I first met Stephen Key in 2001. Two months later, I used a few recommendations of his — shared over the customary gin tonic — to help a friend double overseas sales in less than two weeks in New Zealand and Australia.
How? Licensing. It can be a beautifully elegant model.
Stephen is somewhat famous in inventing circles for two reasons. First, he consistently earns millions of dollars licensing his ideas to companies like Disney, Nestle, and Coca-Cola. Second, he is fast. It seldom takes him more than three weeks to go from idea to a signed deal.
He is not high-tech. There are no multi-year product development cycles. He specializes is creating simple products or improving upon existing products, often using nothing more than a single-sided drawing or photograph. Coupled with refined cold-calling skills, Stephen meets with some of the most influential marketing executives in the world. In this interview, we’ll explore how this advisor to American Inventor rents his ideas to Fortune 500 companies.
1- What exactly is licensing, and why is it a good option for people with ideas but little time or patience?
I think licensing is a bit of mystery to many people. It really doesn’t have to be.
Licensing is renting your idea to a manufacturer. The manufacturer handles the marketing, manufacturing, distribution and basically everything else required to bring the product to market.
Usually quarterly (four times a year), the manufacturer pays you a royalty on every unit they sell. This royalty—generally a percentage of the total wholesale price—is your payment for bringing them a new product idea that they can sell to their customers.
It’s an attractive low-risk alternative to manufacturing products and taking them to market yourself.
Using licensing, I can spend my time coming up with new product ideas instead of worrying about balance sheets, cash flow, employees and all the other hassles of running a company. I might pitch three ideas one month and no ideas for the next two months. You can have total flexibility with your work schedule.
Here’s one tip on how to make sure you get paid a certain amount four times a year.
Minimum Guarantees – So here’s why I use the term “renting” when describing licensing your idea to a manufacturer. It’s very important to make sure the manufacturer performs. You need a performance clause in the licensing contract. Without a performance clause, the manufacturer could just sit on the idea and do nothing with it. I’ve seen it happen.
Ensure you have a “Minimum Guarantee” clause in the contract. A minimum guarantee clause basically says the manufacturer needs to perform and sell a specified number of units every quarter or every year. Otherwise, you get your idea back and you can license your idea to another manufacturer.
It isn’t usually necessary to call in [enforce] the minimum guarantee clause. Most of the time you want to give the manufacturer a chance to perform. After all, you are partnering with them and they’ve spent big money on setting up their facilities to manufacture your new product.
Here’s another tip: Don’t front load the deal. I see many people with ideas doing this. They ask for large up front fees and make it to hard for the manufacturer to say yes to the deal. Instead ask only a small amount of money up front and scale up the minimum guarantees each quarter.
An example of minimum guarantees:
100,000 units quarter one
200,000 units quarter two
300,000 units quarter three
Let’s say the manufacturer sells 110,000 units quarter one. You would get paid a royalty on each of the 110,000 units sold.
Then let’s say the manufacturer only sells 190,000 units quarter two. The manufacturer can choose to pay you the royalty for the minimum 200,000 units they guaranteed you they would sell and they would retain the rights to manufacture your idea.
You should be OK with these “Minimum Guarantee” numbers since you set them up when you negotiated the contract. Set up numbers you think the manufacture can meet and that you’ll be OK with if the manufacture just meets the agreed upon “Minimum Guarantee”.
Of course you would prefer to earn royalties on 600,000 units every quarter, but you know you are guaranteed at least a certain “Minimum Guarantee” every quarter. This makes it nice when budgeting to buy that new sports car you’ve had your eye on.
2- I’ve heard you say that the most important thing you can do when licensing an idea is to spend as little time and money on the project before you get feedback from a manufacturer. Why?
Yes, that’s true. Unfortunately, it’s the exact opposite of what most people do. Most people go out and spend $3k to $20k or more on a patent and a few grand or more on a prototype first.
Time is the enemy in this process.
I’ve talked to inventors who have been contemplating or working on ideas for years. That’s not me. When I have an idea, it only takes me three days to three weeks to find out if the idea has legs.
On average, I recommend that my students take no longer than three weeks to three months before they make the decision to keep working on the project or dump the idea and move onto the next one.
Spend very little time or money on a project before you get feedback from manufacturers. The reason for this is simple: You’re not going to hit every idea out of the ballpark. Sometimes the benefits of the idea just aren’t intriguing enough. Maybe the idea has some manufacturing problems. Maybe the idea has been tried before and you didn’t find it with your research. There can be many reasons why manufacturers decide not to move forward with an idea.
You need to call a handful of potential manufacturers that might sell your idea. It takes very little time and next to no money to make the calls, and it’s the only way you’ll get the critical early-stage feedback.
File a provisional patent application ($100), create your sell sheet ($0-$80) and start making phone calls as soon as possible. That’s totally the opposite of what most people do. Most people dream or plan and research the idea to death.
The reality is that you will never be as knowledgeable about a particular industry as a manufacturer that been in the business for thirty years. They’ve seen everything imaginable in their product area. Their opinion is the only one that matters. Get your idea in front of them as soon as possible and get the feedback you need to pursue it or kill it.
Here’s a summary of my solution to the patent and prototype hang ups many people seem to have.
PROBLEM (What most people do):
The majority of people I talk to think the first thing they need to do is go out and spend money to have an expensive patent filled by a patent attorney. Here’s why that’s wrong: Many times you’re going to get complaints from manufacturers that your idea needs to be fixed in one way or another. No problem. You’re creative and they aren’t. Go back to the drawing board and fix the problems the manufacturer presented.
The only problem is that if you’ve wasted $3k to $20k on a patent, now your going to need to file another patent covering the new features of your product. Another $3-20k? I don’t think so. There is a better way.
SOLUTION (My method for you):
Instead, spend $100 on a Provisional Patent Application (PPA). A PPA gives you one year to fish of the end of the pier to see if anyone is interested in your idea.
A PPA also allows you to say “patent pending.” It’s a huge benefit to the small guy! If you come up with a new version of your invention, just file another PPA with the additional features. With my approach, you should be able to get a “go” or “no go” in three weeks to three months.
Make sure to put another one to five months aside for negotiations and you’ll still have many months left on your twelve month PPA.
