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Making money making toys: how black inventors are bringing innovative ideas to the toy market.

How black inventors are bringing innovative ideas to the toy market.

Successful Inventors Stubbornly Refuse to Accept Defeat. Nobody knows that better than Bill Becoat, who was laughed out of every major bike maker's headquarters in the country when he showed up with his two-wheel-drive bicycle. Conventional wisdom in the trade had always been that two-wheel-drive bikes were a ridiculous and impractical idea. "I went to Roadmaster and Schwinn," Becoat recalls. "I was told to go to Huffy. I sent fliers to different bike companies - GT, Diamondback - and it was always the same. it won't work, they said. And if it looked feasible, they said it would cost $250,000 or $600,000 to develop. Well, they weren't wrong; it did cost an arm and a leg. But they were close-minded."

Becoat had the last laugh. These days, the media are touting Becoat's two-wheel-drive design as the most important bicycle innovation in decades.

Ideas abound. Every year, some 90,000 new industrial and consumer products are in various stages of production and marketing, according to the U.S. Patent Office. Toys and games alone account for between $4.5 billion and $6 billion in American manufacturing output a year, according to Census Bureau figures. In 1992, individuals accounted for 25,237 issued patents, while corporations accounted for 82,296.

But the market can't absorb that many new ideas, and an estimated 95% of all new products fail. In part, this reflects the way many new products come about. individual inventors often work outside corporate structures, have limited product-development funds and are unfamiliar with industry standards and practices.

Unfortunately, within the business world, the inventor isn't usually recognized as a genius but often stereotyped as an idiot or nut, explains Bobby Toole, president of United Inventors Association of the USA in St Louis, Mo., an umbrella group for individual inventor networking groups around the country. "The inventor doesn't have a good reputation because corporations want to take credit for good ideas. Overcoming that is one of the biggest problems we have."

Pistol Packing

No one could mistake Lonnie Johnson for a crackpot tinkerer. The Atlanta toy inventor knew he had something special when he let his children play with the pump-and-nozzle apparatus he had fashioned. "The other kids in the neighborhood," he says, "just had regular water pistols."

Johnson first got the idea for the Super Soaker in 1982, while he was still in the Air Force. "I was experimenting with inventions that used water instead of Freon as a refrigeration fluid," he recalls. "As I was shooting water through a high-pressure nozzle into the bathtub, I thought that it would make a neat water pistol. From that point, it was an engineering problem."

In March 1989, Johnson visited the Larami Corp. booth at the American International Toy Fair held at New York City's Jacob K. Javits Convention Center. But, he was in a wary mood for deal-making, bringing with him a history of disappointing ventures with manufacturers who had licensed his previous ideas. "I didn't have a nondisclosure agreement with me," he recalls, "so I talked very superficially. I just said I had an idea for a new type of water gun and asked if they would be interested."

Philadelphia-based Larami was interested and agreed to a meeting. A guarded Johnson showed up carrying a battered pink Samsonite suitcase. He walked into the room, opened the suitcase, and pulled out the prototype - a handheld pump apparatus of PVC tubing, Plexiglas and plastic soda bottles. A split second later, he fired a giant stream of water across the room.

The reaction was dramatic. Larami's president, Myung Song, had just one word: "Wow!"

A year later, Super Soaker was the most popular water gun in American retail history, with presales of $100,000. By 1993, 27 million units - some models retailing for more than $50 - would be sold.

The success of Super Soaker and similar products prove that individual inventors can make very good money indeed on an idea - if they are persistent and wise in their business decisions. But it's not easy. Those who go it alone often must rely on life savings or a second mortgage to protect and finance the birth of their brainchild. On the other hand, inventors who are willing to trade their independence for the funding and support of a corporation may find themselves shut out. Major toy companies, highly suspicious of industrial espionage, are virtually closed to outsiders. Many good ideas never get beyond the planning stage because their creators can't come in from the cold.

Not always, though. Johnson credits the enthusiasm of Larami's CEO with the licensing deal he made for Super Soaker. "I made a presentation and captured his imagination," Johnson says, "and the rest is history. The top people in an industry know their market, and if they see value in something, they will make it happen."

