A book for inventors who want to realize their ideas through licensing
This book review contains a wide range of opinions, measures, and procedures around the topic of licensing and sales. I disclaim responsibility for any resulting direct or indirect outcomes of actions taken from information contained in the review of this book. To put it differently, please don't do anything stupid. It would make us both quite unhappy. Do your own thorough research or consult a specialist e.g. "Opfinderrådgivningen" before engaging with your own licensing.
Have you ever had an original product idea which you felt was so great, that it simply had to become real? There is a myriad of ways in which this can be achieved, depending on the size and scale of the idea. However, This book illuminates the option of licensing it.
Through this type of business model, the inventor establishes a "perceived ownership" of their idea and gives one or more companies the authority/rights to produce the idea, in exchange for a mutually agreed-upon sum of money. Think of it as the relationship between Spotify and a musician, but for ideas instead of music. Music artists receive some money from Spotify each time a listener plays their song. In the same way, with the licensing model described in this book, the companies will pay you a sum of money, each time they sell your idea. It may sound like a fantasy, but the author of the book Stephen Key has licensed his own ideas more than 20 times for more than 30 years, commonly with a return of 5 % for every item sold. He has made this type of agreement with companies that have sold them in Disney stores, 7-eleven, Walmart, and other stores worldwide. Not only has he used his business model for himself, but he has also helped others to license their ideas too. He does so in his own consultancy company InventRight.
As I usually do In my book reviews, I will run through and explain my main takeaways from the book. This will be done in a distilled, easy-to-read format enabling you to get the main ideas quickly as well as to skip and jump to points seeming most relevant to you. So here goes... My distilled versions of the ideas and thoughts presented in the book. See them listed beneath, to be elaborated on later:
My main takeaways
You don't necessarily need a patent to license your idea There is a multitude of legal measures to gain "perceived ownership" of an idea! Each has different benefits, and some are cheap and can be acquired simply! Know your options of protecting your idea and use them properly for your needs.
The companies need inventors' ideas! Open innovation is a rising phenomenon where companies are looking for ideas outside the company to stay competitive. If your idea is great, the companies will want it and they might even pay a patent for you.
Avoid going to court for your idea! Going to court is a time-consuming and costly affair. Make sure to take proper precautions to avoid going to court in the first place, but be prepared should it happen.
You don't necessarily need a patent to license your idea
No, with Stephen Key's method, you don't necessarily need a patent. To best describe Stephen Key's method, I have made a flowchart to give an overview and visualize the steps and precautions to be taken in advance of seeking a licensing deal. The main part of his method described in his book, is to get a "Perceived ownership" which is what I will explain how to get here. To find inspiration on how to go about the other phases see my other book reviews. For conceptualization, check out Designing For Society. For validation check out The Mom Test.
This is a flowchart I created to illustrate the steps in Stephen Keys' method.
The first part of acquiring perceived ownership is about determining whether your idea is of the type "big" or "small". I will here first and foremost define what each type is before explaining how to license them.
Big Ideas are disruptive innovations and industry-changing. That means, that if the idea came into existence, it would change the entirety of the industry and flip the competitive balance in the direction of whoever markets your idea first. It would make the company selling it industry leaders and take customers from competing companies. In other words, you have a "big idea" if your idea will be a threat to someone else's business. If this is the case then you as the inventor will not just need a single patent, you will need a "wall of patents". I will explain how to build a wall of patents, but first, let me present small ideas and how they are licensed.
"Small ideas" are most simply defined as any idea that is not a "big idea". Most ideas are of this type. They are ideas that would be beneficial to a company, improving their product portfolio with another neat item or be an upgrade/improvement to an already existing product they have on the market. Small ideas have their benefits to the inventor, as these can be licensed relatively simple and at low risk. The reason why the author states this, is because licensing small ideas can be done without a patent. Licensing without a patent is doable and this is the main point the author wants to establish in his book. The method to so goes as follows:
Licencing a small idea
Besides validation, not much is required to gain perceived ownership. All that is needed is to use the following legal tools.
1. Non-Disclosure Agreements (NDA) An NDA is a type of formal contract for keeping secrets. When signed by you and a potential licensing company, you can exchange confidential material, knowledge, or information. The NDA Is meant to give you the means to share the insides of your idea with different parties while keeping them from sharing it with third parties. The tool is super simple to use, and templates can be acquired online for free on websites such as opfind.nu. However, Stephen Key recommends also using another tool, which he calls "your new best friend", This is the provisional patent application.