Then when you license your idea to a manufacturer, you’ll put in the contract that the manufacturer is responsible for paying your attorney to upgrade your PPA to a full patent and put it in your name! This is how I get multiple patents, in my name, paid for by manufacturers.
PROBLEM (What most people do):
People think you need to have a polished and perfect prototype in order to sell an idea. I have sold many ideas with very simple prototypes and many without prototypes at all .
What people don’t understand is that you are not selling your prototype or your patent. I’ll say that again. You’re not selling your prototype or patent. You are selling the benefits of your idea.
SOLUTION (My method for you):
Create a sell sheet. What the heck is a “sell sheet”? It’s a regular 8 ½” x 11” piece of paper. It’s like an ad for your idea. It has the big benefit of your product in one sentence at the top, maybe a few sub benefits or features in bullets below and a picture or drawing of your idea. “Oh, but I have to build a prototype,” many will say. No, you don’t.
You don’t need a prototype until you get some interest. If you don’t get any interest, you haven’t wasted time on a prototype.
Your sell sheet should be like a billboard on the freeway. People should be able to glance at it for a few seconds and understand the benefit of buying your invention. They don’t need to understand every feature or hear you make clichéd statements like, “if we only sell this to 1% of all households in the country, this new idea will make millions”.
My one line benefit statement for one of my biggest ideas was, “I have a new label innovation that ads 75% more space to your container.” That’s it. I didn’t need to explain how when I called on the phone, they just wanted to know more.
Benefits, benefits. That’s what you are selling. Not your patent or prototype.
[Editor’s note: Though the following video is no longer available, you can still watch Stephen and his associates walk you through the ins and outs of licensing at https://www.youtube.com/c/inventRight/videos.]
Stephen in motion: Repurposing existing products in 5 minutes for a call sheet model or prototype…
[To be continued in Part II: negotiated royalty rates, who to call within companies, product idea criteria, what product categories to avoid, and more]
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495 Replies to “A Beginner's Guide: How to Rent Your Ideas to Fortune 500 Companies (Plus: Video)”
Thank you for your response even thought this thread seems very long and you chaps have responded to every single one! Thank you. I am going to investigate your site immediately.
What if you have a product, in my case an advanced version of the board game (Chess). I was more interested in just selling it rite out instead of royalties, and renting. Do companies do that? The article above states, to simply just call the companies, but I am afraid if I explain it, then they can just take that idea, and change one little thing to create their own. Then my PPA would have no legal leg to stand on.
Yes, it is possible to sell your ideas outright, however it’s not advised in most cases. Companies prefer to pay you on the back end with royalties per unit. As they make money…. you make money.
Your PPA is usually your protection. In your case, I’d copyright the rules. Copyrights are easier to enforce than patents. Copyrights don’t apply for most ideas, but they would for yours. So copyright the rules and pitch it!
How do you get connections or find who to market your product to for a large company? Is this something that is covered in your book?
I have been trying to research this to try and figure out the answer to my question but so far have not had any luck. You seem very knowledgeable and after reading your page, I think licensing is the direction I need to go.. my question is: I have a design that I originally just wanted to sell to a major company/brand but the largest part of the design is actually their logo. Since it is my design can I somehow “sell” or license it to them even though it has their logo on it? I feel as though this is one of those ideas that I have to throw out because it can’t be done.
Any advice or input would be greatly appreciated.
Thank you so much and have a wonderful day!!
I have an Invention patent in Alexandia, Virginia today with a Prototype invention in a company’s hands today. But it’s not going nowhere. With this company I’m working with, I plan on making an improvment prototype of the first one in the future already. Could I start that next one now without them? Doing something right here like this?
Yes, we cover how to find potential licensees in our book “One Simple Idea”.
Andrew Krauss – inventRight Co-Founder
co-founded inventRight with Stephen Key over 10 years ago
It’s hard to say. I don’t have enough information on what you are trying to license to answer your question.
Feel free to book a free one time consult with me at http://www.inventRight.com/411
I’ll give you 15 minutes of my time and help you figure it out.
Well I must say that since I perchased Stephen’s book “One Simple Idea” I have secured a partnership agreement for my ideas with an escape clause to let me out early to create more simple ideas. This is my first of many products to come. Thank you stephen for writing your book. It is bang on the money with no pun intended.
That would depend on the agreement you have with the company.
I have an Idea for a new beverage that I have not created a prototype for. I would like to sell my idea of the beverage and believe if it was created it would have great marketability. I do not have the means to actually create the beverage itself. Since there is not a prototype for my product, do you think I will be as successful in licensing my idea?
There are companies that you can pay to formulate a beverage for you. They are not cheap and will cost you a few bucks. Try typing in “beverage formulation company” and a few other searches to learn more.
Ok. If I am wanting to sell to a larger company, would it be possible to pitch the idea of the product without the prototype? Can I license the name and idea of the product without a prototype?
Can you tell me how to protect a cosmetic folmula that is 99% naturel.Can one still get a PPA on it even if it is mostly naturel products?
Thanks … BOB G
It’s possible but tricky. You can’t patent a combination of natural substances in most cases, however you can patent a method of manufacturing. A method of manufacturing is how the product is made or processed.
It’s possible, but it would be hard.
You can’t own a trademark or name if you aren’t using it. You can put TM on the item letting people know you intend to use it though.
As far as the prototype goes…. maybe you can fake one. You don’t have to have a working prototype in many cases to license an idea. After all your not selling you prototype… your selling the benefits of your idea.
I was experimenting with an innovation for a high volume office supply product that would offer significant new benefits, and discovered that one of the utility design options I had envisioned just came to market (without my help). It sells for a relatively high price, and is getting great reviews for exactly the benefits I had envisioned it to have.
I have other alternate designs in mind that would offer the same benefits, and are very likely different enough to warrant different utility patents. I think my fav alternate design would look cleaner anyway, and would appeal to a different market segment.
1) Do competitive response products license well? I would think their competitors would be interested, right?
However, if I show a picture on a sell sheet, it would probably be very easy to copy.
2) Would it be a good idea to contact the top competitors and say something like “Have you seen Mead’s new ___ product? I have a patent pending for a competitive response to that, but mine looks cleaner, is easier to manufacture, and could make a high profit margin at a lower price point if desired. Would you be interested?” And only then, if they show interest, show them a sell sheet with a picture on it?
