Equity · Startups

My role as the inventor of patent pend. system in new company started in partnership w market giant?

Kia Utzon-Frank MA Royal College of Art. Inventor of the patent-pending blinds system 'The Louver Twisting Comb', goldsmith and designer

November 3rd, 2015

Recently I have been contacted by a company who is interested in taking on my invention for a new type of window blinds system and they want to start a new company for this. They are already a market giant in their field and want to expand. They have done the initial research and are now keen to get something formalized so we can get on with it. I have invented the system, patented it and made a great variety of working prototypes. I am a designer and not a seasoned business woman and I don't really know if I have much more to contribute with in a possible future company as the product it will be made into is highly specialized. They are the experts, they are going to finance all R&D, production and manufacturing costs, take charge of sales and customers. Basically everything. I'm not very interested in being a very active part of the company but I still want to be a part. I can contribute in the initial part of the development and with the design part. They are 3 people, covering roles like CEO, CBDO/project/sales manager and 'the guy with the money'. I'm not completely sure of the exact roles as we're still exploring possibilities. I am fine with them taking over the development, but i want our new company to license the use of my system (the IP will remain mine) as it can be used in many other, not-blinds related applications as well. Discussions about equity split and partner obligations are coming up. I don't really know how to approach it. Can you help?
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Rob G

November 3rd, 2015

this is one of the few situations where i would say 'hire an attorney'.  A good IP attorney that has experience with transactional work (licensing, buy-outs, etc.) will be a good investment.  I would also suggest get help vetting attorneys and learning how to manage attorneys. 

Stephen PMP Project Management Professional

November 3rd, 2015

I'm a PM at a the USPTO and would also recommend an IP attorney, ESPECIALLY if you're considering signing documents pertaining to your IP and/or equity ownership contingent upon licensing of the invention.  Best money you'll spend - thank yourself later!

Anonymous

November 3rd, 2015

Sounds like a combo of a license fee for using your IP and a normal salary for your extra work should do

David Austin

November 5th, 2015

Make sure they understand what you bring to the table, that it is far more than veto power regarding development, for example. Rather than you asking "how am I going to hold on to this?" get them asking "how do we hold onto her?". Prove that you bring far more to the table than your IP. They should know exactly what those things are, and should value those things more than they value your IP. If all you bring is IP then all you'll get is resentment in the long term when success has far more to do with execution if you aren't any part of that execution while collecting royalties. This is not something you can nurture overnight either, but I'd start right by carving out execution related responsibilities. As the inventor, for example, you have tremendous marketing potential for the company. Volunteer such ideas to them and get it in the founding documents.

Andrew Lockley

November 3rd, 2015

Easier just to license the idea to them. If they want Exclusivity, make it conditional on hitting targets

Anonymous

November 3rd, 2015

Kia, Couple clarifying questions: - you state that there are a “market giant” but only operate with 3 people? - is the product market ready? or additional development necessary? - do they want to buy the patent? - why do you want involvement in newco? - have you shopped this to anyone else? My 2 cents pending answers to the above questions: - license the patent to them for an ongoing royalty. You’ll probably need to give them an exclusive license. Royalty amount depends on a number of factors, see above questions - license should contain a minimum or you get the rights back - is the marketing budget sufficient to drive the kind of numbers you expect to sell - at best you’ll get a small sliver of equity if you join newco but will probably have to give up some royalty - understand the go-to-market timeline as it will determine how soon you begin your stream of royalties. If longer than you want try to negotiate an upfront payment. When you’re working this type of deal everything is negotiable so figure out what you really want. Worst position for you is to give them an exclusive license then they “bury” it so it doesn’t compete with current offerings. Full disclosure - I’m not a fan of lawyers as lawyers have a history of screwing-up good deals but make sure you use the services of a GOOD business attorney who understands licensing. Hope this helps, Joe Heaney

Liza Taylor Communication Specialist at Keyideas Infotech

November 4th, 2015

If licensing your product is a priority, there is no better way than talking up to them directly. Don't discuss about your plan B. Start discussing about the licensing part of your product. If they are okay with your licensing criteria, start talking about Sales and Operation. This would help you to save your time and becoming more opened about your conversation. In fact, they would be happy with you because you are surfacing the most important part of your work. 

Rob G

November 5th, 2015

Kia, you are getting advice from all angles here, but don't get ahead of yourself. The intro to your questions states "patent pend." I've not filed or obtained patents in the UK (i have filed, obtained and sold a few in the US).  I assume your patents are design patents (correct me if i'm wrong) which means they are more susceptible to being designed around (as Robert C points out).  More importantly, you don't HAVE a patent yet - it is still pending.  The patent(s) may never issue or if they do the value may be substantially different that it appears today (could be more, could be less).  I assume you have a patent attorney now.  Find a small to medium sized IP firm with a few IP attorneys that have PROVEN TRANSACTIONAL EXPERIENCE - meaning they have documented experience selling and licensing design patents and litigating patent challenges and infringement cases (in addition to prosecuting patents through the entire patent process).  There is a great deal of strategy that goes into developing a patent portfolio and patent transactions. Anyone with enough time, money and patience can obtain a patent. obtaining valuable patents that someone is willing to pay for is an entirely different story. Very few patents actually generate net positive returns to the inventors/holders, but if you have interested buyers/licensors then NOW is the time to get expert advice on YOUR particular situation. good luck. 

Justin Zastrow CEO at Smart Armor

November 3rd, 2015

Hi Kia, just wanted to chime in here short & sweet... I personally have several patents and currently license technology to other companies.  Plain & simple: 
Contact a few (of your own choice) different "IP & Licensing" attorneys. Go have a free hour session to describe your situation.  Ask alot of questions and seek their personal advice. Hire the one you like best. Let them guide you, but ultimately tell them how you want the transaction to occur.

Robert Clegg

November 5th, 2015

--  WAIT!  --     Don't fall into the trap of focusing on your IP. It's very simple to work around your patent or IP and for the company to cut you out of any future royalties (or at a minimum put legal challenges and expenses in front of you). The company may even decide to shift directions and move away from production of this product for whatever reason. Then you are out with nothing.

Approach this relationship from a broader perspective. Trust me, once they get into production or packaging they are going to think that your original patent doesn't really cover the new design. They are going to file new patents, etc, etc. And your "value" will be discounted greatly.

Cover your bases here. 

[Happy to discuss. I've filed patents, competed against patents, and have friends who are designers that have done exactly what you are thinking of doing.]