Code name: investors: go from golden idea to agent of invention.
In 2005, Woolery created a magnetic wristband to hold small nails, screws, drill bits, and even smaller tools such as mini wrenches. Made out of Velero and nylon, the adjustable wristband is embedded with strong but small magnets, allowing handymen to keep essential tools close while working.
"I'm awkward when it comes to fixing things around a house," says Woolery, who was a software engineer turned restaurateur turned inventor. "I thought this would be a clever way to keep everything easy to access."
Today, Woolery's MagnoGrip Magnetic Wristband is sold at more than 1,700 Lowe's locations across the country as well as online at Walmart. com and Amazon.com. Woolery estimates he's sold 400,000 units to date and earned revenues of more than $1 million.
For most inventors, bringing their brainchild to market is a rewarding yet taxing process. From patent, design, prototype, to eventually piquing the interest of buyers, the mission isn't impossible but it is a feat seldom accomplished. Less than 5% of all U.S. patents have ever been successfully commercialized, according to the United Investors Association. When starting out, understanding the costs--time and money--is as important as managing expectations, identifying the tools and resources needed, and planning the execution of truly bringing a creation to the masses. For most inventors, the trickiest part is getting started.
While Woolery knew he had a hit product on his hands, the Jamaican-born businessman needed to know if the marketplace felt the same, and to secure his idea against copycats and scam artists. He enlisted intellectual property attorney Jonathan O. Owens, a 17-year veteran.
Owens says he suggested his client file a "provisional patent" with the United States Patent and Trademark Office (USPTO) (www.uspto. gov), which serves as a placeholder and gave Woolery a year to convert his filing to a regular pending patent application.
"In the right circumstances, especially for a startup, a provisional patent is good because it gives you a year to figure out if there is a market for your product and it requires fewer resources," explains Owens. a partner with Haverstock & Owens L.L.P. in Sunnyvale. California.
Hiring an intellectual property attorney can cost between $8.000 and $12,000 depending on the complexity of the invention, says Owens. But money is only part of the cost. The average response time regarding a patent application is more than two years, according to the USPTO. Most experts recommend retaining an intellectual property attorney to navigate the process, but with or without legal help, don't expect your patent to be approved on the first try. Although nearly 483,000 patent applications were filed in 2009, only 192,000 patents were granted that same year. Thanks to a backlog, there are nearly 1.2 million patents pending.
Intellectual property attorneys not only perform patent searches, but also fill out the required paperwork and submit this information to the USPTO. a crucial part of the daunting process, says Calvin Flowers, president of Chicago's 1st Black Inventors Entrepreneurs Organization (www.cfbieo.org).
"Inventors need to be engaged every step of the way," says Flowers, whose organization offers resources for inventors looking to commercialize their idea. "You need to ask if the attorney has actually had a patent issued before," he says, noting that it's critical to make sure the attorney fully understands and has successfully navigated the patent process.
Unfortunately, inventor Elaine Cato found this out the hard way.
From Your Attorney, With Love
Cato self-submitted her design and claims for a backless bra she created one night when getting ready for a New Year's Eve party in 1998. The idea had been lurking in the back of her mind for a number of years and she thought her ingenuity could lead to innovation.
Made for bustier women who need support for backless tops, Cato knew she had a hit product on her hands when friends and family began inquiring about how she'd been able to wear backless dresses while still miraculously managing to support her DD bra cup size. Initiating the patent application on her own, Cato went through two rejections before seeking out an attorney.
The Tennessee native finally sought legal help after viewing a television advertisement one day. "I gave them all of my paperwork, which was a complete application and the drawings that I had done myself," recalls the 43-year-old. After paying a $2,000 attorney fee, Cato received her third rejection from the patent office and she later found out the lawyer submitted the same paperwork she had turned over earlier. She realized the attorney had not done any additional work after the patent office told her the application was denied again for the same reason--the sketches did not meet USPTO guidelines.
Disenchanted, Cato found guidance from the USPTO. After each rejection, the patent office explained to Cato why her application was declined. "The examiner at the patent and trademark office counseled me," says Care. "She gave me the information of who to contact to get a professional prototype made and also who to contact to get professional drawings."
Cato's patent was issued after a fourth attempt and nearly six years of getting it just right. On average, Owens says it takes about two to three years to receive a patent approval. He also says it is rare that a patent application is approved on the first submission.
Test and Let Fail
Inventors can be sensitive about their creations. But as you speak to potential customers, buyers, and investors, and learn about your competition, don't be afraid to refine your product, says Woolery.
"After a provisional application is filed, there's no need to wait for the patent office," says Owens. "[Inventors] should be out there trying to sell the product." Woolery designed plans to do just that and test his magnetic wristbands in the marketplace.
