, if you were conducting experiments and got a completely unexpected result that turned out to be useful, you would have a rather easy time showing an inventive step. If, on the other hand you conducted experiments that led to a result that anyone skilled in the art could have predicted, you may have a more difficult time showing an inventive step.
Getting Around a Patent
You have no doubt heard about the concept of “getting around” a patent by changing something slightly from what is described in the patent. It is important that you understand considerations regarding the ability to do so. One primary consideration is this: If you receive a patent for an invention and someone else can make basically the same invention by leaving out one or more elements in your claims, they can make and use that invention and even get a patent on it. Be sure that your claims include the most basic iteration of your invention. This is one reason that it is essential to utilize a competent patent attorney or patent agent in preparing your patent application.
Inventor Name
The name(s) of each of the true inventor(s) and only the name(s) of the true inventor(s) must be on the patent application. If you want to give someone “credit” that they do not deserve in your application, and it can be shown that the person was not party to the invention, your patent application can be rejected and any subsequent patent can be disqualified. It is exactly like the courtroom principal of: “The truth, the whole truth, and nothing but the truth.”
Patentability Opinion
One major advantage of hiring a patent agent or attorney to conduct a patent search is that you can request from the agent or attorney a patentability opinion, which is a professional opinion regarding the likelihood that the invention may receive a patent and the expected scope of the claims of such patent. Of course this is merely an opinion, not a guarantee. However, it should give you more comfort in spending the large sums typically required to prosecute a patent application, a term which means to move it through the process with the USPTO.
You may for some reason know that you cannot get a patent on your new product idea. However, you may not know whether your idea would infringe on somebody else’s patent. In this case, you may ask a patent agent or attorney to conduct a search of existing patents that are currently in force and to provide you with a freedom-to-operate opinion which would state that, in the professional opinion of the agent or attorney, your idea would not infringe on the patent of another.
Such opinion may be useful to you if you later are sued for patent infringement. The fact that you sought a freedom-to-operate opinion may assist in your defense against a claim of willful infringement. If willful infringement is found, you may be subject to treble damages to the patent holder.
A utility patent may be written to cover both physical entities and processes. Patent claims covering the first are commonly referred to as: product; apparatus; composition-of-matter, or device claims. Patent claims covering the second are commonly referred to as use, process, or method-of-use claims. There are also a number of other variations of claims which will not be discussed here. Understand, however, that if you perhaps invent a better type of adhesive (composition of matter), you may be able to patent that composition and then independently patent a method of using that composition (for instance to produce corrugated containerboard), as I have done. A patent agent or attorney can explain types of claims to you more fully.
Documentation/Inventor’s Notebook
You must document your invention process to establish yourself as the true inventor. This is done by keeping an inventor’s notebook. To do this, record your development process in a bound notebook that has numbered pages. Write down any changes you make in design and why you made them. Sign and date each page. Include a witness statement on the page as follows: “This information was disclosed to and understood by me. (Signature of witness, date).” This witness should not have any stake in the outcome of your invention process.
You should also write in permanent ink and leave no blank spaces. If for some reason you do leave a blank space, cross a line through it and then add your initials and the date.
Drawings should be made directly in your notebook when practical. Otherwise, staple the drawing onto a notebook page and sign so that your signature goes across both the drawing and the notebook page.
The U. S. Patent Office will consider the first inventor of a technology to be the true owner of the intellectual property, not the first person to file for a patent. This is known as the “first to invent” doctrine, as opposed to the “first to file” doctrine used in almost all other countries. Legislation was passed in September 2011 that will change the U.S. system to the first to file system in 2013.
Proper documentation of your invention process and its timing can be invaluable to you if someone else gets to the U. S. Patent Office before you, but you actually invented the technology first and diligently pursued filing a patent on it. You could have their patent invalidated if you can show that you are the true inventor instead of them.
Note that in other countries, the first person to file a patent application for that country will own the IP rights in that country, even if they cannot document that they are the true inventor. There has been talk from time to time about changing the U.S. to this system, and in fact a new law, the America Invents Act was passed in 2011 that will convert the U.S. to this system in 2013.
In addition to keeping a formal inventor’s notebook, you should always have a pen and paper handy to jot down ideas and inspirations as they come to you. It is amazing how easy it is to forget these things, with everything else going on around you. Especially keep a pad and pen by your bedside, as you will find that nighttime is a great time for contemplation.
Non-Recognized Forms of Documentation
There is a common myth that you can document that you are the inventor of a product by describing your invention in a letter, mailing the letter to yourself, and then keeping it unopened. The USPTO and the federal courts do not recognize this as a means of documentation.
Disorganized loose notes and drawings, etc. are also not a recognized means of proper documentation.
Public Disclosure & Offer for Sale
Be very careful about disclosing your invention publicly or offering it for sale before you have applied for a patent. These activities can restrict your ability to patent your invention.
The U.S. allows a one-year grace period in which to apply for a patent after public disclosure of the invention or its offer for sale.
In other countries, you cannot apply for a patent after you publicly disclose, unless you have first applied for a U.S. patent. Once you have applied for a U.S. patent, you can publicly disclose or offer for sale. However, you have only one year after your U.S. patent application date to apply for a patent in another country or to begin the PCT process (more on this later) as a first step toward a foreign patent.
Public disclosure can include an article about your invention in a newspaper, showing it at a trade show, public use of the invention, etc.
You should check with the U.S. Patent & Trademark Office (USPTO) at http://www.uspto.gov/, 800-786-9199 or with a patent attorney or patent agent for more details as the rules on these matters are complex.