Challenges Inventors Face

Black inventors have historically been overlooked and shortchanged. Traffic lights, asphalt paving, automated shoemaking, blood banks: 20th-century life would be inconceivable without them, and they were all invented by African-Americans. But black inventors often had to sell or license their patents to white-owned companies at a financial loss. And such institutional racism persists. "People don't want to deal with women, don't want to deal with blacks," says Toole. "The doors don't open as widely for black inventors as for other members of society."

But getting the product from idea to reality is never easy, inventors say. Time, money and industry knowledge are the big factors of success. For instance, an uncomplicated patent - just one part of the product-development process - can take 18 to 24 months and $7,000 to $10,000. Complex patent applications can cost much more (see sidebar).

Marisa Cascio, at the New York-based Toy Manufacturers of America Inc. (TMA), says its hard to put even a rough estimate of product-development costs on any new toy or game. But the costs can be high, she says. "You have to have financial backing to get from concept to final stages, and you have to got out and promote it."

TMA sponsors the American International Toy Fair, the annual event of the international toy-and-game trade. You got a sense of product-marketing costs from rental figures for one booth at the fair: from $1,400 to $20,000. The organization does not provide any financial assistance, but it does offer a step-by-step Toy Inventor/Designer Guide that includes information on manufacturers and suppliers to the toy-and-game trade.

Undoubtedly, lack of capital has prevented many product ideas from going beyond the drawing board. But judging by the experience of inventors who have made it information rather than money is more often the decisive factor in the success of a new product.

Knowing how an industry works, and who its major players are, can help an inventor spend money where it will do the most good. "Usually inventors have trouble finding a manufacturer," says Fadene Shirley, program coordinator of an invention review program at Baylor Universitys Center for Entrepreneurship in Waco, Texas. "We refer them to the Thomas Register of Manufacturers in the library and encourage them to write the different manufacturers in their product line." Baylor's program charges a fee of about $150 to evaluate an idea and steers inventors toward reputable product-development organizations and trade groups - as distinguished from what Shirley refers to as fly-by-night companies that charge thousands of dollars upfront for invention markefing and "research,' but deliver nothing.

Toole of the United inventors Association says that inventors can do the preliminary work on their idea - including a marketing plan, a simple patent search in libraries or on electronic databases, and competition analysis - for less than $200. The real challenge is to think through idea development strategy, so that when it comes time to spend money with a patent attorney or a manufacturer you know you're not wasting it.

"The toughest two things about getting a product to market," says Toole, "are conceptualization of your idea into a final product and learning the industry that you're in. There's a certain way to distribute your product, certain margins, markups. Find the trade organization, get the trade magazines and become an expert in the industry where you expect your product to succeed."

Overcoming Obstacles

The evolution of Lonnie Johnson's success with Super Soaker is a case in point. A lifelong tinkerer, who holds a master's degree in nuclear engineering, Johnson got his first patent in 1977 by educating himself at the library and then filing all the applications. By the time he went to Larami 12 years later, he was prepared, not only with the prototype but also with the paperwork that protected his rights.

He had learned from experience. A molding company had told him it would take $200,000 (which on an engineer's salary he didn't have) to set up tooling. His next foray into the toy-and-game market was a license agreement with LJN Toy Co., a subsidiary of MCA Records, on an altogether different product - a water-propelled airplane called Jammin' Jets. Johnson didn't have much luck there, either; even though LJN spent $1 million on television advertising, the toy lost money.

The false starts Johnson experienced are typical of the roadblocks individual inventors encounter when they deal with the business side of product development. They were the reason he played it cool at the 1989 Toy Fair, and also the reason he filed new patent applications every time he changed the engineering on Super Soaker. "When I first met with Larami," he recalls, "I had two patents already. I machine-made all the valves and fittings on the gun myself. There are a number of patents on different versions of Super Soaker."