While Woolery's Stanford Graduate School of Business classmates were summer interning at major financial firms and Web companies, he spent his time creating a sales plan. Isolating a 20-mile radius of local hardware stores, the Menlo Park, California, resident began pitching his product to potential retailers. He sold his product on consignment so retailers would only have to pay for what was sold and could return unsold merchandise. But the effort was not without challenges.
"What's important to understand is 'no' doesn't necessarily mean your product or idea is not good," says Woolery, referring to those stores who turned down MagnoGrip initially. Try to extract feedback and figure out how you can improve your product, he advises.
"Sometimes if your product is very new and innovative, you can spend a lot of time educating the market on the benefits of a new approach or solution," says Penny Pickett, associate administrator for Entrepreneurial Development with the Small Business Administration. "Entrepreneurs are advised to talk to potential customers to find out from them if they would buy the new product. Potential customers will provide great feedback on the idea, if it is significant enough for them to make a change, if they would pay for the new product, and at what price point. Customer validation is significant in developing the product and in strengthening the company."
This seemed to be the case with Cato, whose backless bra impressed potential female customers but left male executives and managers confounded. "A lot of [them] just didn't understand how the bra could stay up," recalls Cato, who later found that live demos helped to solve the disconnect.
Once a product is designed and patented, inventors are brought to an important crossroads: to manufacture and distribute their creation themselves, or to license their product or sell their patent. It's here that Woolery and Cato went down separate paths in bringing their respective products to market.
Cato sent her Breakthrough Backless Bra design to Victoria's Secret once the patent was approved. While the women's lingerie and beauty retailer initially expressed interest in distributing the bra, a conflict with another line the company sold stalled talks. Cato then looked to license her product to Victoria's Secret or a comparable retail entity. Licensing would mean Cato retains the legal rights to her invention but allows another company to manufacture and distribute the product.
"I contacted other companies, but they would not receive unsolicited product designs," says Cato. "I learned you have to deal with a buyer for a particular company to try to get your designs in a store."
Because of the minimum resources needed by the inventor, licensing a product may be the most time- and cost-efficient route to get a product to market since inventors will not have to invest resources getting the product manufactured and distributed, says Flowers.
But as Cato found out, licensing your invention can give the licensee room to make changes to your invention depending on negotiations and ultimately contract stipulations. After appearing in Season 2 of ABC Television's American Inventor, which looked to discover the next great invention, the runner up and $50,000 prize winner's bra caught the attention of intimate apparel company Maidenform Brands Inc., which offered to manufacture and distribute it. Cato began working out a deal with the company, whose second quarter profits reached nearly $14 million. Since the offer came about through her appearance on ABC, which is owned by The Walt Disney Co., Cato and Maidenform, agreed to a pre-existing contractual licensing deal with that also included ABC Television, Tic-Toc Productions and FremantleMedia--the show's production companies--as royalty recipients. And she says she was unable to bring her lawyers in during the negotiation procedures.
While Cato says she was happy her product was finally able to hit markets, having five parties in on the deal significantly cut in on her earnings. She received 25 % of royalties for three years, which she says amounted to $50,000 to $70,000 per year. "The bra was sold at Macy's, JC Penney, Kohl's, Belks, and it was sold in Canada," says Cato. Prices range from $29 to $34. Cato's three-year deal with Maidenform recently came to an end; if she were to sign a new deal for the Breakthrough Backless Bra she'd be able to receive full royalties. The inventor is now seeking investors for the patent-pending practical shapewear she's since developed.
While some decide to sell off their product to the highest (or most interested) bidder, other inventors choose a more time consuming process. However, it's one that can yield more control over how and where the product is sold.
Woolery, now a Stanford Business School M.B.A. graduate, enjoyed the business side of bringing his product to market. Traveling to China to speak to potential manufacturers for his magnetic wristband, he began with 5,000 pieces and continued his tried-and-true method of reaching out to retailers directly. Overall, from concept to production, Woolery says it took $45,000 in start-up capital. He secured most of the cash infusion from friends and family and invested $5,000 of his personal savings. Once ready to start manufacturing, Woolery says the money from the consignment deals he made with local retailers helped foot the bill for larger production.
He began advertising in trade magazines, attending trade shows, and building a solid business team around him, eventually catching the eye of one of the nation's largest hardware stores.
"In my negotiations with Home Depot, we brought on board an account manager, who was experienced in doing business with Home Depot to assist us," says Woolery. "It's less about having an attorney involved and more about having business people involved who understand what we're looking for and what Home Depot is looking for."
Currently, Woolery's MagnoGrip products are running in a pilot test in 135 Home Depot stores in select markets across the country.
Flowers--an inventor himself who created a telephone locking device for parents to cut their children's telephone use--uses his personal experience to work with others through the Chicago's 1st Black Inventors Entrepreneurs Organization. He stresses the amount of time and energy commercialization can take.
