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A Better Mouse Trap: Patents and the Road to Riches

By Gene Quinn on December 21, 2013

Image taken from US Patent No. 6,655,077 titled “Trap for a mouse”

To paraphrase the famous quote of Ralph Waldo Emerson, if you build a better mouse-trap the world will make a path to your door.

If only it were that easy!

Inventors and entrepreneurs frequently take this mouse-trap quote all too literally, thinking that if they make a better product it will sell and make them rich beyond their wildest dreams. Although inventors hate hearing this, the truth is that the invention is the easy part of the process because it is the only part of the entire cycle from idea to commercial success that is completely controlled by the inventor. Once you invent something market forces and the reality of life takes over. There are any number of reasons why an invention won’t make money even if it truly is unique and superior to available alternative solutions.

In fact, building a better mouse-trap is only the first of many steps on the road to financial freedom. There is no guarantee of financial success given by any Patent Office in the world, and once you file a patent application you are to some greater or lesser extent at the mercy of the patent examiner and patent process. This process can take many years, you may be assigned to a patent examiner that just doesn’t think your invention is that special and you ultimately may wind up with no patent or rights that are quite narrow. The patent process is full of risk, and even when you do successfully navigate the process and achieve an issued patent no one will automatically back-up a money truck to your doorstep. A patent is an asset and like any other asset it needs to be successfully leveraged in a business context to maximize financial return. Of course, having a good, strong patent is an important step in the overall process, but it is not the last step by a long shot.

Even if you obtain a strong patent that covers a great product you still have challenges. Unfortunately, many inventors operate under the misunderstanding that getting a patent is like owning Boardwalk and Park Place in the popular board game “Monopoly.” The truth is that turning an invention into cash is much more complicated than simply placing hotels on Boardwalk and Park Place.  Yes, you must have a patent, but you need to treat inventing as a business. Remember, the point is not to just get a patent, but rather the point is to make money. So what are you going to do with the patent? How will the patent help your business goals?

Among the many truths missed by most inventors and entrepreneurs is the fact that it is frequently better to have a weak patent and the financial ability to enforce the patent than it is to have a strong patent and no ability to enforce the patent. In the United States, for example, a survey of the American Intellectual Property Lawyers Association finds that the average cost of bringing a patent litigation is over $2 million. How then is the individual inventor or small business owner supposed to be able to meaningfully exploit the rewards offered by the patent system? The answer is that the small players in the game of “patentopoly” frequently see their inventions infringed and find no real recourse available because they cannot afford to even consider undertaking the financial burden that is a patent litigation.



There are several options though. First, increasingly inventors and small businesses are seeking representation in patent litigation on a contingency basis. While still relatively rare, more firms seem to be at least considering such representation.  Of course, in order to justify the investment of time and energy, lawyers who undertake such contingency representation must only take those cases where there are strong facts, a solid patent and an infringer who can afford to pay patent damages.  The rise of contingency representation in patent litigation is becoming the great equalizer, and does provide independent inventors and small businesses with a powerful option to enforce their patent rights.  If you have a patent and believe it is being infringed you should at least talk to someone like Attorney Williams to see if you do have a case.  Having patent litigators on your side who get paid only if you prevail makes for a very formidable team behind you.

Another option can be to borrow money with your patent or patent portfolio as collateral. For example KLW Investments provides funding for those with high-tech patents.  Patent owners can use this type of financing to obtain the funds required in order to litigate against larger, better capitalized, infringing companies.

Another option for patent owners is to license the patent rights on either an exclusive or non-exclusive basis. According to Trevor Lambert, of Lambert & Lambert, licensing may be the way to go for those who are not independently wealthy.  When discussing with me the “Cashflow Comparison” graph (see below), Lambert explained: “The cashflow comparison shows that you go well deeper into the negative cashflow when you are going to manufacture it yourself, but your likely returns on investment are much higher.  So licensing is more of the safer bet for those who are not independently wealthy.”

For more on licensing options see To License or to Manufacture — That is the Question and Licensable Products: The Product, Marketability, Feasibility Test and Choices for Inventors: Financial Arrangements.

Of course, all of this presupposes that there will be commercial interest in the product or process covered by your patent, which brings me back to one of the biggest mistakes many inventors make. Many inventors mistakenly believe that just because a patent has been achieved does not mean that there will be a market for the patent product.  This is similar in ways to the believe that a patent creates a monopoly, which was discussed briefly above.  The truth is that without a market there can be no monopoly, and without a market or reasonable expectation that market demand can be created it probably doesn’t make sense to proceed from the invention stage into the patent process.

The patent only gives the patent owner the right to exclude others from making, using, selling and importing. A patent carries with it no expectation for market success. Granted, if the product does have a market a patent can be a significant barrier to entry that insulates the patent owner from competition, but a patent in and of itself does not guarantee business success. A patent only dangles the opportunity to achieve monopoly profits. This is due to the exclusive nature of the right and the ability to be the only player in the market. Again, a market is necessary, which means a product that people are willing to pay for is a pre-requisite. In the absence of a product that people want, and the business acument to capitalize on a market opportunity, a patent will not result in riches. For more on this see Debunking Innovative Copycats and the Patent Monopoly.