"Persevere," says Lonnie Johnson. "That's what I always say to people. There's no easy route. Nobody's going to step in and dump a lot of money and make it easy. Unless you have a lot of money, you have to pay your dues and make a personal sacrifice."

Success also brought problems. The Super Soaker became drenched in controversy in 1992, when gang members in Boston, New York and Los Angeles filled the toy's tanks with bleach and ammonia and used it as a weapon. Some playful fights with Super Soaker even escalated into real fights with real guns. As a result, the toys were banned from school grounds in various cities. There was talk of banning them from store shelves as well, but that never materialized.

Still, Johnson isn't pinning all his hopes for the future on Super Soaker. He understands that the life cycle for any toy product is limited, and while he continues to work on improvements for Super Soaker, his business focus is on future patentable ideas. Johnson Research & Development, based in Smyrna, Ga., was formed in 1991 out of Johnson's Super Soaker profits. The company, which has 10 employees, is working with Georgia Tech on the idea that got Super Soaker started years ago: a refrigeration system that uses water as a working fluid.

Reinventing the Wheel

Most inventors never get to the point of worrying about foreign-market expansion. They remain stuck at the rejection stage, unless they apply the hard lessons of business practice to each contact they make. Bill Becoat first started working on his two-wheel-drive prototype in 1986 and didn't get any real attention until 1990. In part, his problems were technical; it took time to craft a prototype professional enough to get the industry to look at it at all. "You have to keep rethinking the prototype," he explains, citing his hours of research into technical journals and patent records at Southern Illinois University. "You may have a good idea, but it may be too big, too heavy, to be acceptable in the industry."

Industry resistance to re-engineering the multigear rear-driven derailleur, which has changed little since bicycle design was perfected in the mid-1890s, was strong. "You'd think they would want new products on the market. But that's the last thing the person already on the market wants to see. And the more attention you get from the general public, the more resistance you get from the industry, because they're not tooled up for the new bicycle. Everybody wants to be an innovator in the industry. This [new bike] makes them look like a follower, not a leader, and they don't want that."

Despite the rejections, Becoat raised more than $200,000 in working capital from some 35 acquaintances, 90% of them African-Americans. He spent $200,000 alone on American and international patents so the design couldn't be knocked off by me-too jobbers in Asia and Europe. Meanwhile, he found a small American company to manufacture the two-wheel-drive retrofit kits, which his distributor, The Bent Spoke in Oakland, Ca., sells by mail for $119.

Finding a manufacturer for the bikes themselves proved more difficult. Under the Bect Enterprises Inc. banner, Becoat made an agreement with 2 Bi 2 Inc., a St. Louis company, to license manufacture of the bikes in Taiwan to his specifications. That turned out to be expensive, he says, because, as a group, Taiwanese manufacturers are better at copying already-developed products than in developing them from the ground up. Production was plagued by inferior tooling and materials until 2 Bi 2 put its own quality-control manager on-site in Taiwan. "By the time they got the specs right," Becoat recalls, "we had exhausted our capital - $2 million." But in 1993, under another license agreement, 2 Bi 2 began using the respected MacGregor Sports Products Inc. name to target discount stores with the Taiwan-made bikes, which retail for $150 to $350.

Licensing victory is sweet for Becoat, who was ridiculed by bicycle giant Schwinn in The Wall Street Journal a few years ago as a crackpot. (Schwinn later went bankrupt.) Becoat doesn't dwell on his victory or Schwinn's failure in the tough American bike market. Instead, he cites persistence, a focus on technical product performance, and the fact that he was willing to make himself and his product consistently visible in the industry.

To drive home his point, he talks about his future and how he first made contact with Eugene Spicer, a 29-year-old attorney and "bicycle engineer" from Evansville, Ind. Spicer, who is black, called Becoat after seeing a notice of the new bike on television. "This man has engineering skills that left me with my mouth open," Becoat says, "but if he tried to break into the industry he wouldn't get to first base." Becoat and Spicer are now working on a prototype for a top-of-the-line two-wheel-drive bicycle called Deuce, aimed at the top end of the market where bikes retail for $450 to $3,000. Becoat expects to see Deuce compete in a future Tour de France, the world's most prestigious two-wheeler race.