2. Provisional Patent Application (PPA) A PPA is the first step in acquiring a patent and gives your idea the status of patent pending and protection for a year. The system for acquiring a patent has in Europe and the USA been decided to be a first-to-file system. In a first-to-file system, the right to the grant of a patent is given for the person first to file in a PPA, not the person who first invents the idea. Because of the chosen system, being the first to file an idea for a patent is super important. Therefore, the system is set up in a way that makes it easy for anyone regardless of background or knowledge of the law, to write and file a PPA giving protection. Once the PPA is filed, a task that can be handled online by a simple self-written document, your idea has gotten the status of patent pending. This gives you one year of time to search for companies willing to license it, as well as develop it further. After that year you can seek an attorney and file for the Non-Provisional Patent which gives you up to 20 years of further protection. However, getting the full patent is costly, and as Stephen Key puts it also unnecessary for small ideas. To production companies, time-to-markett, for getting concepts developed and sold, is a task with a huge focus. They don't want to wait a year for your patent pending status to run out. If they are interested in your idea, they want development to start quickly. Stephen Key states that in a lot of cases the companies will even be willing to pay for the full patent for the inventor just to lower the time-to-market and finalize the agreement. In the USA a PPA can be filled for 65 - 130 USD. As I stated by "Opfinderådgivningen", a PPA costs 3000 DKK in Denmark giving protection in all of Europe. It can however also be gained for free, for a couple of months (the time it takes before the deadline of payment for application runs out). A DIY self-made and great-looking PPA will be around 3 pages and have attached drawings with explanations of the invention. However even a one-pager with a "napkin drawing" can be sufficient. No one can access the PPA, meaning the companies will have to trust that your idea is patent pending, or ask you if they can see the PPA. In fact, your PPA will not even be checked by any legal person or official entity before it is filed as a non-provisional patent. You do only have the protection of your patent if your idea has not been published, so keeping it a secret in development before publishing is a must. The picture underneath shows an example of what a drawing of an idea filed in a PPA might look like.
See the full explanation of the drawing for this PPA in the video here.
for a small idea, a simple PPA is an adequate protection. Your self-written PPA may or may not have claims that will be acceptable in court. But… as Stephen Key puts it, "who cares?" The idea just needs to be in a slight grey area, making everyone involved unsure whether the idea is actually protected or not. The companies don't have the time to dig into the details of it, and neither to wait a year until the PPA's expiration. To them, they are focusing much more on protecting themselves from the competition and this is most often done by being the first to market and making a fair licensing deal with you.
Licencing a big idea
Stephen Key explains that when licensing a big idea, the inventor will have to be aware that competing businesses will have professionals looking for loopholes in any form of protection on the idea. They will try in every way possible to find a way around whatever protection you have. It is therefore important to protect the idea in all ways possible; as said, a wall of patents is needed. Besides, the use of NDA's and PPA's here are the other types of protection described in the book of which the inventor can use to their advantage.
1. Inventors Logbook The inventor's Logbook is a free type of protection that is used as a chronological record to prove the timeline of development. It doesn't stand alone in the first-to-file system like we have in Europe and the USA but can be used as another legal tool of protection in court. It is required of the logbook that it is handwritten in ink in a bound book. No lines can be skipped. The full name of any participant in the process must be recorded along with the date of involvement, and finally, every entry needs to be signed by a third party with an understanding of the content... All in all, it's a very inconvenient process, that however might be worth it if the idea is big enough.
2. Copyrights Copyrights are a type of intellectual property that can be given to any type of original works of authorship or artwork that is documented, recorded, or exists in a tangible form. It can be given to websites, television commercials, movies, audio and video recordings, graphical or photographic images. Filling for copyright takes around 90 days and costs in the USA around 35 USD.
Stephen Key used the copyright system very cleverly in one of his own companies called hot picks, a company selling guitar picks. This picture is from their website. Stephen Key got granted copyright for an entire catalog of image prints for his guitar picks for the price of 35 USD. By filling in an entire catalog of image designs, he saved the money from filling copyrights for every single pick. Could you protect your idea or different version in the same way with a type of image or graphical design?
Trademarks Trademarks are defined as different words, phrases, symbols, or designs, or combinations of these that identify and distinguishes one party's goods from another. These are most often used by companies rather than individuals to protect their brand. Getting a trademark can be done entirely for free by simply putting a small "TM" mark next to your logo, phrase, etc, if it is not already a trademark by someone else. However, you will be taken more seriously, and it’ll be better protected with a registered trademark. This enables you to put an "R" next to your logo, phrase, etc. It will cost you 325 USD, if you file it yourself, or about 1500 USD if you let an attorney file it as recommended in the book.
A great example of a trademark is the "Nike Swoosh" and their tag line "JUST DO IT." The picture example here was found on Sun and Sands Sport.
Design patents design patents are a type of patent that protects the non-functional appearance of an invention. It is regarding shape, decoration, or configuration. A design patent will last for 14 years giving 15 years of protection in total if it's filled at the expiration of the PPA.
Heres some pictures of a couple of design patents issued i found here: http://pnwstartuplawyer.com/design-patents-illustrated/.
