The Online Inventor: June 1999

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THE ONLINE INVENTOR -- June, 1999

(C) 1999 Market Launchers, Inc.

http://www.marketlaunchers.com

Publisher: Paul Niemann

E-mail: [email protected]

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Publisher's notes: Inventors' Digest's FIRST NATIONAL NEW PRODUCTS SEARCH will begin July 15 and continue through National Inventors' Month, which is August. Companies that are looking for hot new products are sponsoring the Search.

As you may already know, we've just made our web site even BETTER !!! Here's how:

We've teamed up with the inventor industry's trade pub, Inventors' Digest. We've consolidated our Invention Database with Inventors' Digest's database of new inventions. What does that mean to the inventors who have advertised, or will advertise, their invention(s) with us? It means that a greater number of manufacturers, potential licensees and product scouts than ever before will now be able to see your invention.

When companies visit the "New Inventions for License" section of Inventors’ Digest’s web site, they'll automatically be brought to our site when they click on the link. Your invention will receive added exposure, and the added prestige of being associated with Inventors' Digest will benefit all of us.

Be sure to check it out at http://www.marketlaunchers.com or you can get there from Inventors’ Digest’s web site at: http://www.inventorsdigest.com/connect/inventions.html

If you haven't subscribed to Inventors' Digest yet, you should. To subscribe, call them at (800) 838-8808.

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In this issue:

Article # 1: "Thirty Product Categories and Comments on Each," by Ken Tarlow

Article # 2: "Advantages and Disadvantages of a Provisional Patent Application," by N. Paul Friederichs III (re-printed with permission from Andy Gibbs)

Article # 3: "Patentability Does Not Equal Marketability," By Dennis Dohogne and Paul Niemann

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Article # 1: "Thirty Product Categories and Comments on Each," by Ken Tarlow

Electric Kitchen Items:Good ease of entry into market place. Plug-in items need U.L. approval.
Non-electric Kitchen Items:Good ease of entry but needs to be really new to stand alone.
Sports Equipment:Growing category. Large equipment is usually expensive to develop.
Pet Care:Exploding category – over 40 million homes have cats.
Bath Products:Solid category – growing, needs to be really new and different. Needs to fit a variety of decors. No toilet seats.
Organizer Products:A solid category. Space in home is becoming more limited. Needs organization.
Automotive Aftermarket:Good category – must be a stand-alone product that fits in or on any car. Watch out for safety issues.
Automotive – Built into the car:Tough to convince large automakers to listen. Not an easy category.
Home Electronics, Audio, Video:Mostly sewed up by large manufacturers – but there is room for a good niche product.
Outdoor Camping:Growing category – however, it is a seasonal, fragmented market.
Health Care:Great category – good for infomercials. Needs big ad campaign to promote it.
Toys:Has to be really different. But it’s a good category. Needs great "Play Value."
Games:Tough. Needs a lot of advertising. Hard to license.
Travel-related:A growing category. The travel person has money to spend and wants convenience and class.
Lighting:Has to be really new. Hard to get patent protection. U.L. considerations.
Photo & Picture Frames:This is actually one of the largest retail categories. Hard to come up with something patentable and stand-alone.
Novelties:A catch-all term – hard to come up with a stand-alone item.
Gifts:A large retail category referring to mainly ornamental items. Hard to come up with high-volume items.
Hardware:Good category, but hard to come up with a stand-alone item.
Fad Items:Great when they work, but high-risk category. Be prepared for fast-in and fast-out.
Tools:Good category – needs to be really different. Sometimes can target niche market in trade magazines.
Crafts:Hard to get high volume.
Fitness Equipment:Growing category getting somewhat saturated – but everyone is concerned with fitness and weight.
Furniture:Hard to be unique enough for patent. Varying tastes make it hard for high volume.
Gardening:America’s # 1 outdoor activity. Room for new ideas.
Baby Care Products:Fewer babies but spending more on each one. Room for quality items – watch out for safety.
Environmental:Growing category – but has to make financial sense. Twenty-year payback period – not attractive.
Physically challenged:Growing category. Congress passed law that all public places must have equal access to all. Lots of room for new ideas.
Jewelry:Many different tastes – hard for high volume on one item. Hard to protect.
Hobby:Needs a lot of P.R. to promote it. Takes patience. Needs to be stand-alone item. Hard to find an item that appeals to a large cross-section of population.

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Ken Tarlow is one of the most prolific inventors in the country. He has developed more than 300 products which have combined to sell for more than $1 billion in retail sales. The material in the above article came from Ken’s book, "Mind to Money," which comes with an excellent set of cassette tapes to walk you through the inventing-prototyping-patenting-marketing process in a step-by-step format. His company, America Invents TM, can be reached at (415) 927-0311 or on the Internet at www.americainvents.com. Ken can help you develop your invention, or you can do-it-yourself with his book and set of cassettes, which sell for $40 & $5 S/H.