Becoat thinks it's crucial to cultivate good information, so that "flying by the seat of your britches," as he calls it, is kept to a minimum. "People need to network, need to get in touch with people that have already done it when they are creating a product," he says. "And make sure you avoid those invention-marketing groups. Use the full disclosure system that comes from the patent office instead."

From Dream to Reality

When David Walker Jr., of Atlanta, was put in charge of organizing recreation for an upcoming family reunion 18 years ago, he found nothing at the store suitable for all ages. So he created Walla Balla, "something that looks like a three-leaf clover. Each cloverleaf resembles a basketball hoop. Underneath this configuration is a string and a ball, and the whole apparatus fastens around the waist like a belt. The object is to use the body, not the hands, to maneuver the ball into each hoop. When persons of different sizes play the game, their bodies move in funny ways."

It was at an integrated party of blacks and whites that walker became convinced that Walla Balla could make money.

"When I carried it there," he remembers, "I observed that people had segragated. We were all in our little groups. I announced that I had something I wanted to get some feedback on, and people started playing. This game brought us together. It was a great icebreaker."

Although Walker, like most toy inventors, likes to see people enjoy the things he creates, he is quick to admit that "when it comes to getting to the marketplace, most of us don't have the interest or expertise."

He should know. For 15 years, Walker's homemade "icebreaker" delighted friends and family, who urged him to put it on the market He came up with a company name, IceBreaker Enterprises, Inc., and developed a rough prototype that he hoped would be licensed by a major toy manufacturer.

But hoping for a royalty deal and getting one were two different things. The hardest part, Walker explains, was "simply getting the right people to see it. It's like breaking into show business. If you don't see the right person at the right time, you may not make it." And the "right person" is probably not a buyer far down the management line. "You want to see a person higher up," Walker says, "the person who can make the decision."

There was an additional problem: The major toy companies he called didn't want to see anything in the rough. He couldn't see quitting his job as an operations supervisor for an Atlanta school district to risk time and money on a product that could well fail in the marketplace. He asked his sons Scott and Steven, both investment bankers, to turn their MBA talents to the marketing and promotion of Walla Balla.

Initially, that meant spending thousands of dollars in savings, mostly the money Walker had made on real estate investments. Walker and his sons contracted with Keener Mold Co. in Ellijay, Ga., to have a professional mold made for the product. Then they went to C.I.M. Corp., a plastic-injection-molding manufacturer in Cleveland, Ga., and had 1,200 fluorescent green-and-orange units made.

Armed with finished prototypes, they approached mom-and-pop stores in the Atlanta area during Christmas 1992 and asked for shelf space for test-marketing purposes. A number of units, priced at less than $20 retail, were sold. This persuaded Scott and Steven Walker to leave their investment banking jobs and start working full time on Walla Balla. Now, surely, a big manufacturer would pay attention.

Not exactly. Licensing agents whom they approached with the prototype wanted one-half of all royalties from a licensing sale to a major toy company. Although royalty arrangements vary greatly, the most a toy inventor can realistically expect by the time negotiations are complete is 10% (5% is more typical) of wholesale sales. It was Walker's turn to say no.

By this time, he had spent nearly $80,000 on IceBreaker: on the professionally made prototypes, the patent applications and to create such packaging and marketing materials as four-color catalog sheets. He risked $5,000 more on a booth at the 1993 Toy Fair. Walker felt the product might pay for itself because of the lack of direct competition and the positive response from the Christmas trial run. He also received a great deal of advice and encouragement from fellow inventor and Atlanta native Lonnie Johnson. "It's a waist-mounted game," he explains, "and it struck me that there aren't many things on the market that you play by using the body and not the hands. The closest thing I could think of was the Hula-Hoop."

Walla Balla more then paid for itself in the form of 5,000 orders from retailers and distributors who attended the Toy Fair. Christmas 1993 is looking good, both for Icebreaker and for C.I.M., which has tooled up for production. Best of all, IceBreaker doesn't have to share profits with any shortsighted toy makers and licensing agents.