RE: variations of existing product
Most great ideas are improvements to existing products, so yes they sell well. Consumers like to make incremental changes in the products they buy.
RE: just copying it
If you get a PPA, that would be your protection.
RE: contacting competing mfgs
No, just show them your sell sheet. No need to beat up the competition. They are most likely aware of the competition.
I am at a little lose here now. I have 2 large trash can companies that have my drawings for almost 4 weeks now. How much longer should I wait.Also one large company that does not have trash cans that I submited to wants some type of release signed for each one of my 5 cans, seperatly and they want a copy of what I submited for the provisional. One can I did not include the drawings for the larger can because it is so similiar to the first one but larger with wheels. I did simply mention it when I sent in my provisional for the smaller one. I really believed that would be good enough. But , to manufacturers , I did send the seperate drawings. Is that good enough?
Best wishes… BOb Garabedian
It’s great to see that you are moving forward with your ideas.
Four weeks may seem long to you, however it’s not long to a manufacturer that has many other things to take care of.
With regards to how long you should wait. I usually recommend calling a company about ten days after you initially send something to follow up.
Drawings sounds great however, i hope you also sent them some sort of marketing piece. Stephen and i call it a sell sheet. A sell sheet highlights the benefits of your idea. It’s kinda like an advertisement or a billboard highlighting the key benefits of your invention.
Thanks so much for your reply. YES, I did send a marketing sheet.
I call it my product info sheet. In it I describe what the product is and how it does. And i also describe why the product will sell, and where.
I also describe the feed back I have recieved from the store managers I have spoken to in Fresno, Ca. Especially homewraes and home repair stores.
I did get a mail requist from a large store wanting to see all the material I sent in for my provisional. And a signed release form from ME. They make a statement that they will and can use any idea submited to them they feel like if it is not protected without any compensation to me. So I am not going to try to go faward with them.
One thoing for sure…. Emails do not work. You gotta keep after them…. even if you have to make a few more calls
Thaks again… God Bless.
wow , first thanks for your replies , you sure have allot of real people looking for guidance stay like that , i just ordered book and i am sure you are genuine it will help me through the steps , im gonna look at book then decide on your coarse
Keep up the good work and keep inventing.
Enjoy the book.
I wish you much success in all your invention related endeavors.
Thank you Andrew; I do have a couple companies looking at my drawings
and material. Now for 6 weeks. I am a little embarrised to keep seeking other companies…. should I just wait a few more weeks?? or just keep contacting as many companies as I can..?
I am very tempted to start another one of my tool inventions but I just got a feeling to wait .
Did anybody ever do 2 or 3 at one time?
Answers to your questions . . .
It’s a good idea to follow up after submitting to a company after 10 days to check in.
Never be embarrassed about submitting to as many companies as possible. You should feel no commitment to your potential licensees until you close a deal.
Yes, of course you can work on multiple ideas at the same. Just make sure to make getting the oldest off your plate a priority.
Andrew Krauss – inventRight Co-Founder
co-founded inventRight with Stephen Key over 10 years ago
Read your article, very informative, my question is when you apply for a provisional patent, is it mandatory to do a search first, that’s extra 300.00, will they let you go ahead without a patent out a search??
It doesn’t cost you anything to do a patent search yourself on http://www.uspto.gov or http://www.google.com/patents .
No, there is no requirement for you to have done a patent search before you file a provisional patent application. It is a good idea to do one though.
Co-Founder Of inventRight With Stephen Key
Hi, thanks for your insight into Licensing. I have been reading your blogs for awhile.
I have one question though: When contacting manufacturers or retailers, whom do you ask for to pitch the idea too – Marketing Director, Licensing Director, ???
There are many ways to call companies and get to the right person. No space here to cover them all.
With regards to your question about who to call….
Usually the best person to ask for in most cases is a marketing manager or if you can’t get to them, go for sales… they always pick up their phones!
So if you are doing BBQ accessories, ask for the markting manager in charge of your BBQ accessories.
Thank you Andrew, for your time in answering my question.
You folks are providing a unique community service. I am also looking for a licensing agent but this will get me going in the right direction.
Hey everyone, absolutely fascinating discussion with loads of information.
I am a young inventor and inspiring entrepreneur. I have a great and simple idea that adds to the functionality of a product that currently sells over 20 million units a year. Without giving too much away, I would like to license this technology to a fortune 500 company and collect the royalties for my invention.
Unfortunately, I am unsure about the exact method of doing this. I have read and search numerous blogs and posts online which have been very helpful but I still am unsure about one thing.
When licensing a product should I create a company (LLC, C-corp, etc) assign my patent to that company then make a licensing deal between my company and the large fortune 500 company or should I attempt to license it as an individual. Is that possible? I am curious to how other inventors have done it and which method if any has the greatest chance of success? Furthermore, if I create a company to license the patent how do I get paid, do I give myself a salary, dividend paying stock, or some other way?
Any advice, suggestions, and information would be greatly appreciated.
Yes, it would be a very good idea to do your licensing deals under an LLC or a corporation. Doing a licensing deal under your name would not provide the same liability protection an LLC or corporation would.
Thank you for the responce, my gut feeling was a corperation would be better for protecting against legal cased. Are there any advantages between an LLC and Corperation? I have heard of double taxation in some of these situations which brings me to my next question. What are my options in terms of getting paid? That is how would I transfer money from my corperation or LLC for personal use.
I’m sorry, but I’m not an attorney. I suggest you contact your legal and/or tax advisor for a question of that nature.
Thank you for your help. I understand that your not an attorney, and if you would rather not give advice regarding legal matters that is fine.
The reason I am asking though is not for a definite answer but to become more educated on the various options so that once I hire an attorney I can efficiently and knowledgeably communicate to my attorney while knowing my options. In my experience it is much better for the client to have a basic understanding of the situation rather than just relying on the attorneys advice and actions.
I agree, however i can’t and shouldn’t offer tax advice. My area of expertise is licensing new product ideas, not tax advice. I’m not the right guy to seek tax advice from.
If I carefully read the USPTO’s brochure (see link below) about what’s required for a provisional patent, will that likely be sufficient?
Or do you highly recommend doing it with the help of software (such as PatentWizard)?
I realize you can’t give legal advice, just looking to get an opinion about the difficulty of doing it simply by following the USPTO’s brochure. Thanks!
