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2013.01

 The Inventor's Mentor

January 2013 

 The Chicken and the Egg - Funding and Prototype


You have a wonderful invention that promises to be very profitable. There is only one problem: you need $200,000 to develop it and build a prototype. To get this funding from potential investors, you need to show them convincing evidence that your invention will be financially successful. This evidence, alas, is the prototype itself. What do you do?

 

One solution is to contact companies already knowledgeable in the field of the invention. The logic is that if the company really understands the market and the technology of the invention it would appreciate its value without the need for a prototype. So, after getting the company officers to sign a Non-Disclosure Agreement (NDA), the inventor explains the idea to company personnel. Blown away by the potential of the invention the company then gladly provides the funds for its development.

 

There is, however, one major difficulty with this approach. Such a company would likely be heavily involved in its own research and development for new products and they would be extremely reluctant to sign an NDA with a complete stranger – you - whose invention may overlap with company products. Making such an agreement could render useless years of their own R&D work and even tie up their hands with respect to future development in the technical field related to the invention. Some companies refuse outright to sign an NDA with a walk-in inventor. Others, who do accept to sign such an agreement, make sure that the agreement has enough loopholes to protect their past and future research thus rendering it almost useless.   

How do you overcome this dilemma? You can provide the company with a document describing the invention in clear unambiguous terms. The document should also provide assurance that if the invention is new and non-obvious then the company, through its own R&D effort, past and future, could never claim ownership to it because it has already been claimed by someone else: you. This document is called a patent application. It should contain:

 

“a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.” (35USC112)

 

As of its filing date, the application is on record at the US Patent Office, and is published up to 18 months later. Now the application is a “fait-accompli,” and its disclosure to the company cannot further jeopardize past or future R&D research. . It is still a good idea to set up an NDA for your protection but now the company has fewer objections meeting with you to discuss funding and/or licensing issues.               

 However, you still need to convince the company to give you funding. To achieve this goal you must answer two questions: 1) whether the patent will truly be awarded to you and 2) whether the invention will be profitable. 

 

A filed application, whether provisional or non-provisional, has not yet completed the rigorous examination process which guarantees to the best of the USPTO abilities that the invention is new and non-obvious. A filed application therefore is not a proof that the invention will actually be awarded to the inventor.       

If the company has no knowledge of the market and technology it may not be convinced that your invention will be profitable and be awarded to you. Therefore, it may decide to wait until the patent is actually issued to start investing in your invention.  Currently the USPTO has a multi year backlog in their examination process which depends on the field of technology of the invention. You’ll have to be prepared to wait or to take the financial risk yourself.

 

If, however, the company has a good understanding of the technology and of the market it will appreciate the novelty and profitability of the invention and will determine if the invention will pass the examination process. At this point it may decide to grab a good deal when it sees one and offer you funding in return for some royalties or ownership.

 

Next month we’ll discuss another topic. Stay tuned.

For archived newsletter and a lot of information for the small inventor go to: www.patentsandventures.com.  

If you have any question you can contact me at (858)259-2226 or email me at glevy@patentsandventures.com.

 

 

This newsletter should not be construed as being legal advice.             ©2013 by George Levy

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