Walker acknowledges that it took his sons' business savvy to push Walla Balla from the idea to the business stage, but like Lonnie Johnson, he thinks perseverance was even more important: "Anyone who is creative can come up with ideas, but the most frustrating thing is to come up with a creative idea and find you can't talk about it with people who understand. Don't give up trying to make contact with those who share your interests and experiences. Keep communication going."


There are three ways to legally protect your ideas: copyrights, trademarks and patents. The bottom line of this area of law, known as intellectual property rights, is that you have the legal right to financial compensation from all who use your idea to make money for themselves. Those who don't pay are in violation of the law, and you can go to court to make sure they do pay.

A copyright is the exclusive right to profit from how your idea is expressed, whether it is in the form of a manuscript, work of art or computer software program. Copyrights are valid throughout the author's lifetime plus 50 years. You don't have to spend any money to copyright something; All you have to do is write the word "copyright" or the copyright symbol [C] on the written work. But a copy-right registration ($20 for most works) provides dated protection if you have to defend your rights in court.

A trademark may consist of words, such as a slogan, or pictures, such as a logo, associated with a specific product or service. Filing for a trademark begins with a search to determine whether substantially similar words or images have already been trademarked. If not, then the application may be filed. Usually, this is slightly more complex than filing a copyright registration but far less complex or expensive than applying for a patent.

In 1990, trademark applications numbered more than 125,000, with nearly 3,900 new nonfood retail products (a category that includes toys and games) introduced that year.

There are three kinds of patents: utility, plant and design. Design patents protect the shape of something or the way it looks. Plant patents are used in the agricultural industry. Utility patents, which deal with the functioning of a product or process, apply to product inventions.

Utility patents are the hardest and most expensive to obtain - hard because the inventor must convince the U.S. Patent and Trademark Office that the invention is an original idea, expensive because it takes many months and several thousand dollars, whether or not a patent attorney is involved.

First, there is the Patent Office's fee schedule: a filing fee of $355, a patent-issue fee of $585, and periodic patent-maintenance fees, adding up to nearly 3,000 over the 17-year life of a patent.

Attorneys' fees on a simple patent application are in the $5,000 to $7,000 range, usually spread over a year and a half to two years. Typically, the fees cover the attorney's patent search and expertise in presenting the paperwork in a form acceptable to the Patent Office. Patent applications that do not strictly conform to filing regulations will be kicked back for revision or denied altogether.

You can save money on a patent attorney if you do preliminary work on your own. Start by keeping a dated record of all the development work you do on your invention: notes, drawings, diagrams, detailed descriptions of product and process, test results, market research. You can do a preliminary patent search for ideas similar to yours by going to one of the regional patent libraries located around the country. You can also access patent information on such electronic databases as CompuServe and DIALOG information Services. Doing this legwork before you go to a patent lawyer can save time and legal fees.

You have to apply for a patent within a year of the date you make your invention public, either because you are selling your product or because you have otherwise made your product public knowledge. That's something to keep in mind if you take advantage of the Patent Office's disclosure document program, which carries a filing fee of less than $10 and registers the date on which you publicly disclose the fact that you are working on an idea. This can help you prove that you were first with your idea, but you can't use the disclosure document to enforce patent rights. And you still have only one year to begin the patent application process.

This is complicated; anybody who says it's not is probably trying to sell you something. But if you don't have patent protection, nothing prevents others from knocking you off in the market and profiting from your work.

Even inventors who hold valid patents have had to go to court to enforce their rights. This can be prohibitively expensive, since a lawyer is a necessity in a patent fight. And if the opponents have enough money to outlast the inventor in court, the inventor loses time, money, and the opportunity to do routine business. In recent years, however, courts have awarded damages to inventors who have successfully defended their patents against unfair competitors.


An estimated $14 million a year falls into the hands of companies that for considerable fees promise to guide inventors through licensing, patenting and marketing, Bobby Toole, of the United Inventors Association of the USA, says inventors can benefit from the services of a broker familiar with a particular industry's customs and practices. But reputable brokers make money in the form of a commission or finder's fee, and only in the event a deal is concluded.

