Keep Your Money In Your Wallet Until Proof of Concept

By Leo Mazur
November 23, 2013

As President of a local inventors group I can’t tell you how many inventors I meet who have spent big bucks to procure a patent but never built a prototype. So they have no idea if the invention really works. Others who have a garage full of product, just collecting dust because they never tested the market before hand. However, most successful inventors and product development companies that I know, start off with a Proof of Concept Analysis BEFORE they start spending money. So if they do it, why not you?

A full Proof of Concept Analysis consists of three equally important parts: Business Analysis, Ownership Analysis and Product Analysis. These steps should be developed simultaneously or at least completed before moving on to development or you WILL certainly regret it later. I usually start with the one that I consider to be the weakest link in the chain. For example, if I think ownership might be an issue I will do a pretty strong patent, product and industry search especially if I think I have seen something similar.

After you savor that wonderful “Moment of Discovery” and you have finished daydreaming about striking it rich, you really do need to move forward to take a cold hard honest look at your new product. At this point you don’t have to go into excruciating detail, just a quick overview to make sure it is worth pursuing. The questions generated will form the basis of your development process.

Let’s take a look at each part individually.

Business Analysis

Here you want to identify the market and get a rough idea of its’ size. This can be done using statistics found in trade magazines and websites, the Census, the Bureau of Labor Statistics or by comparing a similar or competitive product.

I once was developing a tool for use with PVC for electricians. I looked up the category on www.bls.gov. There are 579,150. That sounds pretty good until you derate it by all the electricians in the category who do not work with PVC on a regular basis and you come up with maybe 50,000 to 75,000.

Now derate that by the attitude of the average field tech.  What I mean is those that will think like this: “What’s wrong with the way that I’ve been doing this for years?”  Now you are lucky to have a market of 10,000 and a likely sustainable market, which is made up of new people needing your product after the initial surge, of under 1,000. Do you wonder why that lovely prototype that I built is collecting dust on the self?  No sense wasting time on an invention without a reasonable market.  Move on.

In addition to market size, under any business analysis you should consider basic cost and price point, which can be derived by comparison. For example a motorized sheet metal cutter could be guesstimated by adding the cost of a manual cutter and a drill with a motor approximately the size you would need. A pool toy may have several parts of similar complexity and made from the same foam material as those inexpensive ice chests and bottle holders. Simply add them up with a factor for assembly and you’ve got your retail price point. Now, do you think that is in the price range of your potential customer? If so, your good to go!  If not that should inform you about what to do.

Retail to retail pricing can give you an idea of possible price point. To get an idea of investment cost, do a reverse calculation based on the “rules of three.”  This is where you need to make three times the basic cost to produce the item to cover your overhead (of one third) and leave you a profit (of one third). The store will need to sell it for three times the amount of cost to cover their overhead and make a profit.

So if your price point is around twenty dollars, you can guesstimate it will cost you around five dollars of investment per unit to get it to the store ($2.25 for production and $2.50 for overhead). Multiply that by the minimum order, do you have or can you generate that type of investment? Is $2.50 per unit a good enough profit for the effort?

No business analysis can be complete without getting an understanding of the industry and how it works. Who are the players? Can you penetrate the market or is licensing the only option with little or no opportunity due to the “Not Invented Here Syndrome”? This information you can get from trade/industry magazines and websites as well as the first page of related patents. You can also get information like this, in some cases, from inventors at your local inventors group who may have experiences to share.

 

Ownership Analysis

When researching here you will need to do a preliminary Patent, Product and Industry Search to determine how much you could conceivably own and how important it will be to your products success. IPWatchdog has some fantastic articles on searching regarding patents and PAIR. See Patent Searching 101 and Patent Searching 102: Using Public PAIR.  However, you will also need to look in the stores, catalogs and on the web for non-patented competitive products. Don’t forget to look at company/manufacturers catalogs and websites to find products that may not have a patent and may have failed miserably in the market and therefore will not be found for sale. They still count!

I, personally, came up with a fantastic idea for a product that I planned to enter in the Staples Product Hunt one year. I realize a significant problem before I even completed the first prototype. As I was playing with the idea trying to overcome the issue. I decided to do a product search. I was dumbfounded when I was holding my prototype in one hand and looking at it on the Avery Online Catalog. It was exact!!!  Obviously, a good idea because Avery already considered it. Now if only I can overcome the reason it is not on Staples shelves, I could have a winner! Another one for my shelf.