Non-Disclosure Agreements & Non-Compete Agreements
In a non-disclosure agreement, another party agrees that it will not disclose to any third party any information that you provide to them. In a non-compete agreement, a party to which you disclose information agrees that it will not use that information to go into competition with you.
A non-disclosure and/or non-compete agreement is typically used to protect yourself when you want to disclose information regarding your invention to another party before you have applied for a patent or while the patent is pending. This other party could be a person from whom you want assistance in preparing drawings or prototypes or a company that you want to hire to conduct market research, etc. It also could be a company to which you would like to license your idea.
To license your idea means to give permission to another entity to make use of it in exchange for something of value such as a percentage of their sales, known as a royalty.
Note that larger companies will not sign a non-disclosure or non-compete agreement that you provide to them and instead may present you with their own document that offers you little, if any, real protection. For their own protection, many large corporations will not accept submission of an invention idea unless there is an existing patent application on it. Some companies may not accept invention submissions at all.
Certain non-profit organizations that assist inventors, such as government-sponsored or affiliated organizations and economic development agencies, often are willing to sign non-disclosure agreements with inventors that offer real protection to the inventor, although these are normally provided by the organization, not by the inventor.
An example of a non-disclosure agreement is available at http://www.inventnet.com/nondisclosure.html
A patent simply gives you the right to prevent others from making, using, or selling your invention. The government will not enforce patent protections. You must do so yourself.
If you cannot get an infringer to stop voluntarily, then you must file a patent infringement lawsuit in federal court. These suits can be very expensive, ranging well into the hundreds of thousands of dollars for complicated cases.
When two heavyweights start slugging it out in court over IP rights the amounts can be truly astronomical. Over the course of several years in the late 2000s Mattel Inc. and MGA Entertainment Inc. battled over the rights to the highly successful Bratz line of dolls, which generated $3.3 billion in sales since they were introduced in Europe in 2001. As of early 2011 MGA had spent over $150 million in legal fees defending itself against Mattel; and a new trial is scheduled, so there is no telling how high the final figure will go.
Some law firms will prosecute patent infringement lawsuits on a contingency basis and if you are lucky you may find one willing to do so for you. However, the firm is going to look at the amount of damages that can be recovered. If you cannot show substantial economic harm, they may be reluctant to take your case on contingency.
Patent infringement insurance is available for the purposes of providing funds to prosecute patent infringement lawsuits against someone who is infringing on your patents. Insurance is also available to protect you from claims by others that you are infringing on their patents.
Patent infringement insurance information can be obtained on the Web by typing “patent infringement insurance” into several search engines.
Provisional & Non-Provisional Application Processes
It is important to understand the concepts of a provisional patent application vs. a non-provisional patent application. A non-provisional application is also known as a regular application and I will use that term for clarity. A provisional application may be made only for utility patents; there is no provisional application process for design patents.
A provisional application can be thought of as a type of place holder until you file a regular application. The regular application is what is used to actually apply for patent protection. I have heard many people say that they “have a provisional patent” or have “filed for a provisional patent,” but each phrase is inherently incorrect because there is no such thing as a provisional patent. It is a provisional application.
The USPTO developed the provisional patent application process as a means of reducing the costs involved in developing inventions. The provisional application is much simpler and therefore much less expensive to prepare than the regular application. Basically, it provides you a means to “test the waters” in the market before you commit to the substantial costs of a regular application.
You can choose to begin the patent process by filing the expensive regular patent application ($5,000 - $50,000+), or you can start off by filing a less-expensive provisional application (about $110 if self-filed) to establish a patent application date; obtain the ability to put “patent pending” on your product, and publicly disclose or test-market your product.
The regular application must be filed within one year of the provisional application in order to receive the benefits of the provisional application. The main benefit is the earlier filing date of the provisional application. A provisional application will lapse in one year unless you file a regular application that is based upon it.
A provisional application can also be used to effectively extend your protection period from the standard 20 years to 21 years. Check with the USPTO or a patent attorney or patent agent for details.
Filing a provisional patent application is much simpler than filing a regular application. Although it is reasonable to attempt preparing a provisional application yourself, you still must be knowledgeable about the process of writing a regular application because the provisional application forms the basis for the later regular application. In order to obtain the benefit of the filing date of a provisional application, the claimed subject matter in the later-filed regular application must have support in the provisional application.
For more information on how to file a provisional application, please check the USPTO web site at http://www.uspto.gov/web/offices/pac/provapp.htm or contact the Inventors Assistance Center at 800-786-9199.
After filing the regular application you will have a wait of typically two-to-three and up to four or more years before you receive your first office action, which is the response from the USPTO. The length of the wait varies according to the technology field, some of which are more backlogged than others. You should expect that your first office action will be a rejection, as I have seen figures stating that over 90% of all first office actions are rejections. Note that you will receive no office action on a provisional application.
In its office action the patent office will explain its findings of why some or all of your claims are not accepted and will give you an opportunity to respond.
Unless certain conditions apply, the USPTO will publish your regular patent application eighteen months after submission, making it available to the public. It can easily take 24+ months after the application date for a patent to issue, so this 18-month publication provision often applies. If potential publication of your application concerns you, you should consult the USPTO or a patent attorney or patent agent regarding the rules on publication and how to avoid this. In general, though, you avoid it by agreeing that you will not seek patent protection in any foreign county.
Provisional patent applications are not published–they lapse in 12 months.
This publication of the patent application can have dire consequences for you if the patent office for some reason does not end up granting you a patent. If this occurs, you have disclosed the details of your invention to the world and will have no recourse against someone who “steals” your idea.