I did an interesting interview with a regular visitor to our site who is developing a new sewn product. She is an inventor and has patented several accessory products that are utilitarian. She has successfully licensed her products to the leading companies in that field -which is different from ours. Obviously I can’t name names or companies involved but she agreed to share some of her experiences with you. Some were good, some were sheer luck and others were bad. Still, she has been successful with regard to protections in spite of having to weather some infringement problems.
Background: She is an engineer and had been previously employed by a blue chip science oriented international firm. I say previously employed because she says she’s making more from product licensing now, than she’d been getting in salary which had to have been within six figures. I don’t know how old she is but she has a young pre-school aged child.
On starting the patent process:
The products she invented could not be more dissimilar from her job function so there was never the slightest conflict between her employment and her private endeavors. Still, she says she gleaned a lot from her environment because her firm was heavily involved in patenting. She also read several books on it and mentioned that one was particularly useful. She didn’t recall the title but said she’d look it up. I’ll amend this post and add it comments when I get that information.
When I asked her how she started the process, she said she first filed for what she considered to be a provisional patent, a design patent. Design patents aren’t strong protection; they only govern how something looks but those are fast, relatively inexpensive and easy to get. Design patents are good for 14 years. She then filed for a utility patent which is more costly and takes longer to get. Those are good for twenty years. She did a lot of the patent preparation herself -because she was qualified to- but hired an attorney to manage the process and her interests.
I asked her how she went about licensing. She said the first thing she did was call a company that made products similar to hers. I can’t describe the industry but let’s just say there are two main players. Both are enormous multi-nationals with plants all over the world. Absolutely huge. You own products made by both of these companies. These are plastic products, injection molding mostly. That matters because manufacturing dies for these are costly, minimum $100,000 per component part and it is unlikely the average inventor would have the resources to manufacture their own invention. Anyway, she called the one company after hours, thinking she’d leave a message -basically assuming they’d never call her back- and lo and behold, the president of the company answered the phone. Yes. The president. What a stroke of luck! She laughs telling me this. Long story but he had her come down to the office as soon as possible.
This company signed very quickly, they really liked her product. She says she very much enjoyed working with this company. I gather she hadn’t anticipated that licensing her product would mean forming relationships with people beyond contracts, dollars and cents. How many of us do? She had a very good experience with this company. Contrary to what inventors fear, she says the contract was fair, if not generous. They wanted an exclusive license for the lifetime of the patent -pretty flattering.
She was compensated in two ways. First she got a lump sum payment, she says you could describe that as an advance on royalties but she says it’s more common that they just give you that as a kind of gift to cover some of what it had to have cost you to bring the product thus far. I suggested it sounded like a “signing bonus” and she agreed. Next, she is being compensated monthly based on a percentage of each unit sold. She says the typical royalty per item is 2%-15% but she implied or said, I don’t remember which, that 2%-3% is most common. I gather that’s what she’s getting.
I also confirmed -because so many of you think otherwise- that her royalty is based on the total wholesale invoice, not the retail price. In her industry, it is impossible to calculate on retail price. I also had her confirm for me, that you have the ability to verify what you are owed -if you feel you need to- through an auditing process, the conditions of which are included in the contract.
Speaking of contracts, I asked her what kinds of things could go wrong and she mentioned the licensing of another product she’d invented (she has three). Another company -to whom she did not license her product- wanted her to pay to have the item patented in other countries. She says it’s not worth it -or at least it wasn’t for her product (I’d agree). She says it’s too hard, too costly and too difficult to enforce and she wasn’t willing to pay for it. She says that if they’d wanted to do it, that would have been just fine by her (they were negotiating an exclusive, for the lifetime of the patent).