In researching your strategy should also consider the cost of litigation as required by your industry. If you are planning to enter a very litigious industry and you don’t have the resources to compete, you will be giving your invention away to the first challenger.

 

Product Analysis

“Product Is King.” This phase is credited to Ron “Ronco” Popeal, who was made famous by the Veg-O-Matic (it slices, it dices…), the Pocket Fisherman and was one of the founding fathers of direct response TV. He feels the reason for his success over his competition is his use of a system similar to what I am describing here while others just “…throw a lot of stuff against the wall and hope it sticks.”

I don’t care what some of the books say, you NEED a working prototype!  At first a Frankenstein model made from parts you find lying around or easily purchased just to prove it works will do. Followed by something fairly close so you can live with it.  Work with the prototype and find the flaws.  That is how you will discover all kinds of useful information.

One of my first inventions, that I DIDN’T make, started with a product I had thought about for years. I knew exactly how it would work. As I was building the “virtual prototype” I needed some measurements to make it perfect but in retrieving those measurements some of the parts I thought would work were looking kind of iffy.  So I decided to build a prototype just for the heck of it. I didn’t even finish cutting the first piece of wood when I realized a major flaw. In less then a minute the entire design changed and I was on the road to riches again.

I started to use my invention on the job whenever I could without making a public disclosure and began to see certain flaws, which I would overcome, one by one. This IS why they call it “Product Development.”

One day, I was up on the third floor of a building and there arose the perfect opportunity to test my product for the work it was intended. However, remember it was the THIRD floor and my truck was way on the other end of the parking lot so I thought, “The heck with it.”  No sooner did that thought cross my mind that I realized, if I am not willing to go that extra step to use my own product nobody else will either. And so another dust collector was born and is still sitting on my shelf.

But what if I submitted the product anyway?  If I submitted the item prematurely to an industry giant, it may have sparked a “Wonderful Moment of Discovery” for the Company. With their vast resources of experience, talent and wealth, I am sure the New and Improved Model would be on the market without me. At least, this way, I can still toy with new embodiments as I am so inspired. Who knows, maybe someday I’ll come up with something that will make it more appealing.

 

Conclusion

You may have guessed by now, I have a pretty big shelf full of dust collectors but I still have my money in my wallet. Every one of them seemed like a winner, at least at one point. Every one of them may still have that potential, who knows?  However, every one of them has some significant flaw that was discovered in the Proof of Concept Analysis.

As Kenny Rodgers once sang, “You got to know when to hold ‘um…Know when to fold ‘um…” Using this method, as long as you are honest in your analysis, you can better allocate your hard earned resources to a winner or run away to come back with a better product another day.

The Author

Leo Mazur

Leo Mazur

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 1 Comment comments.

  1. Ron Katznelson November 23, 2013 8:52 pm

    Leo Mazur: I started to use my invention on the job whenever I could without making a public disclosure and began to see certain flaws, which I would overcome, one by one. This IS why they call it “Product Development.”

    These were the good old days before the AIA killed the grace period for secret public use or commercialization. Unfortunately, following Leo’s sage advice is no longer legally safe for inventors filing applications after March 15, 2013. The grace period under Section 102(b) is now available only for subject matter “disclosed” to the public by the inventor or its privies. Given 180 years of case law, judicial interpretation of the terms “public use” and “on sale” is well-settled. Without disclosure to the public these terms will likely bar a patent under the AIA.

    The PTO Examination Guidelines on FTF construes Section 102 as providing for an indefinite grace period under the AIA – arguing that Pennock and Metallizing Enginieering have been repealed. The PTO, however, has no substantive rulemaking authority (Tafas v. Dudas) and the courts will not defer to its interpretation of the statute. No competent patent attorney will advise their clients that they have a grace period for secret commercialization.

    Rep. Lofgren’s amendment in an effort to remove the ambiguity in Section 102 met with Chairman Goodlatte’s objection and was withdrawn last Wednesday in Committee. The amendment is an uncodified rule of construction that reads as follows:

    “PRIOR ART GRACE PERIOD. – Paragraph (1) of section 102(b) of title 35, United States Code, shall be construed in a manner that ensures that all activities listed in 102(a) shall qualify as disclosures under such paragraph (1).”

    The objections by the AIA proponents for clarifications of this type are the same as those we have encountered during 2010-2011. The ambiguity apparently “is not a bug – it is a feature” crafted ambiguously by design. Any attempt to clarify it will be met with resistance from the AIA proponents.