The Author

Gene Quinn

Gene Quinn is a patent attorney and the founder of IPWatchdog.com. He is also a principal lecturer in the PLI Patent Bar Review Course, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam.

Gene’s particular specialty as a patent attorney is in the area of strategic patent consulting, patent application drafting and patent prosecution. He has worked with independent inventors and start-up businesses in a variety of different technology fields.

is admitted to practice law in New Hampshire, is a Registered Patent Attorney licensed to practice before the United States Patent Office and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. As a patent attorney he is able to represent inventors and businesses seeking patents across the United States.

You can contact Gene via e-mail.

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 10 Comments comments.

  1. ip guy December 21, 2013 2:15 pm

    Patent haters at work again:

    http://topromotetheprogress.wordpress.com/2013/12/20/when-asked-vast-majority-of-businesses-say-ip-is-not-important/

    Can you point out all of the flaws in their reasoning?

  2. angry dude December 21, 2013 3:10 pm

    It’s a lot more difficult and complicated than this.
    With the exception of patents on very simple mechanical tools (e.g. a garden spade or kitchen utensil) there will be many many patents covering different aspects and improvements to any high tech device.
    In the case of mobile phone that number goes into thousands or even tens of thousands (!!!)
    What chance in the world a solo garage inventor has to be commercially successful ?
    (Other than getting a patent and then hiring a patent troll company to enforce it against huge multinationals – a opportunity denied to a garage inventor by current bills in Congress)
    Heck, you cannot even sell your patent for small change, cause nobody (other than possibly some patent trolling entity if you are very very lucky) will buy it – why buy if you can use it for free ?
    Get real people, you have no clue
    The world as it is today is an ugly place, especially for poor garage inventors
    and pretty soon there will be none left
    Amen

  3. Gene Quinn December 21, 2013 3:25 pm

    Angry Dude-

    Unfortunately, it is you that doesn’t have a clue. The fact that you are bitter about your situation doesn’t change the VERY REAL REALITY that independent inventors do succeed all of the time. The fact that you have not had any success on your own is a personal statement about you, not a statement about the many successful independent inventors who do commercialize their inventions and make money.

    In the future if you want to comment on IPWatchdog.com you must keep comments honest and truthful. If you want to say that you have never succeeded that is fine, but if you continue to make over broad and incorrect statements you will be invited to go elsewhere.

    -Gene

  4. Gene Quinn December 21, 2013 3:26 pm

    IP Guy-

    The flaw is they are wrong. IP is critically important. It is virtually impossible to obtain funding from investors without a patent position.

    -Gene

  5. Benny December 22, 2013 7:32 am

    As a manufacturing company, I have something that the lone, but intelligent, inventor does not have – a marketing department. We would probably not patent an invention that has no market appeal, and neither the R&D nor our IP partners are professional enough to understand the mind of the consumer. So it’s not enough to invent a better mousetrap – I have to convince my customers that it IS better and they want it – and thats’ something marketing experts can do equally well with an inferior mousetrap. If a lone genius invented and patented a better version of our product, we would probably just promote our inferior model in the market over his head. In the long run, it’s probably the most cost-effective solution for the company and share-holders

  6. cdw December 22, 2013 10:43 am

    Dear IP guy,
    Thanks for pointing that site and report out. I took a look at it and left this response of my thoughts there:

    Interesting,…so if a survey is conducted asking citizens about some law for which most have little familiarity with, then that law is not important. …And I guess it follows that if such is true, that law shall be deemed as unnecessary? (I’m not sure what the conclusion is here in this article)

    So, if a survey is to be done of some reasonable subset of Americans asking them for example, say “How important to you is Second Degree Manslaughter?” Then since most of them are not really sure what 2nd degree manslaughter is, and thus might not indicate a resounding majority indication in the affirmative of the importance to them, then that law is unnecessary?

    So we as a people cannot rely on anyone else to watch over matters of importance for which we ourselves lack a firm grasp of? So, if I don’t personally understand a law then that law is unnecessary?

    It seems to me that you ask far too much of the general populace if that is the requirement. Sadly, we’re all far too busy, to achieve this ideal!

  7. cdw December 22, 2013 10:45 am

    I should have ended the above comment with the statement that I am tired of the onslaught against IP rights.

  8. Yosef Haim December 24, 2013 5:29 pm

    Angry dude- I am not a patent expert, but I do see the small guy getting thrown around like you said to these patent trolls. – Ditto for one (http://www.youtube.com/watch?v=nMGs3aWwCUo). However, there are ways to fight back. Fight power with power, either learn to monetize on your own or do as Ditto did a pull out the big guns against these patent trolls. Ditto is using Ipnav (http://www.ipnav.com).

  9. Celeste Ancar January 4, 2014 12:26 am

    My family has a 100 year old patent that is used on trains and dump trucks today. The idea was stolen. So yes, the small guy is thrown around by patent trolls. And the family does not have the resources to fight it.

  10. Gene Quinn January 4, 2014 1:23 pm

    Celeste-

    If the patent is 100 years old it has long since fallen into the public domain, which means that it can be freely used by anyone without paying royalties.

    -Gene