Yes, you should use software or a book to guide you along. The patent office isn’t going to train you with their instructions on how to write a Provisional Patent.
Co-Founded inventRight with Stephen Key
To Help Inventors License Their Ideas
Hi Stephen Key,
Love your book. Got really excited. I have a new toy idea and was very excited to license it worldwide to maximize royalties. Now i foind out no big companies like Hasbro, Mattel, Fisher_Price, Disney are interested in outside ideas.
Now i see toy companies, but will their even be enough royalties with the smaller companies to make this all seem worthwhile.
Enlighten me please.
thanks and appreciate your good work!
Yes, many of the bigger toy companies have swallowed up the small ones in recent years. So there are fewer small toy companies these days than in the past.
First off, the toy biz is really competitive. Just know that. Personally i find other categories easier to license into. That’s not to say you shouldn’t work on licensing toys though if you are passionate about toys.
Here’s the strategy I’d use….
Submit to all the companies that will receive ideas directly from you.
Then, if you don’t get any interest, have a toy agent submit your ideas to the bigger companies. Some bigger toy companies will only receive ideas from toy agents. I’d recommend going with an agent that doesn’t charge you anything unless they close a deal.
And yes, royalties from licensing to a small company can add up. It really depends on how many units they sell of course.
Co-Founded inventRight with Stephen Key
To Help Inventors License Their Ideas
Question for Stephen or Andrew:
so if most of the ideas you submit have no protection, how do you respond if the company asks if you have patent pending?
And then the second question, i understand they want to be first to market but why pay you with no protection when they didnt even sign and nda?
The answer is to file a PPA (Provisional Patent Application) and put Patent Pending on our sell sheet. It’s only $125 to file if you file it yourself which you can do with software or a book.
Stephen says that sell sheet can serve as a prototype. But what if they ask if you have a prototype. Then i have to make it?
With many products, the licensee can look at your sell sheet and know they can make it. It’s not always necessary to make a prototype.
And if you do make one, it doesn’t have to be perfect.
But what if you have a design that a provisional patent cant protect, what is the likely hood of receiving a low rate for design patents if they need to make a couple changes?
You can license a new product without a provisional utility patent. You can also license design patents.
If a company wants to make some changes to your idea, you should still get compensated. One way to do this is to get the potential licensee or licensee to sign and improvements clause that says any improvements they come up with…. you own.
I have read “One Simple Idea” and really enjoyed the book! I have an idea for a Social Media Site that would help benefit a company’s sales. Is there any way to protect my idea for the site? I didn’t think that a social media idea could be protected the same way as a product. I have also created a web domain for the site.
I was wondering about protecting a media idea or marketing idea? There is not a way to license that, how would you suggest protecting it?
I have recently been introduced to The 4 Hour Work Week and I love it. Now I am trying to figure out how i can apply it to my jewelry business. I do lots of one of a kind hand made jewelry, which I prefer, and I have some basic simple jewelry that sells for less than $100. Would I be able to license some of my simple jewelry designs to jewelry manufacturers?
You are correct. It’s tougher to protect a new idea for a social media site. However, in many cases it is possible.
Look into business method patents. Google it. There might be something you can protect.
Licensing a marketing idea is without a doubt tougher than licensing a physical product. It is possible though.
Look into business method patents. Google “Business Method Patent” and plug it into wikipedia to find out more.
Sure. You can license jewelry designs.
Figure out what manufactures would be a good match for your type of jewelry, make up a one page presentation which is basically an ad (we call it a sell sheet at inventRight) and give them a call.
So after filing my ppa, is it safe to get a prototype manufactured in china. Or will my idea be copied before i even license it. Can i apply for a patent in china after applying for ppa in us, if needed. I am confused. Can you please explain in detail what i should do? Thanks
Good question. We get that one often. First off…. most of the time you don’t need a perfect working prototype. That’s not what you are selling. Your selling the benefit of your idea. So if you have a hammer that hits nails straight every time that benefit is what you are really selling. Not the prototype itself.
Inventors that believe they need to have a beautiful working prototype that’s just like the one you see in the store end up spending more money and time than they need to. Now I’m not saying you should never build a beautiful prototype. What I’m saying is that the companies you present to are looking for a benefit they can sell first and foremost.
If they contact you back and show interest…….that’s the main thing you want to accomplish. You can work out the details later.
Quite often you can cannibalize other products that you find in the stores and modify them to become a “works like” or “looks like” prototype.
If you can show them the benefit of the product in a sell sheet. That’s the most important thing. Not having a perfect prototype.
You could also have a drawing or illustration of the idea done.
If you are going to have a prototype done, you will most likely be doing it in the US instead of China anyways.
I am wondering if it isn,t time for me to move on . I have got to many NO,s on my 5 king of all trash cans. I have got excuses from just not for us to too much tooling but great idea. I am thinkng…. is it possible to go to China with my trash cans…?? I have never done that and really wanted to keep all my innovations in the U S. One of my provisionals will expire the end of NOV.
If I were to try to get a China,s manufacturer do I have to start all over in China.? Can you give me some feedback on that. Also, If I do not apply for my one patent in NOV>… will I tottaly lose it..? THANKS VERY MUCH ANDY.
Sincerely, That old guy;
Stephen and i get that question a lot….. “when is it time to move on?”.
The answer is that it’s usually the time to move on when you’ve gotten no’s from every potential licensee on your list.
Also, if companies have shared reasons with you that the product won’t work or voiced complaints that you can’t fix ….. then it’s time to move on.
Yes, one way to move on is to manufacture the product yourself.
Another way to move on it to start working on license another idea.
I’m helping my uncle get his invention licensed. Back in the late 1980’s, he had patented, prototyped, and manufactured. Before a series of unfortunate events brought things to a halt, he was starting to see some significant success with sales.
Here’s the concern: at this point, his patent has expired – NO LONGER PROTECTED! Should we
1. submit for a PPA with some kind of change (e.g. change material or add a doodad) and declare that it is a “patent pending” idea on the sell sheet with no mention of the old patent sitting there on the books at the USPTO
2. put “patented” on the sell sheet, leaving off the patent number and hoping that they don’t go nosing around to see if it “technically” available
3. try to rely solely on a NDA that we may or may not be able to get from a large corp.
I know you can’t give us “legal advice”, but I’d like to hear thoughts. Any experience with this?
