Avoiding Invention Company Scams
You have likely seen the ads on late-night TV. Bring us your invention and we will make you rich! The reality of the innovative process is that very few inventions make money. If all you have is an idea, don't make the mistake of believing that an invention company is going to do everything for you. Getting a new product to market is hard work and often takes a great deal of time - your time! Most real invention service providers are very selective about who they work with and usually have a team of expert consultants who work with them to provide legal advise, prototype development and marketing services.
Most of these companies will not deliver; some are outright crooks. They will almost always ask for money up front to assist you. Avoid getting ripped off.
 |
What is their track record? Ask to see a list of the inventions they have represented. How many of these inventions have been successfully commercialize?. Ask to see, in writing, the number of successes that have made more money than was invested by the inventor. |
|
Ask for references; three satisfied inventor clients. |
|
Do you feel pressured to make decisions quickly or send money? Think again about dealing with them. |
|
Never sign any agreement with a company until you have decided to work with them. Never disclose the details of your invention until formal confidentiality documents are in place with the company. Get a legal opinion about the agreement if you can afford one. |
|
Ask about the total cost of the services they provide. Hesitation or a vague answer is a bad sign. |
|
Ask how they will perform a market evaluation of your invention? Market evaluations should provide an objective evaluation of the merit, technical feasibility and commercial potential of your invention. |
|
Have they agreed to check for existing patents for your invention? Will they provide you with a formal opinion on patentability? Will they provide a full report showing the results of the patent search? Bad companies will market an idea even if it infringes an existing patent. |
|
Do they claim to have a relationship with a manufacturer? Ask for written proof of this. Never submit your idea to a manufacturer before you have filed your patent application or without an appropriately executed confidential disclosure document in place. |
|
Watch out for addresses that do not match. They claim to be in one state or province but the mailing address is in another. Do you always get a recorded message when you call? |
|
If you feel that
the company is legitimate, still take the time to check them out. Call the
Better Business Bureau. For US companies contact the FTC and look under
"Invention Company Scams". |
You have determined that you have a technology or new product which has good potential. You now wish to locate third parties who will be interested in taking a license or investing in further development. Before you begin your search for the ideal partner there are a number of questions you need to answer. The answers to these questions will enable you to make a strong case for your product and improve your chances for success.
| What problem does your product address and how does it solve that problem? |
| What other products currently exist that address the problem? Why is your product better? |
| What's your target market? What's your market size? What's your market potential? These questions may seem like the same thing, but they're not. |
| Do you have a platform technology? A technology from which more than one product can be developed. Do these individual products address the same or different markets? |
| Who is currently active in the market you have identified for your product? Is that company a potential licensee or financial investor? |
| How much polishing does your product need? How much will it cost? Can you provide the financing or does this need to come from somewhere else? |
Gathering the information to answer these questions will take some time and effort on your part. The following list contains some suggestions as to where you might look for some of the answers.
| Internet sites, on-line technology information exchange groups and on-line databases. There are now hundreds of these and most are free of charge. Check our LINKS page for some suggestions. |
| Government and Venture Capital Company studies and reports. These are usually free and can be obtained directly from the originating source, via the Internet or from a public or university library. |
| Publications issued by trade associations. Many of these are free or can be obtained through the library. |
| If you work for a university or government technology transfer office: |
- talk to your scientists and their students.
- locate and talk to former graduate students who now work in industry.
