If you want to license your invention for royalty payments, you have to deliver more than a “me too” product. Prospective companies will demand that your product exceed their standard profit goals in order to pay royalties, which represent increased expense.
Many inventors believe the way to get a company interested in their inventions is to write a letter – and then hope they receive an invitation to begin negotiations. This seldom happens.
Your licensing quest should begin by phoning and asking for your prospect’s invention submission guidelines. Know that many times unpatented inventions, or inventions without at least a patent pending, will not be accepted.
For patented (or patent pending) inventions, you’ll have to agree to give up all your rights except those that are, or will be, granted by your patent. You’ll have to acknowledge, by signature, that you agree to this condition or they won’t review your product.
Study guidelines carefully to determine whether the company advises on how soon it will give you an answer. If you’re lucky, the guidelines will come with a signed letter. Companies often discourage direct communication with inventors. So, without a commitment on response timing, or the name of a person with whom you can follow up, your proposal may be destined for the corporate “black hole.”
If your targeted company appears especially well-matched to your invention, you may have to accept this anonymous way of dealing. But if the company is just one of many that all rank about the same as prospects, place it low on your priority list.
If the company has no formal guidelines, ask for the name of the person who will handle an invention submission. Talk directly with this person before sending off your proposal or your prototype.
The odds are not in your favor.
You may need to contact 20 or more companies before you connect. So, when you receive your first rejection, don’t sulk. Contact another company on your list right away. You should consider sending out at least one proposal every month whether you hear from your prospects or not. If you connect with more than one prospect, so much the better.
How to find prospective companies
The Thomas Register of American Manufacturers is a place to start. It’s on the Internet and may be in your library. Another way is to check is the North American Industry Classification, or NAICS, reference book at your library.
NAICS gives code numbers for all the products made in North America. Look up your “product” code and use this for researching through several other library references, such as Dun & Bradstreet, Standard and Poors, etc. Check with your reference librarian on how to do this. This will lead you to profiles of prospective companies, along with names of their key executives.
Also review companies that produce complementary products. If you’ve invented a better mousetrap, the mousetrap companies may not be interested. After all, what they’re selling now is doing well, why compete with themselves? Another mousetrap might also sell well, but would it increase their sales and profits? A rodent poison producer, on the other hand, might welcome an addition to its product line.
Don’t send your only prototype to a company. Either have enough copies of your prototype made so that you can afford to lose one or have tied it up for a few months while the company contemplates its licensing. Or, if your invention has moving parts that are important to its proper demonstration, make a video and duplicate it. It’s important to send a DVD rather than a VCR tape. Every executive these days has a computer that will show the DVD, but VCRs are rapidly going the way of the 8-track tape player.
If your invention has moving parts, but you haven’t yet made a working prototype, consider making a virtual prototype. A virtual prototype is an animated video that is made by a graphic studio. Each second of animation is very expensive, so plan your demonstration carefully. Once you have the master, duplicating DVDs is inexpensive.