The next set of blogs will deal with how to maximize your profits with intellectual property, particularly patents. Suppose you have an idea for an invention, maybe you have built a prototype. This invention is hot. When it goes to market, you will be richer than Bill Gates and Paul Allen combined. Move over, Fort Knox. You need to protect your invention. Should you patent it?
First, let’s discuss what a patent does. Patents are issued by the United States Patent and Trademark Office (USPTO). The basic steps are given here. But keep in mind the purpose of a patent. A patent does not give you the right to exclusively manufacture and produce the product. It gives you the right to exclude others from making, using, selling, offering for sell or importing the invention. If you find someone else using your idea for profit, you have at least three options. You can send them a formal letter and ask them to stop. You can sell them a license to use your patent. You can sue them in court to stop manufacturing and selling your invention. In any of these three, you may or may not get retributive value since the patent, itself, only gives you the right to exclude them from making, using, or selling your invention. If all this sounds unfair and expensive, it can be and often is.
The problem with the first scenario is that you must first discover someone is violating your patent. A man approached me the other day with an idea for a crawfish (aka crawdad or mud bug) trap. He said no one else had this invention. (I could only imagine.) He said he was expecting to make thousands (not millions) of dollars. (A $1M market at an attractive 30% profit, is only $300K total.) He was meeting that week with a firm that would “help him file a patent.” I explained that, never mind the patent, how would he know if someone else was violating his patent? In other words, if the total business was less than a million dollars, someone else could steal the idea and flood the market before he even got started. Or, they could sell them in Mississippi while he was working Louisiana. If they were violating his patent, he could make them stop but what if they had saturated the market already? This man was struggling to find the money to even file for the patent. How could he ever afford to take someone to court?
Thus, we have consideration number one. It will cost $2K – $20K to file for a patent and 2-3 years before it is awarded – if it is awarded. (See Fees to get the details of the costs. The cheapest you can go is a little under $2K, but it is difficult, in practice, to complete everything at that cost.) So, if we are taking about a market of less than a million dollars total, I would still recommend filing for the patent. (Go cheap, cheap, cheap). Then, find someone to make the product, stamp it Patent Pending, and capture what market there is with affordability and availability. Hence, your business plan is not dependent upon the award of the patent because you will probably saturate the market before the patent is ever awarded. Keep in mind though, that there are serious penalties for fraud so your patent must be on file with the USPO before you can mark the invention Patent Pending.
Some of our readers may have have other ideas to offer to the question, “What do you do if the total sales are less than a million dollars?”
Next time, we add another thought to keep you awake while you write your patent application.