- join the Association of University Technology Managers (AUTM) and
discuss your questions with other members.
| Attend local chapter meetings of industry associations or organizations such as the Licensing Executive Society (LES). |
| Hire a business student from your local university to help you. Many universities now have out-reach programs with industry at very reasonable cost. |
| Get to know and keep in touch with industry representatives. |
You have determined that you have a technology or new product which has good potential. You now wish to locate third parties who will be interested in taking a license or investing in further development. You have diligently done your background research and have answers to the questions posed above. So now what? The following list contains suggestions for how to locate the perfect partner for your technology or product:
| Develop an inexpensive company web site to advertise your product. Make sure that interested parties can easily contact you. |
| If you already have a license with a company, would this new product be of interest as well? If not, could the company suggest someone that might be interested? |
| If you work for a university or government technology transfer office: - talk to your
scientists and their students, they may have already been contacted |
| Create an Advisory Board for your company. Ask people who are part of your industry sector and have a strong network to become members. They may know of a company you should approach. |
| Attend trade shows and conferences in your product sector. Talk to industry representatives who are exhibiting products. |
| Post your technology or product on an Internet "bulletin board". Most do not charge for a technology posting. |
| Get to know and stay in touch with industry representatives. |
| Work with your local IRAP representative. |
| If your budget permits, take out an advertisement in a trade publication that is targeted to your market. |
| Use your market research to make cold calls in person or on the telephone. Leave behind a non-confidential brief describing your technology or product. |
| Use your market research to do targeted mailings of your non-confidential brief. |
You have determined that you have a technology or new product which has good potential. You have successfully located a company that has expressed some initial interest but they want to know more about your technology before they will commit. If you do not have an issued patent covering your technology or product we suggest creating a one page brief that supplies enough information to create serious interest, yet does not reveal enough information for them to duplicate your invention.
| A short description of the technology and what it does, not how it does it. |
| What specific problem the technology addresses. |
| How the problem is not solved by existing technology. How your technology solves the problem. |
| The advantages your technology has over existing technology. |
| The stage of development of your technology. What needs to happen over the next 6 months, 12 months. |
| Whether patent protection has been applied for/is issued, and in what countries. |
| How to contact you for more information. |
| Details of how your technology functions or operates. |
| Identity or structure of a compound if it is a medical/biological/chemical discovery. |
| Algorithms or key features of software code. |
| Critical data or results. |
You have determined that you have a technology or new product which has good potential. You have successfully located a company that has expressed interest based on your non-confidential technology brief. You and the company now wish to evaluate and discuss your technology in detail so that the company can make a final decision as to whether it wishes to enter into negotiations for a license or be involved in some other manner. We suggest that you now have your attorney draw up a Confidential Disclosure Agreement (CDA) for signature by you and the company. Most reputable companies are accustomed to these types of documents and will not be surprised when you ask them to sign one.
| A CDA allows you to talk freely and openly and exchange critical data and information with potential licensees and investors. |
| A CDA provides you with legal recourse if the confidentiality is breached. |
| If you have not filed for patent protection and not made any type of public disclosure, a CDA will preserve your rights so that you can file at a future date for a patent. |
| If your invention is not eligible for patent protection you will want to keep the details of your technology as a Trade Secret. A Trade Secret is lost once the secret is publicly disclosed. A CDA will protect your Trade Secret. |
You may encounter companies or individuals who will not enter into a CDA but wish to know and discuss the details of your invention. The following list are some things to try to overcome this problem:
| File a patent application before you speak to the company. |
| Give them more details, but do not tell them everything. Hold back the key elements. |
| Modify the CDA agreement to something you both can live with. |
| Ask the company what it specifically wants to see. Can you give them this without jeopardizing the secrecy of the invention? What they want to know may be unrelated to the technology, ie. the nature of the deal being offered. |
| Go elsewhere. |
"Technology by itself is of no use to any investor or licensee because it does not create wealth on its own. If the product is not strikingly apparent and well defined, there is no technology exploitation opportunity."
