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August 15, 2004
Invention Rip Offs
I read this article from the TimesLeader.com and it struck me that I had heard this story before. A company called Advent Product Development was helping an inventor of a swiveling beach chair, who was hoping for millions of dollars. The whole thing smelled fishy to me.
So I did a little Googling and found Inventor Ed's webpage and a few comments on some discussion groups about Advent Product Development. I did this in less than 5 minutes.
There are many companies out there that prey on independent inventors, often taking them for $15-30K and delivering very little value.
It is very true that few inventors are successful, and even rarer is the inventor who is successful at their first invention. Taking an idea and making it into a product is one of the most excrutiatingly difficult tasks, for which very few people have the knowledge, money, and perserverence it takes.
Paying someone else to do the heavy lifting usually does not benefit the inventor. I have never met a satisfied customer of one of the invention marketing companies. (Maybe they exist, but I haven't talked to one yet.) These companies generally don't have the belief in the product because they are getting paid up front. (If they are taking several thousand dollars before the product gets into production, they are getting paid up front.)
I have personally seen the sloppy and expensive work from several invention marketing companies, where the inventor's dreams (read: greed) were milked by the company.
Nothing is going to make an idea a success more than the hard work of the inventor. If you are not willing to invest the time to learn what you need to know, you should not be wasting your money.
My clients who are successful independent inventors all have the same mentality: learn what they need to know, make as many contacts and ask as many questions as possible, and be willing to invest but do so judiciously and with careful consideration. They are not willing to hand off their invention to anyone.
In my practice, I get a big red flag when an inventor is already figuring out how to spend their soon-to-be-millions, and they say "I don't have any money now, but I will give you half..." I politely end the conversation and refer them to someone else. I want someone who sees the value in the idea so much that they are willing to pay me cash and keep the ownership themselves.
My advice to every first time inventor: do a business plan. Understand the market, the distribution network, the retailers. Know the consumers, the demographics, their disposable income, their buying habits. Research the manufacturing costs, normal margins in the industry, lead times, tooling costs, material costs, shipping costs, packaging costs, inventory costs, minimum orders.
Take all of this information and digest it, understand it, and mull it over. Go back and do worst case scenarios for each factor. Does it still make sense?
After doing a business plan, the decision to get a patent and pursue The Dream should be less of an emotional one and more of an analytical one. Every decision like this has some emotional content, but it should be supported by fact.
The real benefit of the business plan is to do what these invention marketing companies say they will do for you: survey the market and give you a better basis for your decision.
Why does a market survey have to be difficult? Find a store where your product is likely to be sold and ask the owner or clerk how many products like this do you sell? I researching a product of my own, I always seemed to find a nice clerk who would check the computer to tell me that they sold 14 widgets last week. Alternatively, go to the store, count the product, and go back the next week and count again.
Take the number of products sold, multiply by the number of stores, and assume you could get 1 or 2% of the market.
For consumer products, weigh the product. Excluding electronics, steel products cost between $0.40-0.75 per pound to manufacture, and plastic products about $3.00 per pound, as a rule of thumb for reasonable volume (250,000 units/year). That $50 coffee pot probably cost between $6-8 to manufacture.
For the invention to be seriously considered by distributors and retailers, it should be priced at least 10X the manufacturing costs.
These are some of my personal rules of thumb that I picked up after 13 years as a design engineer before starting a career in patent law.
These and other simple rules help you clear the initial hurdles of whether or not the idea should be pursued to the point of applying for patent. The important lesson: you need to do this work yourself, and it is entirely within almost every person's ability to do. Granted, some people may have more experience in marketing or whatever specialty, but it is not rocket science. Don't let them scare you out of doing the job you almost have to do yourself anyway.
Posted by krajec at August 15, 2004 07:23 PM
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