Thanks a lot. You Guys Rock!
Yes, you could always file a PPA(Provisional Patent Application) on an improvement. You then have the right to put Patent Pending on the sell sheet.
If you filed a PPA no one can look it up during the one year your PPA is good for. That’s one of the great things about a PPA. But never ever put “Patent Pending” on a sell sheet or anywhere else if you haven’t filled a PPA or Patent. That’s against the law.
That would be an option, however many companies (especially big companies) will not sign an NDA before they at least have a general idea of what you have. There are exceptions of course and you should talk to your legal advisor as to what is right for you.
For example, if you have a new dog toy, insisting the companies you talk to sign an NDA might not be the best route to go. However if you have an engine that get’s 500 miles to the gallon, you might want to pitch that benefit and get an NDA.
Getting a PPA is a good route to go as far as protection goes.
This is not legal advice. Seek the services of an attorney if you need legal advice. Every situation is different.
I don’t know anything about your product and can’t offer you advice since I know none of the specifics. NDA’s can be great at the right point and time (many of which aren’t mentioned above), so throughly study NDA’s and get legal advice before you take any action.
Thanks for your reply on the 19th. I have been trying for 8 months with my trash cans and I think it is time to move on. I did get one company ask me to do all my drawings all over again with exact manufacturing dementions for one of my cans. And no guarantee that they will like it. But that they did like the idea. I figure they did not like it enough to buy it for my 5%. I did not want to spend 2000 bucks for drawings . Besides I was not selling drawings. The drawings and my info sheets should have been good enough, I believe. I could not believe they could not understand that. I did get a few that liked the isdea but that it was not for them . Anyway, I want to move on with my new pocket wrench. There are really so many tool companies. I found over 20. I am not sure where to start. The big guys are kinda silly but I do want at least national marketing. I am trying to find the 10 top selling hand tool manufacturers in the U S and START AT THE 10TH. AND take it from there. What do you think.
THANKS ANDY. SINCERELY;
Regarding your tool idea. I’d call them all!
As long as they have distribution in major retailers, they are a candidate.
I have found a great alternate use (no modifications) for an off-the-shelf product. Should I get a PPA? How should I approach the company/competitor companies?
I am a third year student taking a diploma in aeronautical. I have a stream of ideas that keep on flowing at the back of my mind but the problem is how to turn them into toungable products by maybe selling them to relevant companies. The recent one is about an improvised AUTOMATIC-UNIVERSAL JACKING MACHINE which has been approved viable by certified personnel from KENYA NATIONAL EXAMINATION CONCIL in connection to KENYA CIVIL AVIATION AUTHORITY, however, my key discourage has been lack of finance and i am afraid it may be sold without i realizing any profit. How do i go about it? . Kindly assist me.
Getting a PPA is never the first step. You want to do some research first to see how your product is going to fit into the marketplace along side competing products.
With regards to “who to call”…. yes you can call the companies product you are improving, but you should also call a long list of other companies. This way you will dramatically increase your chances of success.
Working on a project that only has one potential licensee is not nearly as attractive as working on a project with let’s say 12 potential licensees.
Thanks for your response. Research suggests there is no improvement needed. My idea is definitely alternate use all the way. Is there any way you can suggest I approach the company or any of its competitors in a way that I could profit?
When you license your ideas, you don’t need financing. The company you license to will not only finance it, but will provide their existing distribution to sell it.
When you license your ideas, you don’t need financing. The company you license to will not only finance it, but will provide their existing distribution to sell it.
Got it. You have an alternate use for an existing product. I understand.
Try to change the product (even if just in appearance) to create the perception that the product was made for your application. Then license it. You may even be able to get a patent on it. It’s hard to say though without knowing exactly what the product is.
I have a similar situation that I’ve been trying to figure out.
An existing chemical already produced (by many companies, but I’m currently interested in one manufacturer in specific due to the properties of their chemical in specific) that I would like to license for an alternate use.
I’m not sure if its possible to patent an ‘idea’ or a ‘planned use’ of an existing product before getting into licensing discussions.
If I skip the patent portion and discuss the idea with the manufacturer, they can simply take it and run with it…
I don’t know all the details to really answer your question, but i think you are talking about patenting on top of what they’ve done.
You can do that, but you will need their permission to license the invention if they have a patent on the underlying technology.
Tim, great work as always! Stephen and Andrew, thanks in advance for all the tools/tips and great book. The question I have is in regards to a product I want to license. I am patent pending on an invention that is a promotional product like a coaster. I spoke with Anheuser-Busch and they do all of their promotional products through a third party called Staples Promotional Products. They gave me a contact there and I sent her my pitch in an email. Her response was “what is your MOQ, Lead Time, and cost”. Again, I’m not trying to sell the product, just the idea, so should I tell her that? Should I try to find out who MFRs similar product and supplies that to them (then try to license the idea with them)? Or what?! Thanks for any knowledge you can float my way!
Your welcome for the book at tips.
Sounds like you are talking to the wrong person (probably a buyer). Let them know you are looking to license your product to their company and ask them who the right person to talk to would be. Can they forward your info?
It’s not all bad when there is this type of confusion. It helps you verify that they are interested in the product. Now you just need to find out if they would like to license it.
Great information, thanks!
This may have already been answered but, what stops a company rejecting your idea, and then stealing it themselves? Are they prevented from doing this due to the PPA you mentioned?
Have them sign an NDA – you can get a free copy with a provisional patent from legal zoom – or buy one for like 14 bucks.
We get this question a lot. There is no way to guarantee 100% that a company will never take your idea. I can say that it’s never happend to one of my students. However, I’m sure it will happen one day as there are no guarantees in business and the same rule goes for licensing new products.
Many companies will not sign your NDA. In this case, one of your major forms of protection is your PPA (Provisional Patent Application).
There’s also the paper trail you create with the company. And then of course the fact that many companies are more afraid of you than you should be of them. Why would they want to knowingly knock off your idea just to get sued later?
So, yes you can get knocked off. However, if you never pitch your idea to anyone you’ll be ripping yourself off. This is 1,000 time more common than a company ripping off an inventor. I should know. I’ve been running an inventors association for 13 years and been coaching inventors at inventRight for over 10 years. I know all to well about this fear
This is a major fear inventors need to get over. Unfortunately, most inventors don’t get the answer I’m giving you hear and end up ripping themselves off by never showing their ideas to anyone.