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Article # 2: "Advantages and Disadvantages of a Provisional Patent Application," by N. Paul Friederichs III (re-printed with permission from Andy Gibbs)

Provisional Patent Applications (PPA’s) were devised to hold costs down, while an inventor explores the marketability of an invention. The PPA shifts costs, but does not necessarily reduce costs. The overall cost of obtaining an issued patent will be slightly higher. Provisional patent applications have been resoundingly praised by some and resoundingly despised by others. Typically this line is determined by those serving the independent inventor and those serving corporate interests. Sorting through the rhetoric is important before deciding whether or not to pursue a PPA. This paper identifies the principal arguments in favor of and counter to Provisional Patent Applications.

1. Initial cost -- Some commentators suggest that the initial cost of a PPA is slightly lower. The market has been clarifying itself over the past year. Formal patent applications (FPA’s) have typically been about $3000-$5000 for preparation and filing of a simple mechanical patent. A PPA covering the same invention would be between $1000 and $1200. All of the arguments suggesting PPA’s should cost closer to the $3000 - $5000 mark are not being proved out in the marketplace.

2. Higher overall cost -- The overall cost of a patent can be higher if one files a PPA. The PPA is a cost shifting tool. It allows one to market the invention, while enjoying a patent pending status. The marketing information is used to determine whether a formal patent application should be pursued. The overall cost will be higher, assuming the marketing is positive and one files an FPA. Of course, the business should justify the cost before filing the FPA. Should the invention prove not salable, the loss will be minimized, since there is no requirement to file an FPA. Note: The cost of a subsequently filed FPA should be reduced over standard rates due to the overlap in effort between a PPA and an FPA. The PPA route definitely costs less spread over several applications when one considers the risk of non-marketability.

3. Delaying Examination Costs -- This is the primary benefit of filing a PPA and is the reason for creating this form of protection. This one year delay should be used to gather information on the market viability of the invention. Viable inventions justify further expenditures, while unworthy inventions are dropped before overspending occurs.

4. Extending the Patent Pending Term -- The PPA period does not diminish the twenty-year period of the patent. "Patent pending" is often a more powerful status than "patented," since the claims can still be modified to nearly guarantee a finding of infringement when the competition gets too close. Still delay in issuance of a patent is not always desirable, e.g., when the infringement is occurring. Extending the patent pending term benefits the inventor under most circumstances. One is also free to change strategies when the circumstances change.

5. Risk of Inadequate Disclosure -- This is a serious risk depending upon whether the PPA is prepared with a cavalier attitude. The PPA should contain the full and complete disclosure of the invention equivalent to the quality level found in an FPA. This means the PPA should be written as the Detailed Description and further include the drawings that will be used in an FPA. Prepared in this manner, there is no more risk of an inadequate disclosure than there is with the preparation and filing of an FPA. Too often, however, inventors believe they can prepare and file their own PPA and in the process provide an incomplete disclosure, which can lead to a variety of problems include complete and total loss of rights. Avoid this problem by using a professional and having the professional write the PPA as the Detailed Description that will be used without alteration in a subsequently filed FPA.

6. Foreign Recognition -- Under the Patent Cooperation Treaty each country is free to determine whether it will recognize the priority dates of other countries. Nobody knows for certain how each country will treat the PPA foreign filing date. However, international politics would suggest that each country will respect priority dates granted by the United States government. Nobody, over the course of the past four years has found and publicized a single instance where the PPA priority date was not recognized in a foreign country and you can be sure lawyers are motivated to find justification for encouraging clients to pursue the more expensive FPA.

The usefulness of a PPA is readily appreciated in some situations and not in others, thus the mixed reactions. Commentators have identified the key times for pursuing a PPA to be when time is short and/or when financial resources are low. Most independent inventors fall squarely in this second category - low funds. In this situation, the primary risk to be avoided is an inadequate disclosure. A properly prepared professional application should not suffer from this problem. Hold the cost and protect your invention with a professionally prepared PPA in those situations where funds are at a premium or when the marketability is substantially unknown. Pursue an FPA when funds are more available and the marketability is well understood."

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Thanks to Andy Gibbs for permission to re-print the above article. Andy’s web site, called the Patent Caf�, is the #1 rated Intellectual Property site on the Internet, according to CNN. MEET EVERYBODY WHO'S ANYBODY @ WWW.PATENTCAFE.COM™

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Article # 3: "Patentability Does Not Equal Marketability," By Dennis Dohogne and Paul Niemann

"Anything that won’t sell, I don’t want to invent."

-- Thomas Edison

Inventors usually spend thousands of dollars of their own money patenting new products. Add to this expense the hundreds of hours that it takes to create and fine-tune an invention, and you can see why an invention is so sacred to its inventor, and why each inventor wants to see his or her creation reach the marketplace.

This is all a normal part of the inventing process. Many inventors stop there, though, believing that the hard work is all behind them and that the world will beat a proverbial path to their doorsteps for the rights to their inventions. In most cases, however, nothing could be further from the truth.

We often hear comments from inventors such as, "Now that I’ve got my patent, I’m just waiting for some big company to come along and buy it."