"If you plan on selling to a major retailer, you have to think about packaging, you have to get somebody to help you come up with a design, you have to find a manufacturer," says Flowers, who adds a product can be the solution to everyone's problem but if it doesn't look the part, consumers won't be impressed to buy. "Having packaging really helps get your product on shelves because it's a credibility issue. Retailers want to know 'Can you really do this? Do you have the resources to put your product on my shelf?'"
While Woolery and Cato took different paths to bring their products to market, both agree inventors need to possess patience as well as the ability to manage their own expectations and those of others in order to withstand the process and--for those lucky enough to reach it--the marketplace.
"I think a lot of the no's we were hearing initially was more people not being fully convinced we were serious," says Woolery. "We just needed to keep plowing away and eventually we'd be able to prove to them the product makes sense and is something they should have in their stores."
A TALE OF TWO INVENTIONS
Elaine Cato and Andre Woolery went down divergent paths when it came to getting their product to market. Cato licensed her product to Maidenform and established a deal where she receives royalties from sales. Woolery decided to manufacture and distribute his product to retailers himself. Both methods can be profitable. Here is what you need to consider when choosing which method is right for you.
Do your due diligence. When looking for a partner, you want to license with a company that already has the distribution channels and manufacturing capabilities you need, says Calvin Flowers, president of Chicago's ]st Black Inventors Entrepreneurs Organization. Your negotiation agreement should include the ability to check their records periodically to see how your product is faring in the marketplace, he says.
Don't go it alone. Negotiate a licensing deal with a skilled intellectual property attorney or a negotiator who works with an IP attorney. This will give you more leverage and aid in ensuring you get the best deal possible.
Understand the industry. You need to research sales history for similar products in your industry, says Flowers. "You need to know the potential of your product."
Set goals. Aside from determining what percentage of royalties they will receive, inventors should also be aware of how their product is faring with consumers and be able to respond. "You want to have a timeframe that keeps the seller motivated to sell your product," so you want to set what the minimum sales for a particular amount of time will be, Flowers says. If that requirement is not met, you want to be able to get the rights back for your product.
DO IT YOURSELF
Prepare for the onus. When venturing your product, prepare to carry the load. "You're going to have to develop your own manufacturing systems. You have to buy your tools, your molds, your packaging. That's a lot of responsibility for an inventor," says Flowers. Inventors turned entrepreneurs will also need to develop their distribution channels and means to get the product from the manufacturer to the customer,
Have a clear understanding of your finances. When it comes to finding potential investors, you'll need to demonstrate that you also have "skin in the game"--by putting up some financing yourself. Maintaining a good credit score will make you attractive when it comes to taking out loans.
Building a team is critical. "You want to find someone who understands every facet of the business venture," says Flowers. This includes someone who understands how retailers and manufacturers think and what they're looking for. "Finding a good financing and management team is also a top challenge. Everything you don't know, you want someone else to know and understand," he adds.
Shop around. Flowers recommends visiting at least three potential manufacturers. "When you visit the first manufacturer you're just getting your feet wet," he says. Take comprehensive notes on each visit and get price quotes. You may be able to leverage these quotes when negotiating a deal with the manufacturer.
Know your time commitment. When it comes to venturing it not only takes patience but you must understand how this can affect your work-life balance. "I always recommend keeping one week for your family," says Flowers. "This process is going to drain a lot of resources from the family so you want to try to balance that as much as you can."
READY TO PATENT YOUR PRODUCT?
There's no shortage of wily intellectual property attorneys and so-called experts ready to take advantage of enthusiastic and ambitious inventors.
"A lot of inventors see those late night television programs that promise to get your product patented and shop your product around but a lot of them are fluff," says Calvin Flowers, president of Chicago's 1st Black Inventors Entrepreneurs Organization. Before you spend money on an intellectual property attorney, here are three questions you need to ask.
1. How many patents has the attorney issued? While many IP attorneys may be good at what they do, you need to know their rate of return. "You want to find out if the attorney has actually had a patent issued before," says Flowers. If your intellectual property attorney has never had a patent issued before, that is cause for concern.
2. What's the attorney's background? Making sure your attorney fully comprehends your invention is vital, says intellectual property attorney Jonathan O. Owens, which is why it's important to understand the attorney's experience. "A lot of times, intellectual property attorneys specialize in different technologies," he adds. If you have an apparel invention for the garment industry you need to make sure your attorney has experience with garments, advises Owens.
3. What's your role and responsibility? Good patent attorneys don't just submit your application to the United States Patent and Trademark Office. Their first responsibility is to perform a patent search to make sure a patent has not already been issued for your invention and to save time from getting rejected. "The patent attorney should be able to understand [the] invention and the differences they're trying to capture and protect," adds Owens. "That of course has to be communicated effectively to the patent office."
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|Title Annotation:||SMALL BUSINESS|
|Article Type:||Cover story|
|Date:||Nov 1, 2010|
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