Thanks for this information. I guess you’re never fully protected then, and the decision is either to take the ‘chance’ where success may mean seeing your idea in a shop, or remain ‘safe’ and watch while some else does it.
Puts things into perspective really.
Yes, you are correct. Well said.
I have moved forward with an idea and am now at the stage where I have a prototype, a short video / advert and I’m working on branding. I’m very pleased with the advert as I feel it will provide a better idea of the product than a simple sell sheet (which I also intend to include). I have, however, used parts of a music track by a well known band purely because it fits so well, but I’m realising that I cannot use this without their permission and that of the copyright owner so I’ll probably need to remove it unless I can acquire this at no cost (which is unlikely and dissapointing since it makes the ad so much better).
I have nothing by way of protecting my idea. It is a mobile phone accessory and there are similar products on the market (although mine has added benefits) therefore I don’t imagine I could patent it even if I had the cash or the desire to do so.
My next step is to begin contacting potential licensees. Is there anything I should be doing prior to this?
Many thanks. Any advice is greatly appreciated.
So I’ve read the ‘One Simple Idea’ book and I have a lot of ideas I may want to pursue. I do have a question however, mostly in regards to ideas that include someone or something that is trademarked or copyrighted – such as a Disney Character (or in Stephen’s case – Michael Jordan). So if you take a product and all you are doing is changing something such as a backboard – I wouldn’t think that would require a patent – so how do you go about protecting an idea such as that?
If you are referring to Stephen’s Michael Jordan wall ball….. there was no patent. The toy biz doesn’t always care if you have a patent or not because things move very quickly in the toy biz and they are often more concerned about being first to market.
Yes that’s what I was referring too – so if there was no patent – how did he protect his idea and get royalties from it?
You are making some assumptions. One being that if you don’t have a patent, that companies will take your idea and not pay you for it.
This is simply not true. The toy biz and other businesses need your ideas, if they stiff you and the word get’s out, who’s going to send them more ideas?
With many products and industries, you can get away with no IP or weak IP(Intellectual Property – patents, copyrights and trademarks).
That’s not to say this works in all industries. In some industries like packaging, you really do need a locked down patent.
I think this answers your question.
Let’s get you past the fear and talking action.
Thanks for the reply – I appreciate it.
I can not get anyone interested in my 5 new trash cans. I really believe two of them are great. BUT, lots of excuses like tooling and packageing and perhaps nesting. Anyway. I got a couple months left on my last one for my provisional. I really believe the Chinese will like it. What about trying to get them to licence it from me..??
THANKS GUYS. Still a great way to promote an idea.
The cost of the product and nesting issues sound like legit issues. I’d address them if you can and go back with solutions.
Licensing in China. That would be a difficult one…
I have been playing with a couple ideas for licensing and patents for a few years, but have not had the money to file them and risk the time and money to build a prototype and this post was like a huge weight lifted off my shoulders.
Many people don’t move forward with their ideas because they think they need money for patents and prototypes.
I’m glad you now realize this is simply not the case.
Love the topic,,would like to learn more and where to purchase
The details of our coaching program and how we help people license their ideas can be found here.
Can someone successfully license inventions to US companies from overseas, using Skype, video, and Skype-to-phone, or is it usually necessary for companies to meet you and see the presentation/prototypes in person? Also, is it necessary to pose as an licensing agency or can someone represent him or herself?
I am a US citizen currently living/working in Thailand, but can contact companies Skype-to-phone, and email them a link to a product video presention if any express interest in seeing it.
Great questions. Stephen and i get this question often.
There is no reason to do in person meetings when licensing.
You can license your ideas via the phone or (Skype to phone) and email.
Your not selling yourself, your selling the benefits of your idea. In person meetings are not necessary.
Yes, you can absolutely represent yourself. No need to pretend to be an agent. That’s not necessary.
If you use the approach we teach, you can license from Thailand just as if you were in the US. There should be no difference as to your approach.
The only big difference is that you may need to work slightly odd hours to accomodate your calls to the US.
So go for it! You are at no disadvantage.
Hi, massive fan of the 4HWW thank you for the inspiration!
I am after some advice of how to create a license for a skill…I am developing a new fitness training method for PTs and the like, to learn from me and then for them to use on their clients. I want to keep control of that skill they have learnt by asking the to sign up to a license to practice it and use the brand name. Just assume that the brand name is worth something to the trainers, how does one set up the license for the to effectively join the club..!? Any advice is appreciated.
Your trademark and a business method patent, plus copyrighting your materials should do the trick for protection.
And yes of course a contract as you suggested would be a must.
Your more or less selling a franchise.
Andrew, I really appreciate your reply thank you.
I will look further into a business method patent, I haven’t heard of this before.
Is your company still running the free teleconference service that has been mentioned in this thread? I’d love to learns some more about licensing.
We aren’t doing tele-conferences anymore, however we do have a lot of cool free stuff on our website.
There’s ton’s of free advice on our website.
One free thing people seem to enjoy is our radio show.
Check out our “help menu” at http://www.inventRight.com for other free stuff as well like our list of 1,400 companies looking for ideas.
I already have some prototype of my inventions, How do rent my Idea for money, I have about 8 new ideas and inventions.
First thing to do would be to pick a nice simple project to “get your feet wet” and experience the entire license process.
For your first idea, stay away from ideas with manufacturing or prototype issues.
I am currently in the process of trying to license my rights for a very simple baby sanitation product(My first product I have developed to license). I have made contact with the big fish and have gotten a very excited response from each. I have mailed off my packets with my product info. My question is how do up front advances work and how do I determine a fair price to ask for upfront e.g. $100,000? I already have my PPA filed. One trick I’ve read about is to negotiate in your contract that e.g. in the $100,000 royalties advance work out a deal to where whenever paying back the $100,000 try for a 50/50 agreement meaning 50% of my first royalty checks go to me and the other 50% go to paying back the advance this way I still have $ rolling in while the advance is being paid back. Thanks in advance.
Asking for $100k upfront would be the best way to kill any potential licensing deal.
You want to get your money on the back end. So as they sell units, you get paid on every unit sold.