Denzil Doyle, Making Technology Happen, 1997, Silvan Communications
The most critical issue in technology development is identifying how that technology will be delivered to the end user. Technology itself cannot be sold, only products and services. What's the product, and much of it can be sold, must become the first question any technology intensive company must answer. What's your company's product?
| What is your invention? Can you concisely describe your invention, the problem it addresses and how it solves the problem? |
| Do you have a complete enough story to tell? Do you need to do some more testing or market research before you launch your marketing campaign? Can you answer all the questions people might ask about your product? |
| Do you have some specific results that demonstrate the superior nature or your product? |
| Is your invention just a concept or is it reduced to a prototype or process? Will this make a difference to potential partners or investors? |
| You will need to determine or confirm the following things with respect to your new product: what market will it address; how big is that market; what portion of that market can you reasonably access; what trends are presently evident in this market. |
| Are there other deals that have been done recently in your chosen market that would provide some insights? |
| Are there other people or organizations in my city that can help me get my product ready to go to market or help me locate partners or investors? |
| Have you prepared a non-confidential brief about your product that you can leave behind after an interview or mail out to potential partners or investors? |
| It you are seeking a partner or investor, can you concisely describe what further development is required, how long it will take and how much money it will cost? |
You have determined that you have a technology or new product which has good potential but you are not capable or willing to manufacture and sell it yourself. The decision you now face is whether to license the rights to your technology or product in exchange for a future royalty stream or to sell it outright for a single cash payment.
| You want to generate cash flow from the sale of products developed using your technology, but you do not need the money immediately. A royalty stream at a later date is acceptable. |
| You do not have the financial ability to fully develop the technology. |
| The technology is not core to your business but revenue from royalties can be used to fund development of critical products. |
| You want to shorten the time it takes your product to get to market. |
| You do not have the financial capability to acquire the rights to other components of the technology which will make it functional. |
| You simply wish to recover your development costs. |
| You do not have the financial capability to legally protect the technology through patenting. |
| You do not have the financial capability to defend a patent infringement suite. |
| You need money right now. |
| Your company is too small and you cannot compete with large competitors that are already in the market place. |
| You do not have the financial capability to acquire the rights to other components of the technology which will make it functional. |
| The technology is not part of your core business. |
| You do not have the financial capability to legally protect the technology through patenting. |
| You do not have the financial capability to defend a patent infringement suite. |
| It is a high risk technology - there may never be a royalty. |
| You do not want the administrative burden of monitoring a licensee. |
Technologies or products with the following features are good candidates for a license with a continuing royalty:
| Patent protection has been applied for or has been issued. |
| There is a long life expectancy for products developed from the technology. |
| Potential partners are interested in an exclusive license are willing to commit the resources necessary to complete development and promote sales. |
| More than one product can be developed using the base technology. |
| No patent exists or the technology is not eligible for patent protection. |
| The market size is very small. |
| The anticipated life expectancy of the product is short. |
| Partners are not interested in an exclusive position. |
| Popular for software, biological/chemical reagents, some processes. |
Patenting of technology and potential new products requires a considerable investment of time and money on the part of the inventor. The following tips are designed to help you maximize the value you receive from this investment.
1. Take your time in selecting a patent attorney. Interview several either in person or by telephone before committing your business. Ask for references of applications similar to yours that the person has prepared in the past. After you have selected an attorney, work closely with the individual while your patent application is prepared. Supply him/her, in a timely manner, with as much information as is needed. Always carefully read any correspondence from your attorney and ask questions about the material if you do not understand it.
2. Prepare and file your application well in advance or any public disclosure or presentation about your invention. This includes abstracts of scientific papers or conference presentations. Public disclosure of your invention prior to filing a patent application will prevent you from obtaining patent protection in many countries.
3. Before you meet with your patent attorney, prepare a detailed description of your invention. What it is, what problem it addresses and how it works to solve the problem. Provide copies of any publications or issued/pending patents- yours or others - that relate to your invention. Explain in detail how your invention is different from what is known or others are using.
4. If you work in a laboratory or research environment, keep good laboratory note books. This will protect you later if your rights to the invention are legally challenged as well as help educate your patent attorney as the invention's details.
5. The patent application process is time consuming but also time-sensitive. Allow sufficient lead time to respond to requests from your attorney or the patent office. This will save you money as well as increase the likelihood of getting your patent issued.
Back to Top of Section