Speaking of things that can go wrong after licensing the deal, she mentioned her experience with still another product. She was -is- unhappy with an aspect of the product that was changed by the licensee. However, she is very pragmatic about it. She says that it bugs her but her name or image isn’t tied into it and the company did sign an exclusive for the lifetime of the patent, so she is resigned to it. She says they have to do what is best for them, she’s getting paid, all agreements have been honored so she can’t complain if they are fulfilling their end of the deal. To the inventors out there, I’d say to keep her attitude in mind. She’s very fair and aware that for a fee, she’s profited from her idea but she doesn’t try to control the manifestation of it. Someday, some of you may find yourself in similar shoes. I know of one designer who never got off the ground for precisely this reason. She couldn’t bend and in ways that were immaterial to the product or its quality; but only affected the method of sale.
Then I asked her if she’d had any problems with somebody taking her ideas and using them without her consent and she said yes. Those of you who love to wave your required non-disclosure agreements around, pay close attention. She said that in the process of trying to license a second product, she’d been negotiating back and forth through email mostly with this other company for about five months. She said they discussed everything in complete detail but in the end, they decided not to sign. So, later on, this company decided to manufacture the product anyway. This is where most would-be inventors tremble but she said it was very easy to take care of. She had a good attorney, the law is clear and the company pulled the product. She had a clear case specifically because she had a lot of documentation. It’s documentation that wins cases and the more of it, the better. And get this, she didn’t have a non-disclosure with them. NDAs are pretty useless. You show damages with what’s been done -the manufacturing, not with what’s been said. Specifically because she discussed it in so much detail, is why she could prove they’d infringed her. Furthermore, they knew it. She says the only thing she would have changed about how she handled this was to get them to sign a statement saying specifically that they were not going to manufacture the product. Personally, I’d have no problem signing something like that but I won’t sign NDAs. They’re an insult.
She brought up another interesting but unrelated thing about the above incident. She says that internally, and within the industry, it was understood that the company had acted inappropriately and they knew they did. A vice president within the firm that had stolen the idea, actually resigned in protest. It was a big deal. I think urban myth and fears feed a level of distrust among inventors that may be disproportionate to the level of actual malfeasance. There are matters of reputation within an industry that serve to reinforce and encourage ethical and best practices among colleagues. I don’t think individuals realize the strength of self policing that the mechanism of reputation provides. But I digress.
The licensing of her last product (the third of three) is different still. This is a sewn product that is a fashion accessory of utility. As such, the range of variability in the manifestation of the product is virtually limitless. As such, no single company can produce the range of possible variations. Accordingly, she has a non-exclusive license with a company for that product. The terms of this contract were also different, as well as the compensation. For one, she didn’t get a lump-sum up front payment but she retains the right to sell versions of her own product within a specific range of the market -boutiques. Anyway, she’s decided to manufacture her design within the segment of the market she is alloted. Which is how she found us here.
[post amended, 9/8/06]
The lady I interviewed sent me some corrections and additional information. Her comments read verbatim:
One of the books that I relied on heavily initially was “Patent It Yourself” from Nolo Press. I will send you the names of others once I make up my mind to dig through the few thousand books in our basement (my husband is a voracious reader; he doesn’t buy one book at a time; he buys entire shelves; mostly at book sales I should add).
Regarding patents: A Provisional Patent Application is separate from a design patent application. Think of it as a pre-utility application. A Provisional Patent Application does not have the same stringent requirements as a full-blown utility patent Application. Also it is relatively inexpensive and can be filed quickly. It doesn’t require any formal drawings or claims. It gives an inventor a year to develop/test the idea to see if they want to put in the resources for a full-blown utility application. The design patent application, as you said, just covers the exact “look” of the product and is relatively weak (except that Rommy Revson, the inventor of the Scrunchie, only had a design patent application).
The compensation: there are three components in general including an advance payment, a royalty payment and a minimum yearly payment. My royalty is slightly higher than what you mentioned; but that’s not important.
Regarding the number of products I have licensed: I have licensed three and am working on the fourth. Two are plastic products and two are sewn products.
In my free time I have been slowly working on a book for “everyday inventors”. So far I have a very disorganized/chaotic set of chapters; but I will go through them to see if there is anything else that might of general interest to fashion-incubator.