Obtaining a patent can be the best decision you could possibly make, and may even be the best business move you could make. On other hand, the patent path may wind up costing you time, energy and a lot of money. The investment placed into getting a patent may be wise, but it is important to realize the no one is simply going to show up on your doorstep with a money dump truck and unload lottery like winnings onto your stoop. The road to riches in the invention world is hazardous, has many detours and seldom goes as planned. That is why the first question you absolutely must ask yourself before you rush off to your friendly neighborhood patent attorney is this: why do you want to get a patent?
The unfortunately reality is that most patents do not make inventors money. When I first started out in the business estimates were that perhaps 2% of patented innovations made money. That estimate has grown over the years to anywhere from 2% to 10%, but this increase isn’t due to the fact that inventors have gotten so much better, but rather is a function of the massive portfolio licensing that goes on at the top of the industry. It is extremely difficult to know which patent or patents out of a 1,000+ patent portfolio are the ones worth acquiring rights for, but you likely don’t have to spend time wondering because if you want to license the valuable patents you probably have to take a license to the entire portfolio. So even by the bloated estimates you might hear today the underlying reality has not changed. No more than 2% of patents individually would be considered viable moneymaking propositions.
Of course, if you are an inventor that means you are not only creative but determined. When you come up with an invention you are very proud, and seeking validation at the United States Patent and Trademark Office can be exactly the stamp of approval you need and want. But what are you going to do with the patent once you get it? Are you going to attempt to license the rights so that you receive a stream of royalty income? Are you going to manufacture the product and sell it yourself? Are you going to frame the patent and hang it on your wall? Knowing what you want to try and accomplish with the patent will go a long way to determining the proper strategy to follow.
The question should not be whether you can get a patent, but rather whether any patent you are able to obtain is worth the investment. In other words, is the scope of protection meaningful? Getting a patent is relatively easy if you are willing to take extraordinarily narrow claims. By layering on enough specifics together you can turn practically anything into something that is new and not obvious. I only half jokingly suggest taking something that has nothing to do with a radio and integrating a radio in order to become an inventor and receive a patent. See The 65 Year Old Integrated Radio Patent Strategy. The essential questions is for any inventor to ask themselves is whether they are going to actually be able to prevent competitors from making, using, selling and importing your invention based on the claims you are likely to receive? After all, the patent will not grant you the right to do anything other than exclude others.
This phenomenon is best illustrated by looking at the pharmaceutical industry. They spend millions and millions of dollars obtaining patents before they ever know whether the FDA will allow a product to be sold. Perhaps a better example for independent inventors might be the baby market. There are substantial safety regulations that need to be kept in mind if your invention relates to something to be used by children. So getting a patent doesn’t mean you have the right to sell or market your invention, rather it means you have the right to prevent others from selling or marketing what is covered by your patent claims.
Another critical question is this: can you realistically expect to get claims that would cover what someone else might want to do? If you are successful there will be people who want to copy you and take your market away. It is not personal, it is just business. Economics suggest that where there is money to make there will be new market entrants until there is no additional money to be made. You get a patent in large part to skew economic reality and prevent competitors from encroaching on your market.
Wrapped up in what we have been discussing is a very simple question that many inventors fail to ask. It is this: is a market for your invention? Frequent guest contributor and patent attorney Eric Guttag tells his clients that if they don’t know 5 people right now that would buy the product they probably should not pursue a patent. That is probably good advice. While many friends and family will not be supportive of even good innovations for a variety of largely personal reasons, we all know folks that are supportive. Go to the aunt or uncle that always bought whatever you were selling to raise money for school, for example. If they aren’t interested that might be a clue.
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When you are considering whether to get a patent you absolutely must know what rights a patent will give you. As already discussed, a patent will give you the right to exclude others from making, using, selling and importing a product or process that is covered by your patent. Many will tell you (including Supreme Court Justices) that a patent is a monopoly, or a patent provides a monopoly. This is simply not true and anyone who tells you this simply doesn’t understand patent law, or they don’t understand the economics of innovation, or they are severely generalizing to dumb down the concepts they are discussing.
The loose application of the pejorative term “monopoly” to the property right of exclusion represented by a patent is misleading. What the patent can do is allow you to prevent others from entering your market. This requires a strong patent with solid claims, not just any old patent claims that you can get through the Patent Office. Likewise, you need to have a product or process that others are willing to pay money to acquire or use.
It is a simple truth that a monopoly can only exist if there is or will be an existing market, or if you can create a market. Of course, creating a market is far more difficult, but might be necessary if your invention is a first of its kind. Think about the DVR. Why would anyone ever need to pause live TV? Once you have a DVR you figure that out pretty quick, but with some products you have to educate the consumer and create interest, which translates into demand and ultimately into a market. Most inventors never need to go that route because they have created an improvement or a gadget that, although new, obviously does something more easily.
To characterize a patent as a monopoly without first questioning whether there is a market for the patent is to put the cart before the horse. Those patents that are litigated are litigated because there is money at stake and, therefore, a market does exist. Nevertheless, there are undoubtedly a large number of patents that could never possibly have any market and could never be considered to yield a monopoly. If you doubt this take a look at the Museum of Obscure Patents. It does no good to perpetuate the myth that all patents are monopolies. It is simply not true. So thoughtful consideration needs to be given with respect to whether a market actually exists, how large the market is and whether the invention can compete within the market. For more on this see Debunking Innovative Copycats and the Patent Monopoly.
While here allow me to briefly caution inventors about exaggerating the market. This topic really deserves its own article, but as you are spending time figuring out whether there is a market and how large the market is don’t make the mistake many inventors make, which is to believe that “virtually everyone in America will need one and that means 308 million sales!” No product or service is ever going to be purchased by everyone. Remember only about one-third of America watches the Super Bowl, about half of the people in the U.S. do not file or are not counted on a federal income tax filing, only 79% of Americans know that the earth revolves around the sun and only 76% of Americans know that the nation achieved its independence from the England/Great Britain/UK. See Gallup poll. So 100% is never achievable. If you are serious about determining the size of the market you will go to the U.S. Census Bureau and dig through the data. If you have a baby product aimed at children learning to walk you will figure out the age range when children learn to walk and then use the Census data to determine how many families have children in that age bracket. Then you will still not assume 100% market penetration! It will be difficult to achieve even 5% to 10% penetration without great effort.
The goal of this article has been to point out that there are a great number of things that need to be considered before you decide to move forward down the patent path. As with many complex systems in life there is no single correct way to move forward. The goal should be to move forward in a business responsible manner. That means that there are a number of things that you need to work on simultaneously. You need to figure out whether the invention can work, perhaps with a crude prototype you build in your garage of basement. Then you probably want to consider the business questions posed here to determine whether it makes sense to move forward. If it does then the next step really should be a professional patent search because if there is no opportunity to get rights, or the anticipated rights would be quite narrow, that has to inform the business inquiries. Of course, it is also important to know that the business inquiries are not a “one and done” thing. The road to riches will take time, money and energy. It only makes sense to continue to invest time, money and energy so long as the project continues to make business sense, so periodically reevaluate the business questions as you progress from step to step.
For more information on topics discussed in this article please see:
- A Better Mouse Trap: Patents and the Road to Riches
- Keep Your Money in Your Pocket Until Proof of Concept
- The Business Responsible Approach to Inventing
- Financially Responsible Inventing: Prototype Basics
- Patent Strategy: Laying the Foundation for Business Success
- Invention to Patent: Pitfalls, Perils and Process
- Inventor Pitfalls: What is the Patentable Feature
- An Overview of the U.S. Patent Process