Licensing · Product Development

What is the best route to get a patent pending product/idea to become physical prototype?

Connor Muckler Associate at Hidden Valley Ski Tube Ride

August 10th, 2015

The idea is as far as a virtual 3d model, with a personal website. I am planning to start a company.

Steve Everhard All Things Startup

August 11th, 2015

If you have a 3D model I am assuming this is a physical product. Your patent pending status affords you with certain legal protections but as you haven't completed technical review your application could still be challenged and denied. This increases risk for any potential licensee so you would have to mitigate that with the quality of your searches. You may already have a search file but unless your patent is a serious block to someone you will struggle to find licensee's.

A word on licensing. Although it's talked about a lot, licensing a patent can be complex and financially unrewarding, unless there are obvious targets which either currently infringe or are likely to in the near future. Prototypes and market acceptance tests strengthen your hand somewhat but even the opportunities that would then arise are challenging ahead of a full patent grant. Once your patent is granted you need to defend it, potentially extend its coverage to other geo's like Europe and Asia with the costs associated with that.

If you believe in your design and have the ability to move to prototype I would recommend you do so. As it stands you have very little to bargain with.

In terms of bringing the design to life there are facilities everywhere from model makers, through maker labs to contract 3D printers. Your options very much depend on the materials you need to use and any process issues in making it. For instance, if you want to produce a single Sapphire crystal toothbrush then 3D printing is of no value to you. Moulding and forging are expensive but there are alternatives. If you just want a representative model you may be able to use the facilities in your College if you have an industrial design faculty.

Most of the popular crowdfunding sites won;t let you launch a project at the design stage and too many of these took the cash and never produced a thing. You would have to demonstrate that you are ready to manufacture, or very close to it.

Valera Kushnir UI/UX - Client Relationship Manager at Dabble Lab: early stage product development, mobile apps and start ups.

August 11th, 2015

Hey Connor, 

A lot of businesses start around one product. You encounter a problem that no one has solved, and you solve it. And if it has been solved, but poorly, here is your chance to improve. 

Google was a 1 product company at first too. And so was Apple. Don't let that thinking hold you back. 

My company helps people that want to start a business but do not know where to start. We provide the guidance and know-how, and most importantly we teach you. Let me know if you wanna chat. 

Aaron Call

August 11th, 2015

Building a startup is all about adding value to your idea and de-risking it as quickly as possible and with as little capital as possible. There are some tried and true methods for this which typically all center around customer validation. Have a look at our Fundability Criteria Worksheet, it was built specifically for medtech startup risk identification and strategy development but the general process and concepts can help with any new product idea.

Gary Jurman Screen Printing Industry (30 yrs)

August 11th, 2015

I have a similar situation, but I only want to license restricted use on a patent pending. So have you already filed the provisional patent? For my first provisional, I used an attorney. I filed my second on my own. Then I used a patent professional to file for the full patents. But these are not software patents, which I am sure are different.

Trevor Power Business Development Manager at Warwick Ventures Ltd.

August 11th, 2015

Hard to say without more detail, but licensing is often a quicker, cheaper, less risky route.  Assuming you can get over the patent hurdles and the technology delivers a real benefit to some segment of the customer base, the key issue is whether your technology can be grafted onto or incorporated into an existing product to deliver that benefit.  If it can, then plugging it into the established infrastructure (marketing, sales, production, distribution etc) of an existing company makes a lot of sense.

Licensing is often the first choice in the technology transfer world for all these reasons - generally speaking you'd only want to create a new company if a market doesn't already exist, or if you will derive a significant advantage from developing, adapting or melding together production technologies that don't already exist in the supply base.

If you're a lone inventor you might want to consider filing with the UK's Intellectual Property Office first - they're a bit more user-friendly than the US equivalent.  Make an initial filing (which you can do without professional help if you're willing to put in the work) and then negotiate with potential licensees under an NDA (to preserve your options... for example, there are circumstances where you might want to drop the application and re-file). 

You'll need to revise and finalise your application within 12 months of filing, which will cost you $4k-$6k if you engage a (UK) patent attorney.  At that point you would almost certainly want to transfer the application into the PCT system (and drop the initial UK application - you can pick it up later if you want protection in the UK and dropping it at this stage avoids complications later).

The PCT application will probably cost you another $4k-$6k if you engage professional help.  The advantage is that you're then positioned to file in any/all of the 170-odd PCT countries and you've delayed the cost of those national applications by 30 or 31 months from the initial filing.

The game, if you go this route, is to nail a licensing deal - preferably before the PCT application (i.e. +12m from initial filing), but definitely before the national phase (i.e. +30 months from initial filing) which includes a duty for the licensee to meet the patent filing and maintenance costs.

It's not an easy route (but then again, none of the other options are either!)but pull it off and you might enjoy a lucrative royalty stream without having to re-mortgage your house or be beholden to investors


Connor Muckler Associate at Hidden Valley Ski Tube Ride

August 11th, 2015

Because I feel this product not only replaces the old but also opens an entirely new line of improvement for years to come, I am leaning towards a startup.  I'll have to look into investors and/or "crowdfunding", but my problem is I do not have much experience when it comes to starting a business.  What is the best way to go from virtual design to prototype?

Kenneth Larson Retired Aerospace Contracts Manager, MicroMentor Volunteer and Founder "Smalltofeds"

August 12th, 2015

I suggest you locate teaming companies to further the objective that they would market your product as part of their offerings with your company licensing your idea to them and sharing in the proceeds.

Your business plan is your road map for developing your ideas and laying out how you are going to extend the sales of your product and researching your market to do so. It will also assist you in developing your pricing by considering the direct costs of product development, service implementation and distribution as well as the indirect costs of your enterprise itself (operating expenses).

I believe your negotiation position for a given product will be driven by certain other strategic factors you should consider:

1. Does a developer or teaming partner have a strong but realistic incentive to actively make your product a part of the marketplace?

2. Does your market research indicate your idea will have strong sales volume once it is developed and distributed?

3. How much will your prospective teaming partner or investor have to invest in the product to get it to market? Does the product require testing?

4. Which is the better deal? Would you rather receive a 7% royalty on $5,000 worth of sales or a 1% royalty on $500,000 of sales? Even though 1% does not sound too impressive, of course itfs the better choice in this example.
In my experience a negotiation position should be based on support by you for the argument that your concept will experience a certain level of sales and the royalty should be based on a % of estimated end user volume sales, discounted for the investment that the developer and distributor must make to get it to market.

If you agree with this approach than the royalty should be outside of the distributor cost breakdown and the end user cost breakdown. It is simply a deductive factor the manufacturer will have to introduce into their profit equation after the costs have been tabulated. They should not view your royalties as a cost factor; they should view them as your share of the profit on the total estimated sales.

I believe you can improve your chances of succeeding with a negotiation with a developer and/or distributor by showing you understand the prospective market for your product and drawing some comparisons between your type of product and other similar successful products.

Naturally you will probably have some give and take with the other side about estimated costs to get the product to market. I suggest you be forthright in acknowledging their investment but also support your position with some research and comparative data on the product potential.

Lastly, recommend you settle on a % of the end user sales volume based on an estimate to which you agree with the other party and insure that the purchase agreement you sign entitles you to the agreed upon % on all future sales.