Most products available on the market today are not protected by intellectual property. In other words, they aren't patented. That makes sense. It takes years--easily as many as four--for an idea to work its way through the patent examination process. Waiting for a patent to be issued before attempting to license an innovation or venture it yourself isn't a wise choice given that speed to market is so important. And in fact, I think getting to market first is one of the best ways of protecting your ownership anyway.
Patent attorneys don't enjoy hearing that the majority of the ideas I have licensed have not been patented--and that the same is true of 99.9 percent of my students. They believe that in order to license an idea, an inventor must have intellectual property. Why wouldn't they? Their jobs depend on it.
But that's simply not true.
What is important is establishing perceived ownership. Patents aren't inherently worth anything. As I learned firsthand, the only way ownership is ever definitively determined is in a court of law. Who wants to have to go to court? I know I don't. My goal is to make money from my ideas.
Don't get me wrong. Companies that you want to license your idea would love for it to be patented. They want to be able to prevent competitors from infringing as much as you do! But the reality is that there are always ways to work around an idea if someone is intent on doing so. The most powerful companies in the world--like Nike and Apple--aren't able to stop me-too products from cropping up. Knockoffs are a fact of life. Frankly, they're an indicator business is good!
Companies that are truly serious about open innovation do not assert that ideas submitted to them must be patented. Plenty of companies out there do, but I feel confident that is going to change. Having that policy makes things easier on them, for sure. It's cut and dried. But at the end of the day, owning shelf space is far more valuable than a patent.
So how do I go about establishing perceived ownership? Let me explain. First, I file a provisional patent application (PPA). Filing a PPA protects my innovation for up to 12 months. Then I use that year to find a licensee.
When I find a licensee that loves my idea, the company has, in essence, three options: It can license it from me, it can try to work around me, or it can walk away.
Walking away because my idea is not yet patented would be foolish. I've heard of companies that tell inventors, "Come back to us when you have a patent." That's weak. The small window of opportunity that exists for most ideas is likely to have passed by then. Trying to work around my idea is similarly unwise. Inventors talk. Ultimately, the company isn't looking toward the future if it decides to shut the door on open innovation.
So here's how I sell them on my idea. I ask the company to pay me a 3 percent royalty rate while my application is pending. This could mean during the 12-month period after I have filed a PPA, and/or when I have filed non-provisional patent and am waiting to see if it going to be issued.
In the event that the patent is granted, I ask the company to pay me a 5 percent royalty. If the patent isn't granted, I tell the company it will only have to pay me a 1 percent royalty rate for my efforts. This strategy guarantees that everyone wins.
And finally, instead of paying for my own patents, I negotiate my licensee to do so. After all, it's in both of our best interests. If you follow this strategy, you won't waste money filing for a patent on an innovation that is not going to result in a commercially viable product. So few patented innovations ever do.
Don't fall into the trap of believing you own anything. You don't. When it comes to business, ownership is a truly gray area. But that's actually a good thing. You just need to find a way to make it work for you instead of against.
Stephen Key's latest book, Sell Your Ideas With or Without a Patent, is out now.