This is rarely the case, and consider this sobering statistic: The percentage of patented products that actually produce a profit for the inventor is only about 2%. This means that out of the 120,000 patents granted by the U.S. Patent & Trademark Office in any given year, 98% of them fail to even recoup the inventor’s cost of creating and patenting the product. The total cost of a patent usually runs between $3,000 - $6,000, not including the costs involved in developing it and testing the product.

Why is this percentage so low? There are 2 main reasons:

First, inventing a product is a totally different skill than selling a product, and most inventors would rather invent new products than try to sell them. They either don’t want to, or don’t know how to, go about marketing a new product. Second, many products are not worthy of the cost and time involved in creating and patenting them. This is usually because there is not enough of a market for the product and, as a result, insufficient demand for the product.

For example, a woman called one day looking for help in getting her new product onto the market. She said that she had spent over $100,000 in the past 10 years in developing

and marketing her product, yet so far she had received only 2 orders. If she had done a little more research, she would have learned that there simply wasn’t enough of a demand in the marketplace for her product. Now she’s just throwing good money after bad in trying to recoup her sunk costs.

Occasionally inventors come up with products that are simply ahead of their time. The world doesn’t want a product that’s 15 years ahead of its time; instead, the world wants a product that’s 15 minutes ahead of its time. Any way you look at it, most patented inventions are not successful because they miss the market.

If your invention is patentable, should you apply for one? That’s a good question: Should you? Here are a few other questions to help you determine if you should apply for a patent:

Who will use it or buy it?

This means knowing what demographic variables describe your intended customers, i.e. age group, gender, income level, and so on. Ever notice how the TV stations show a lot of beer ads and truck ads during football games? Or why they show toy ads during cartoons? This is because they know the demographic variables of their audience. Knowing this kind of information is important when you do your market research.

How much will they be willing to pay for it?

This is important for several reasons: First, if you price your product too high, you’ll lose some potential sales. Second, if you price it too low, you’ll miss out on some of the profit that you deserve. Plus, price is often an indicator of quality. A price that’s set too low often gives the impression of inferior quality. A higher, but reasonable, price indicates that the product is of high quality.

What will it cost to produce?

A common rule of thumb is that the production cost should be 1/4 - 1/5 of the final purchase price. Remember, there will be additional mark-ups between you and the final consumer – such as markups to the wholesaler, the salesperson, and to the retailer. Most middlemen mark it up by 75% - 100%. There are advertising and promotional costs along the way, even if you’re selling your product directly to the end user.
What other products exist that serve the same market -- how are they different and how are they similar?

Knowing the level of competition that your invention will face will give you an idea as to how your product will be received by potential licensees if you choose to go the licensing route. On the other hand, if you’re planning on manufacturing it yourself, then knowing the level of competition will give you an idea as to how your potential distributors and end users will respond to your offer.

If there are similar products on the market, then you need to develop a unique benefit that the others don’t offer. This is called a Unique Selling Proposition, or U.S.P., and is intended to set you apart from your competitors. Your USP can be higher quality, better service, quicker delivery, low price, etc.

If there are no products that are similar to yours, it usually means one of two things: Either there is no demand for your type of product, or (hopefully) there is a demand and nobody is currently filling that demand.

If you believe that your idea is worth something, then how do you plan on getting your reward?

What’s your game plan for bringing your product to the market? Are you going to license it? Are you going to build a business around your product and manufacture it yourself? Or are you going to enter into a joint venture with an existing company?

These are questions that you need to answer as you try to decide whether or not to apply for a patent. If you can’t answer these questions, especially the last one, then the question of patentability is moot. Whether you are an independent inventor or if developing new products is your job, there's not much point in applying for a patent unless your invention can generate revenue for you. After all, if it won’t generate revenue, then what is there to protect?

The point of this article is to help you determine how to make the most of your precious resources of time, talent and legal tender. Obviously you feel that there is some sort of need for your invention, or you wouldn’t have been inspired to create it.

You can and should use professionals to help you with this. Use your network of contacts, inventor organizations, patent attorneys, small business administrations and so on to locate some good, affordable help. If you don’t know how to assess your market, you’re not alone. But you should at least understand the value of doing a market assessment, and then get help. Otherwise you might end up with nothing more than an impressive piece of paper from the U.S. Patent and Trademark Office, and a reduced bank account. Use your resources where they are most likely to pay off for you.

And the next time you have an idea for a great new product, just remember: A product’s patentability does not guarantee its marketability.

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Dennis Dohogne is a Registered Professional Engineer with Code 3 Public Safety Equipment in St. Louis, MO. He currently holds one patent with three pending and has an MS in Mechanical Engineering from the University of Missouri - Rolla. His e-mail address is: [email protected]

Paul Niemann is a former marketing instructor at Fontbonne College in St. Louis and earned his MBA from Southern Illinois University. He advertises inventors’ new products on his web site, www.marketlaunchers.com. He also helps companies locate new products to license in. He can be reached at (800) 337-5758.

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Click here to read the May 1999 issue.