Utility Patents utility patents on the opposite to design patents protect the functional properties of an idea. These can be filled for new technology, machines, compositions of technology, production methods or processes, new ways of doing business, software, or mathematical algorithms. A utility patent grants 20 years of protection excluding the year of the PPA.
Here is the illustration the design patent (to the right) and the utility patent (to the left) of the Charles Eames chair. The annotations on the utility patent points out different details that together make up for the utility patent, whereas the design patent is a much more simple illustration just showcasing the chair in different perspectives. The picture was found in the same article as the previous picture here: http://pnwstartuplawyer.com/design-patents-illustrated/
Plant Patents Plant patents are the last type of patents that can be issued. It can be given to any new and original species that can be reproduced sexually or asexually with or without seeds. This patent also lasts 20 years.
Non-Provisional Patents can vary greatly on how much they cost as you need a professional patent attorney to file the patent. Depending on the complexity of the idea, office hours for filling will be shorter or longer influencing the price. As a rule of thumb, it takes between 20-30 months before a patent is given and costs around 10 000 USD to be granted. That's a lot of money for an individual. That makes it difficult to license an idea of this size. You could file a PPA to get patent-pending like for the small ideas and hopefully get the licensing company to pay for the long-term patents afterward as described earlier. However, with a big idea, you probably want to get professionals involved before reaching out. Big ideas require a big investment.
Stephen Key has himself made a wall of patents and licensed a big idea for multiple companies, across different industries simultaneously. This was with his idea, the Spinformation. For this idea alone, he has over 13 patents and has said to have paid around 20 000 USD for the idea himself.
The companies need inventors' ideas!
Licensing your idea is a win-win situation for both parties. Both the company and the inventor get something out of the deal. The inventor obviously gets their invention realized and gets to earn some money. And the companies get new ideas to drive their business. They need new ideas and new concepts to keep staying relevant in the market and be in business. They have to be open to open innovation (pun intended 😂). However, you have the responsibility of making them want your idea. Thus, the following points are important to take into consideration.
Choose the right company
Sell the benefits of the idea
Choose the right company
It seems obvious to choose a company suitable for your idea, however, all companies are not as willing to license ideas as others. On Stephen Key's company website he gives resources to some companies that are more willing to license than others. In general mid-size companies will be easier to make a deal with than the bigger ones, because they to a larger extent are in need of ideas to stay competitive. In addition to that mid-size companies also have a smaller product range than the bigger ones. This means that they will be much more invested in getting your idea to market because that extra product to them means more to them, than an extra product for a larger company. Another thing to consider is the industry in which a company is. In some industries, products are just launched more often than others. In these, it's much more simple to license your idea as ideas are more needed. The industries Stephen Key mentions being easier to license to are:
Toy, Fashion, Pet, Kitchen, Hardware (Gadgets and Tools), Medical, Fitness, Baby, Gardening, Craft.
Sell the benefits of the idea
Inventors must put themselves in the shoes of the companies. They must tell them what they want to hear. That is why you should try and sell the benefits of the idea and not the idea itself. You are not selling a patent or the technical specifications. The licensing company will only understand why they should license the idea from the value the idea is creating. Companies are busy and have always limited time. That is also why protection of your idea with a simple PPA is adequate. To them, they are focusing much more on protecting themselves from the competition and this is most often done best by being the first to market. If they understand that the idea will be beneficial to their business, they will be willing to negotiate with you.
"Don't tell, show!" When you reach out to the company, you need to be prepared. Have a prototype and/or a video ready to show them the perks of the idea. You and your idea looking professional show them that you should be taken seriously and that the idea is something that has been thought through. That is also why Stephen Key recommends that you make a well-written PPA. They might not ask to see your PPA but if they do, it is great to have one that looks professional and nice.
Avoid going to court for your idea!
The reason why Stephen key calls it "Perceived Ownership" and not "True Ownership" is because he himself has been to court, trying to defend his patented idea against a party claiming their rightful ownership. His court proceedings were against the company LEGO that had produced and sold his idea, Spinformation on their Bionicle packages without his allowance.
This is a picture from Amazon featuring an old model of LEGO's Bionicle with the Spinformation label on its package. The old model here is only sold as a second-hand item as it was pulled out of the market after Stephen Key won the trials against LEGO.
When going to court it is a game of words of who can prove to have the rightful ownership. No one owns the idea before the judge has made their decision. Getting intellectual property and patents doesn't mean that others can't produce your idea. It just means that if they do, you have a right to sue them. To sue is a process that takes time and money and there is a chance that the opposing party will win making your patent useless. You may be able to get a wall of protection that enables you to sue others who produce your idea. But that is not the reason why you should get it. The reason to get it is for others to be perceived as the owner. You should come across as being serious about your invention and make them, afraid to cross your boundaries by imitating it. It should be made so that you avoid going to court in the first place. Should it happen anyway, make sure you find an attorney who has tried going to court before. That is not to be taken for granted, as not all attorneys are created equal.
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