Andrew thanks for the info. However I have read several places and spoken with people and it seems advances are very common in licensing deals now I’m not saying it always happens. But in my situation I have 2-3 major companies wanting to license my product exclusively how would asking for an advance kill my deal? I will pick one and go exclusive which I know gives me more bargaining power however it has its cons e.g. I’m counting on one company to bring my product to market and sell it instead of several companies. Could you please elaborate how in my situation asking for e.g. $100,000 advance would kill my deal? Thanks
I’m not saying you don’t ask for any advance. A small advance or getting your potential licensee to pay for your patents is common.
If you are turning over tooling and inventory, 100K advance might make sense.
However, if you are licensing your idea and have a PPA or Patent, but nothing else which is common and fine….. you don’t want to front load the deal!
What can i say…… if you can get 100K, go for it. I’m sure there are situations where it might make sense, however I can’t think of many.
The reason you don’t want to front load the deal is simple. Reduce their risk, so you can get the deal done. The money you want is from units sold, not upfront. If they are successful, you are successful.
I can’t think of any other way to say it.
Every deal is different though. Just make sure you are getting advice from someone that has done many licensing deals before. Otherwise you’ll mess up on the deal points in the contract. And there are many places to get a licensing deal wrong if you don’t know what you are doing.
I have had one book written about my last innovation and it got me no where. The cost was about $900.00.
I have sent in one provisional patent application and got lost figuring out what to do with it?
I am really interested in trying the “renting my idea”. I am not afraid of failure and I live to create. I can already see and feel my ideas in action. I am hoping to move forward with the help of this site. I will share my ventures with you all so you too can move forward and watch your dreams come true….
Sometimes we just need the help of someone willing to share.. for this I thank you all….. chat again soon. P Sullivan
I am off to buy the book that will move me forward… much thanks.
I wish you much success in all your invention related endeavors and hope our book “One Simple Idea” moves you forward.
I have a safety concept for the auto industry. It simply takes to position a set of lights at a certain way to get the safety results. I am not sure that it requires a patent. The concept/system has a cool technical name like the auto industry likes especially, LEXUS. My question is should I approach them just with the concept and have them sign a PDA and sell them on the name only? Of course, the concept goes with it.
It’s really hard to license directly to auto manufacturers. You’re better off licensing to one of their contractors that makes parts for their cars.
Hello. I have a very good idea for advertising for the drinks industry. It is only an idea at the moment and I have no idea how difficult it will be to manufacture as it has not being done before even though it is so simple.
Would you be interested in talking to me and see where it goes.
Stephen and i stick with coaching and mentoring. We don’t partner with our students. Our students keep 100% of the deals they do.
If you need some guidance, we’ be happy to help.
I have several product ideas where do i go from herew
With my prototype, sell sheet, and movie complete, I am now ready to begin contacting potential liscencees. I wasn’t planning to send the prototype, only the movie and sell sheet and, as such, had intended using email.
Is there a particular approach I should be taking to contact lisencees, which may improve my chances of success, other than simply attaining email address and asking them if they’d be interested in lisencing my idea?
Call them. Ask permission to send the sell sheet and movie.
Then follow up.
Thanks for the great info so far. In terms of an NDA, can you simply write your own or is it better / safer to use a generic template?
I have been emailed by a company asking that I forward this to them prior to any detail regarding my product (which, I guess is decent of them).
On October 29th, 2010, 8:43 am you wrote the following: ‘Go visit our home page at http://www.inventRight.com and click on “How Timea Licensed Her Idea” on the right hand side of the page”. I did not see any link for this, if possible, can you still provide a link to this.
Yes, you can still access the free success story videos.
They are on the right side of the coaching page now. We moved them from the home page to the coaching page.
Hello Andrew, my name is Chad and first off I’d like to say I love the “One simple Idea” book because it has been an eye opener to say the least .Many people talk about trying to help other’s become successful however, I truly feel like you and Stephen are really holding true to this idea and for that I say Many Thanks!!!
Now, I have an idea regarding a modification to a lawn mower that I would like to get licensed I have tried to research contract manufacturers to find out cost and whether the product would be a go however, I found it very difficult to just find a contract manufacture who builds lawn care equipment many of the companies I found, actually manufacturer/distribute the products themselves and they could be potential licenses.
I know you and Stephen suggest that we find out whether the product is doable first before taking the next step of getting a PPA and then proceeding forward so my question is should I just contact them to find out what I need to know or should I get a PPA first and then contact them?
Thanks in advance for your time and assistance
Chad, If you think it can be done, just go for it. You don’t have to be 100% sure it can be manufactured. Sell the benefit of the product and see if anyone is interested.
Good information and simple as
I’ve spent so much money on preparing prototypes to which I didn’t need after watching and reading your information on your website.
Thank you for sharing
Your welcome. No worries. You know now. Glad Stephen and I could help.
How can I get a chance for you to give a few of my iventions and ideas a look over. Thanks
Joel, If you are interested being mentored….. that’s what we do, feel free to give me a call on my direct line at 650-793-1477.
I have an idea that i have just presented. Because i do not have the money to pursue its processing a company that finances SME’s have decided to support the cause for me(and this is just my first) but they need me to get the idea patented first. Please advice.
Secondly when you guys talk about royalties and percentages paid on every unit sold, how do i find out how many units have been sold should the case the company I’m dealing with decides to manipulate the figures? Thanks.
I’m not sure what your first question is, but the answer to your second question is that there is an audit clause in the contract.
About 7 months ago I had come up with a jewelry design that if it was made People I had talked to about it and showed them (after I had it copyrighted )would buy it as an anniversary gift. Or a plain ole I love you pendant. The uniqness of it is it can be manufactured as a neckless, stickpin for your collar, a locket, bracelet, and a few others. I don’t know how to market it. I don’t have the money. I talked briefly to a research company about it.(Davison ) and they want to go ahead and do it. But like I said before, I haven’t the money to produce it. If given the opportunity to prove it’s value I know it would be a hit. But I’m also afraid of the idea working and someone making it selling it and me be left out in the cold. I’m just proud of my work and feel I should be able to gain from it.
Can you briefly discuss how to work out my problem.
If your jewelry piece has unique functionality, you might be able to file a PPA for $65. If not, you can still license it, however you will have less protection.
I really appreciate that, years later, you’re still answering questions here! Yay!