Some firms that represent themselves as brokers are actually frauds. Many such firms prey on minority inventors. Toole cites a father and son from East St. Louis, III., who spent $3,000 in borrowed money on one company (now out of business) and got nothing except a lot of promotional material. "The worst part," she says, "was that this guy, a mail carrier, saw that four other guys in his neighborhood had paid this company and had gotten the same stuff he did."

One way to spot unscrupulous invention marketing companies is by the hundreds of dollars in upfront fees they invariably ask for such services as a "preliminary" patent search or market research. The research these companies do, however, is precisely the kind that you can do yourself.

And don't be satisfied with pious disclaimers that a very low percentage of new products make it in the market; you already know that. Find out what specific products the firm has successfully marketed. Then follow up with the inventors themselves. If getting this information proves a problem, walk away.

If you do get taken, ask for your money back. "If people complain right away," says Toole, "the company usually gives their money back because it doesn't want a lawsuit." But buyer beware: The FTC sued a New York company that had collected $5,000 from a number of people. Then the company itself declared bankruptcy, and most clients lost the money anyway.


* U.S. Patent and Trademark Office, 2121 Crystal Dr., Arlington, Va 20231; 703-557-3158. Telephone the PTO's automated information line, similar to the Small Business Administration's Answer Desk, for general information about the full range of PTO products and services. Ask for booklets titled Basic Facts About Patents or Basic Facts About Trademarks, which are specifically designed for inventors and prospective applicants for patents.

* United inventors Association of the USA, PO Box 50305, St. Louis, MO 63105. This organization is a clearinghouse for individual inventor networking groups around the country. UIAUSA fosters the commercial development of new ideas and promotes education and professional development for independent American inventors.

* American intellectual Property Law Association, 2001 Jefferson Davis Hwy., Suite 203, Arlington, VA 22202; 703-415-0780. Membership is chiefly composed of patent attorneys. The mission of the organization is mainly to keep members apprised of information on patent legislation and regulation. AIPLA has a schedule of nonmember fees.

* Patent and Trademark Office Society, PO Box 2600, Arlington, VA 22202. This group, made up of current and former Patent Office employees, sponsors educational outreach programs for the public, and publishes a monthly Journal of the Patent and Trademark Office Society.

* Toy Manufacturers of America Inc., 200 5th Ave., Rm. 740, New York, NY 10010, 212-675-1141. Send for TMA's advice publication for toy inventors.

* Toy & Game Inventors of America, 5813 McCart Ave,, Ft. Worth, TX 76133, 817-292-9021. According to founder Bruce Davis, membership in this organization, ranging from $25 to $125, buys unlimited consultation on an invention. Davis works with a broker; if a licensing deal is made on an invention, Davis, the broker and the inventor share the proceeds.

* Invention Evaluation Program, Baylor University, PO Box 98011, Center for Entrepreneurship, Waco, TX 76798-8011. This program provides a computer-generated market feasibility study estimating the likelihood of success for new products. The Center for Entrepreneurship also provides organization contacts for inventors.

* Inventure Place, Home of the National Inventors Hall of Fame, 80 W. Bowery St., Suite 201, Akron, OH 44308. In addition to sponsoring the National Inventors Hall of Fame, Inventure Place sponsors a whole range of educational outreach activities to help inventors make connections with the corporate community.

* Inventor Assistance Program News, published by Batelle Pacific Northwest Laboratory, PO Box 999, K8-12, Richland, WA 99352, 509-372-4333. This newsletter is published under the auspices of States Inventors Initiative, which is sponsored by the Department of Energy's Inventions and Innovation Division of the Office of National Programs. Its purpose is to support organizations that assist inventors.
COPYRIGHT 1993 Earl G. Graves Publishing Co., Inc.
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Title Annotation:B.E. Report on Small Business; includes related articles on product invention rights, licensing brokers and information services
Author:Brown, Caryne
Publication:Black Enterprise
Date:Nov 1, 1993
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