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Did you ever wonder how some Invention Promotion Firms actually work?
Our Guest Blogger, Terri Phillips, is an inventor of numerous products. She has worked at an Invention Promotion Firm. She now works in marketing, packaging, and product development for an inventor service company that provides a means of distribution for inventors to sell their products through AccessInventors.com. Terri's goal is to educate inventors from the inside out, so she wrote this article exclusively for the readers of AmericanInventorSpot.com.
Here's her article:
There are approximately 450,000 patents filed per year. In 2005, the United States Patent and Trademark Office ("USPTO") issued 151,079 utility patents alone. Many of these patents are filed by individuals who want to have their ideas protected and want to bring their ideas to market.
The USPTO is an agency of the United States Department of Commerce. The overall USPTO objective is to preserve the US's current and future competitiveness and encourage economic progress. One of the USPTO's functions is to grant and assist the American inventor in protecting their intellectual property. The USPTO offers an abundance of information, resources and assistance to individual inventors.
Unfortunately, it is not one of the primary functions of the USPTO to shield patent holders from unethical businesses and shady business dealings. It is estimated that inventors stand to lose a whopping $300 million each year from unprincipled relationships with companies that sometimes present themselves as "invention promotion firms" ("IPF").
Ever wonder how an IPF works to scam inventors from their hard earned money and their dreams? Here's an inside view on how it's done:
Most inventors do not know that once the USPTO grants and issues the inventor his/her patent, the information about his/her patent becomes public. It is vital that the USPTO make patents available to the public to enable other inventors and researchers to do patent searches. Otherwise, inventors risk unknowingly infringing on existing patents. Regrettably, there are many businesses who are not utilizing the USPTO library, publications and its website for legitimate business practices.
Unfortunately, once a patent is made public, the unknowing inventor is vulnerable and his/her name, address and patent number is exposed for the world to see. This is where the unscrupulous IPF typically swoops in.
When an inventor receives an envelope filled with a glossy brochure from an IPF, the unknowing inventor is usually excited that an actual company out there is interested in his or her idea! The inventor believes he/she is closer than ever to seeing their product get a manufacturer and to market. In the marketing materials sent to inventors, inventors are led to believe that a committee hand chose their invention and this is why they have received this envelope - the materials urge them to "act now and make millions of dollars". The inventor does not realize that there is no committee and that the IPF does not even examine the patent's abstract, description or claims to see if the concept in the patent can even be executed.
In some cases, larger IPFs invite the inventor to their company, offering to pay inventors for his/her round trip airfare. In reality, this isn't a free trip, and the inventor ends up ultimately paying dearly for this trip!
Typically, IPFs work hard to convince inventors to work with them and urge the inventor to sign a contract with them. Why do IPFs want a contract? First, it sounds important and makes inventors feel like they are doing something official. Second, it is a legal agreement that is created to bind the inventor and protect the IPF. Intentionally, these contracts are not clearly written, and it nearly takes a rocket scientist to understand them!
An exclusive contract with an IPF typically ranges between six months to a year. Normally, the inventor is not allowed to market his/her invention during the period he/she is under contract with the IPF. The actual contract amount that inventors agree to pay to the IPF varies from hundreds into the thousands per contract. What the inventor is not told is that if a licensing agreement is entered into with a manufacturer, it is also with the IPF. The inventor doesn't realize that the IPF will also be receiving a royalty off the inventor's idea and that the IPF's royalty can be equal to or much higher than the inventor's own percentage!
After the contract has been signed, the IPF then assigns the invention to a product-licensing manager. What inventors are not told is that these product-licensing managers handle no less than 15 to 75 other inventor's products. This person's job is to make calls to manufacturers and retail companies. However, if they call at all, they are calling companies and asking them to enter into a manufacturing licensing agreement. But the unfortunate reality is that manufacturing licensing agreements are a rarity! Most successful manufacturers have in-house inventors and product design engineers working in their research & development departments. As for major retailers, they are in business to sell products not develop the product! Usually, retailers and distributors want a product that is already developed and has somewhat of a sales history. A company is much more likely to enter into an agreement for a product with a proven track record than a product that isn't even in the product development stage.
Many IPFs will design a product sheet for the inventor. Some will call it a "brochure" when in fact, it is only a one sided 8.5" x 11" piece of paper. They ask for little input from the inventor on these. In their view, the less anyone at the IPF spends time on the phone with the inventor, the better!
Most inventors who are approached by IPF only have a crude prototype, sketches or nothing at all. Typically, the inventor has only his/her patent's USPTO image(s), which hardly can be viewed by a buyer or manufacturer. IPFs love the fact that the inventor is not fully prepared because eventually they will offer them other costly services and items at huge markups. Prototypes, animations and three-dimensional drawings bring in big bucks to IPFs. The problem is the renderings/CADS provided by the IPFs are usually not manufacturer ready. How can they be? The IPF haven't spoken to the actual engineers, product manager or the designer at the manufacturer's - because they do not have a manufacturer interested yet!
Product development is a lengthy process, and it takes working closely with the actual manufacturer's engineers and designers to nail down the product's quality and working parts. The prototype service offered by an IPF is nothing but a costly service that rarely ends up looking like what he actual invention should look like or functioning correctly or for that matter, even following the patent's claims!
Some firms suggest that they will take the invention to tradeshows that relate to the invention. The reality is that when the product-licensing manager goes to a trade show they walk the show. So it is nearly impossible for them to carry prototypes. They may try to speak to companies regarding product-licensing deals. But only sales people and marketing directors usually are working booths. These are typically the wrong people to approach about a new product! They are not the decision makers. They will at best give you a contact at their company to contact or just tell you to call their headquarters. This is something you as an inventor can do yourself! Also, it is unlikely that they can get into a good conversation about a new product that hasn't been made yet and is only represented on paper!
The majority of IPFs do not have a booth at a tradeshow. This is for many reasons, but the number one reason is cost! Booth space is expensive! Shipping product and personnel to the show's location is yet another expense. The main reason IPFs do not exhibit inventions is simple: a majority of agents, brokers and buyers for retailers and distributors are not interested in prototypes or a sales sheet that shows a three-dimensional image of what the product may look like. Potential buyers want a new product that is consumer and shelf ready and offer the buyer the answers to the three P's (product, pricing and packaging). The IPF does not know these answers because simply they have no way of doing the price sourcing required to get these answers. This takes visits to the manufacturer producing the product!
Some IPFs state they will send the inventor a monthly report indicating the companies they say they have contacted. The contract does not tell the inventor how many calls they will actually be attempting to make. Nor do they tell the inventor how many they are obligated to contact. When the inventor receives their report normally through certified mail (certified mail has to be signed for; therefore, the IPF is not liable or delinquent per contractual obligation) they see an average of ten companies that have been supposedly contacted or attempted to be contacted. That is only 60 companies contacted for a six month contract!
It cost money to invent! PERIOD! It's an investment for whoever decides to manufacture the product - whether it is the partnering company or the actual inventor. There are much more successful and cost effective options available to inventors than using an IPF. So, make sure to do your research before committing to work with anyone and don't be seduced by the lure of the false promises offered by the IPFs.
NOTE: Only some compaies that promote themselves as "Invention Promotion Firms" are unscrupulous. Just be careful and make sure that any company you deal with is legitmate and will be providing you a valuable service.