Here’s my question: I have a product line for a cleaning invention that will be very useful in the medical setting and cut environmental contamination by 50+%. I have filed for provisional patent protection and am pitching to large medical supply companies.
Do you have any suggestions on where to run prototypes or how to capture SBIR /STTR grants?
You would not need an SBIR grant if you are licensing.
The point of licensing is that they (manufacturer) will risk their money, not yours.
I need an SBIR grant to pay for the research that makes the invention valuable enough to license. It will save about 50K lives and $20B a year but they keep needing more and more info. (It’s a cleaning invention, basically, for the medical setting.)
Please advice. August of this year(2013) i pitched an idea to the area sales manager of a food manufacturing company, his name i will call Mr. Tim. Mr. Tim liked the idea so he wrote about it in his end of month(August) report which only about 3weeks ago Mr. Tim called me that his boss had minuted on the proposal, “check if this is doable” and had it sent over to R&D department. Now my concern is this: August up until now is a long time for something not to have happened from the company in question. What steps should i take to hasting the company, or should i still be patient with them? Need i say at this point that my only contact with this company is Mr. Tim which my only proof of haven discussed about an idea with him is two recordings i have of our discussion. Please what do i do, the idea hasn’t been patented yet, I only gave Mr. Tim the impression that it had?
Two or three months is not long for a big corporation. It may seem like a long time to you, however it will not seem like a long time to them. You need to understand how to move a deal forward. You clearly don’t understand and really should have filled a PPA before contacting companies.
Second, you need to get some expert advice from someone like myself. It doesn’t need to be me, but it does need to be someone that understands licensing.
Third, you need someone else to send all communications for you. Your written english skills are not good enough for you to be sending emails.
Fourth, it’s always a good idea to create a paper trail via email after you talk to people.
Fifth, you should talk to a patent attorney regarding patent protection.
Clearly what i do not understand is how to move a deal forward, agreed. But the reason mainly is that i am limited when it comes to cash – how on earth does anyone approach a company without a PPA? Well, i did, and i know it is absurd! But what should i do since the lawyers are charging too much, about $220, when i can only afford about $100? So, you see my dilemma with getting a PPA.
On your second point. Of course, i will gladly love an expert to handle this on my behalf so i can just lounge on the couch and wait till the cash starts popping in. But here i am, having to deal with giving a lawyer $220 and now i have to worry about paying an expert, also. Where do i get the money?
To further highlight on your third point, it still boils down to cash to have someone send all my communications for me. And hey, Andrew, i try, considering that english is not my first language. However, i can do better. Do not judge me with what you have read so far, trust me…
Regarding a PPA(Provisional Patent Application). It’s only $65 if you earn under $150 a year. You’ll get the micro-entity discount.
I am not suggesting you hire someone to license the product for you, but rather that you get some coaching and good advice as to what the best path is for your product. Then you would take action and lean on that advisor. This is the best path in my opinion and particularly if you have a limited income.
If you can’t afford $65 for a PPA and maybe $80 to have a graphic designer help you with a sell sheet, you should wait to license your products until you have some money in the bank.
RE: Your english
I am not judging you at all. I’m saying that you need to present a professional appearance and to do that you should enlist the help of an native english speaker. Both my father and my wife are non-native english speakers. I have a great deal of respect for people that can speak multiple languages.
I wish you much success in all your invention related endeavors.
Fourthly, what i do have, like i mentioned in my first -well, second- message to you, are two voice recordings. Plus a third that i just recorded this morning.
Lastly, Andrew i really do want to talk to a patent attorney, but my hands are tied. I feel i sound like a cracked record already. However, if it means iterating, again; patent + attorney = cash!
Please advice. How do i achieve all that you have mentioned with just $100 in my wallet?
Note: I am Nigerian, the amount i quoted in dollars above is the equivalent of what i have in naira.
thanks a lot for your time.
Believe it or not, you CAN license products with only $100 in your wallet for many ideas.
PPA = $65
Sell Sheet = free if you do it yourself, however being in Nigeria you could probably pay someone $35 to help you with it.
Then go for it and call some companies !
Hello there Andrew, i really hate to be a pain in your neck. But if you know anyone who could help me file a patent for $35, please hook me up! I’ll be knocking at that persons door faster than you can say ASAP as this is my major hurdle.
As regards sell sheet, i have a friend who is quite good with photoshop – we have already worked something out.
On the other hand, how can i make the company take up doing the patent themselves?
It’s $65 for a provisional patent and they can be filed online at the USPTO’s website. Good news- you don’t have to have an attorney! I have filed them on my own before and I thought it was easy. It’s only good for a year so you’ll need to be prepared with a “real” patent on your year anniversary and, if $65 is a big challenge, then the real patent’s expenses are likely to be a lot bigger challenge because they are far greater.
Andrew has been very kind in giving you his free advice but he can’t make your business. Only you can do that- and he’s been generous to give his advice several times in the last few days.
No company can be “made” to do anything-including license your idea. You have to put together a compelling argument for why they should “buy” or “rent” your idea. And then you have to negotiate a mutually beneficial agreement. And then make sure it’s followed through on.
None of this is easy or really even cheap in many cases. If it was cheap and easy like WalMart, everyone would do it. Not many of us do because it is difficult- really difficult- and finding the money to do what is needed is a piece of why it’s difficult for many of us.
And my guess is that, if it’s a comfort, most of us on this thread are using it to ask questions instead of engaging Andrew because we are tight on cash. Otherwise, who wouldn’t love to toss a great idea at someone and say, “Go get it while I wait for you to bring me bags of money to my hammock on the beach…”
You might try to post on something like Kiva or Kickstarter to get some initial fundraising. It’s not easy but, as anyone who’s made it and many who don’t can attest, it’s part of who you are if you’re an entrepreneur.
Good luck and I know that I’m looking forward to hearing how you overcame so many obstacles to reach your success!
Thanks for your wonderful contribution to the conversation.
You can do a PPA yourself. The patent office filling fee is $65.
No patent attorney will even talk to you for 2 minutes for $35.
I think the problem here is that you don’t believe you can’t file a PPA yourself. Our course and mentoring program trains people on how to file a PPA, however the course and mentoring program is not within your budget.
You might try finding a book on the subject.
The inventRight approach Stephen and I teach allows people to license their ideas on a really tight budget, however you’re budget is to tight for even our approach.
I wish you much success in all your invention related endeavors.