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    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.

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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.

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Ask for references; three satisfied inventor clients.

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Do you feel pressured to make decisions quickly or send money? Think again about dealing with them.

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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.

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Ask about the total cost of the services they provide. Hesitation or a vague answer is a bad sign.

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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.

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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.

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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.

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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? 

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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".

Things You Need to Know Before You Start the Search for a Licensee or Investment Partner

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.

bulletWhat problem does your product address and how does it solve that problem?
bulletWhat other products currently exist that address the problem? Why is your product better?
bulletWhat'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.
bulletDo 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?
bulletWho is currently active in the market you have identified for your product? Is that company a potential licensee or financial investor?
bulletHow 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.

bulletInternet 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.
bulletGovernment 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.
bulletPublications issued by trade associations. Many of these are free or can be obtained through the library.
bulletIf 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.

bulletAttend local chapter meetings of industry associations or organizations such as the Licensing Executive Society (LES).
bulletHire a business student from your local university to help you. Many universities now have out-reach programs with industry at very reasonable cost.
bulletGet to know and keep in touch with industry representatives.

Getting the Word Out: Locating Potential Licensees and Investment Partners

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:

bulletDevelop an inexpensive company web site to advertise your product. Make sure that interested parties can easily contact you.
bulletIf 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?
bulletIf you work for a university or government technology transfer office:

         -  talk to your scientists and their students, they may have already been contacted
            by a company that is interested.
         -  locate and talk to former graduate students who now work in industry.
         -  join the Association of University Technology Managers (AUTM) or the 
            Alliance for the Commercialization of Canadian Technology (ACCT). Close to
            45% of current AUTM and ACCT members are not from universities; many of these are
            from industry.
         -  a company that has provided financial support under a grant or contract might
            be interested in taking a license to the technology.

bulletCreate 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.
bulletAttend trade shows and conferences in your product sector. Talk to industry representatives who are exhibiting products.
bulletPost your technology or product on an Internet "bulletin board". Most do not charge for a technology posting.
bulletGet to know and stay in touch with industry representatives.
bulletWork with your local IRAP representative.
bulletIf your budget permits, take out an advertisement in a trade publication that is targeted to your market.
bulletUse your market research to make cold calls in person or on the telephone. Leave behind a non-confidential brief describing your technology or product.
bulletUse your market research to do targeted mailings of your non-confidential brief.

How to Disclosure Your Technology to Prospective Partners Without Fear of Theft

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.

What to Disclose

bulletA short description of the technology and what it does, not how it does it.
bulletWhat specific problem the technology addresses.
bulletHow the problem is not solved by existing technology. How your technology solves the problem.
bulletThe advantages your technology has over existing technology.
bulletThe stage of development of your technology. What needs to happen over the next 6 months, 12 months.
bulletWhether patent protection has been applied for/is issued, and in what countries.
bulletHow to contact you for more information.

What Not to Disclose

bulletDetails of how your technology functions or operates.
bulletIdentity or structure of a compound if it is a medical/biological/chemical discovery.
bulletAlgorithms or key features of software code.
bulletCritical data or results. 

Confidential Disclosure Agreements: Why You Need One

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.

Reasons for Having a CDA:

bulletA CDA allows you to talk freely and openly and exchange critical data and information with potential licensees and investors.
bulletA CDA provides you with legal recourse if the confidentiality is breached.
bulletIf 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.
bulletIf 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.

What To Do When You Cannot Get A CDA:

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:

bulletFile a patent application before you speak to the company.
bulletGive them more details, but do not tell them everything. Hold back the key elements.
bulletModify the CDA agreement to something you both can live with.
bulletAsk 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.
bulletGo elsewhere.

What's the Product?

"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?

So You Think You Have a Potential New Product?

The invention process can be exhilarating. You have developed a potential new product. Now what? Getting your product to market can be a long and frustrating road to walk. Before you begin your marketing campaign here are a few things to think about and a few questions to ask yourself.

Getting Started

bulletWhat is your invention? Can you concisely describe your invention, the problem it addresses and how it solves the problem?
bulletDo 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?
bulletDo you have some specific results that demonstrate the superior nature or your product?
bulletIs your invention just a concept or is it reduced to a prototype or process? Will this make a difference to potential partners or investors?

Getting Ready

bulletYou 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.
bulletAre there other deals that have been done recently in your chosen market that would provide some insights?
bulletAre 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?
bulletHave 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?
bulletIt 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?

Commercialization Strategies: Licensing Technology verses Selling it Outright to a Third Party

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.

Reasons to License Technology

bulletYou 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.
bulletYou do not have the financial ability to fully develop the technology.
bulletThe technology is not core to your business but revenue from royalties can be used to fund development of critical products.
bulletYou want to shorten the time it takes your product to get to market.
bulletYou do not have the financial capability to acquire the rights to other components of the technology which will make it functional.
bulletYou simply wish to recover your development costs.
bulletYou do not have the financial capability to legally protect the technology through patenting.
bulletYou do not have the financial capability to defend a patent infringement suite.

Reasons to Sell Technology

bulletYou need money right now.
bulletYour company is too small and you cannot compete with large competitors that are already in the market place.
bulletYou do not have the financial capability to acquire the rights to other components of the technology which will make it functional.
bulletThe technology is not part of your core business.
bulletYou do not have the financial capability to legally protect the technology through patenting.
bulletYou do not have the financial capability to defend a patent infringement suite.
bulletIt is a high risk technology - there may never be a royalty.
bulletYou do not want the administrative burden of monitoring a licensee.

Royalty License

Technologies or products with the following features are good candidates for a license with a continuing royalty:

bulletPatent protection has been applied for or has been issued.
bulletThere is a long life expectancy for products developed from the technology.
bulletPotential partners are interested in an exclusive license are willing to commit the resources necessary to complete development and promote sales.
bulletMore than one product can be developed using the base technology.

Single Cash Payment Agreement

bulletNo patent exists or the technology is not eligible for patent protection.
bulletThe market size is very small.
bulletThe anticipated life expectancy of the product is short.
bulletPartners are not interested in an exclusive position.
bulletPopular for software, biological/chemical reagents, some processes.

Avoiding Patenting Problems

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.

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