Absolute Techology Law Group regrets to inform you that we must CANCEL the upcoming Inventors' Forum on June 8th due to a scheduling conflict.  We apologize for any inconvenience this may cause you.

Announcement: Inventors' Forum
Tentative Next Meeting: September 15, 2010 at 5:30PM
To be held at:
Marquette University High School
Room 127, Conference Center
3306 W. Michigan Street, Milwaukee

Topic: Manufacturing in China, India and Beyond - Patent and Other Legal Issues
-Letters of Credit
-International Patent Protection
-Quality Control and Delivery
-Contract Enforcement Issues

For more information, please visit our website
 

Some of my clients are asking about adding the design professional to the patent application.  There seems to be some confusion about the law this area.  I am hearing this a lot.

If a design professional is involved in the mechanical design, this is not appropriate.  The design professional can, however, receive an assignment of rights and royalties.

However, in the event that the design professional’s relationship with the client terminates, I am not at all comfortable from a legal standpoint that the design professional would continue to be listed as a co-inventor.  Even if the relationship is amicable for the life of the patent, I do not believe this type of co-inventorship designation is valid in many cases.

Patent law contemplates infinite alternative designs for a product.  Inventors need to have their inventions implemented from an engineering standpoint.   The invention itself and concept of being protected is the concept for an apparatus for an unmet need, and theoretically, there are infinite designs.  Design of one or more alternatives to render the apparatus functional generally does not result in co-inventor status.

Again, the assignment of royalties, revenue and licensing rights is probably the correct and effective legal alternative.

Another issue coming up is the use of non-disclosure agreements.  These agreements are generally not used once a patent application is pending.  However, if there is a quick provisional on file or something outside the scope of the application to be published, these agreements are a good idea.  If in doubt, as to the scope of your patent protection, you can find a free non-disclosure agreement for at www.milwaukeepatents.com.

Announcement: Inventors' Forum
Next Meeting: April 15, 2010 at 5:30PM
To be held at:
Marquette University High School
Room 127, Conference Center
3306 W. Michigan Street, Milwaukee

Topic: Inventor Economics
Speaker: Terry Whipple - Why it's a Great Time to be an Inventor in Wisconsin: The Age of Rapid Change
For more information, please visit our website
 

In June of 2009 President Barack Obama nominated David Kappos, an experienced patent lawyer with more than 20 years of experience, as Director of the U.S Patent and Trademark Office (USPTO).

The change in the atmosphere at the USPTO is palpable. Attorneys and applicants are actually receiving phone calls and substantial guidance from patent examiners to help them get applications allowed. Allowance rates, by all indications are up, and the quality of patents issued will likely be improved by the new atmosphere of communication.

Examiners have generally been receptive from communications with our office in the past, but have reiterated some of the things that they appreciate most in moving applications toward allowance. Our clients appreciate them too, since they invariably increase their chances of getting an issued patent, and decrease their legal fees. I’m passing a few of these practices on to you at this point:

1.       Well drafted, coherent applications - if you, as the inventor, do not understand a patent application, chances are the examiner will have difficulty as well. Do not hesitate to question your attorney on rambling or vague passages. Ask your attorney to explain your claim language to you, just as he will to the examiner.

2.      Reasonable claims - every patent applicant wants the “broadest” patent possible, but examiners will caution you to limit your claims to what you can reasonably make and sell. If you fail to adhere to this advice, you’ll find yourself arguing patent protection for hypothetical products.  Invariably, this is a waste of resources.

3.      Take advantage of examiner interviews - the patent process permits examiner interviews, and dialogue between attorneys and examiners is encouraged now more than ever. Attorneys need to pick up the phone before drafting expensive written responses that may miss the mark. It is amazing how much can be accomplished with a phone call.

Announcement: Inventors' Forum
Next Meeting: March 3, 2010 at 5:30PM
To be held at: Marquette University High School
Room 127, Conference Center
3306 W. Michigan Street, Milwaukee
Topic: Funding Strategies for New Inventions
Speakers:
Mark Fuchs: Launching Products in a Global Marketplace
Dave Linz: Getting Government Funding
For more information visit our website

Overcoming Obviousness

In addition to proving that your invention is novel, you also have to convince a patent examiner that it is “nonobvious.” This means that at the time you came up with your invention, it could not have been evident, without much thought or experimentation, to people who are “ordinarily skilled in the art” to do the same thing.
 

In particular, patent examiners are on the lookout for patent applications that appear to claim a combination of things that are already known in the art. For example, e-mail programs are well known and so are digital music files. A device combining an e-mail server and digital music files would be obvious. Similarly, a cell phone with a holographic image that corresponds to a ring tone to create a “theme phone” is probably not a patentable concept because holographic images are known in the art of telephony and so are cell phones and ring tones. Even in the best of moods, most patent examiners would probably reject the theme phone as an obvious combination of existing elements.

Of course, any invention taken in hindsight is arguably obvious. It now seems quite normal to stick a metal rod in the air to divert lightening; but no one was rushing out in the rain to do it in Benjamin Franklin’s day (except Ben, of course).
Similarly, Thomas Edison’s patent for a light bulb (U.S. Patent No. 223,898) consisted of a combination of known elements (thin carbon filaments, glass bulbs, platinum wires, et cetera) and predictable interactions. There was also an abundance of light-emitting objects, so it might seem obvious to channel a predictable result for an activity commonly engaged in by consumers these days. At the time, however, few people questioned whether Edison deserved a patent.
 

Today there are many arguments you can make to a patent examiner to overcome an obviousness rejection. One position you can take is that your invention solves a problem that the competition did not solve and that commercial success has proven the value of your inventive contribution. Your patent may still be pending by the time you take your product to market and any commercial success of your invention may be often cited by courts as evidence that an invention is nonobvious.
 

In May 2006, as mentioned, the U.S. Supreme Court released its decision in KSR International Inc v. Telefex, an important case on the matter of obviousness that addresses which ideas are entitled to protection under the U.S. patent system. It’s safe to say this landmark case makes it harder for individual inventors to prove that their inventions are not obvious. Simply adding a part to an existing invention is an obvious change. In the KSR case, the Court ruled that “[g]ranting patent protection to an advance that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.”
 

Needless to say, obviousness remains a subjective determination and a hotly debated issue within both the USPTO and the court system.


 

BHD:Design Patents and Their Downsides

Design patents, as compared with utility patents, were introduced in 1842 to protect original and ornamental designs for articles of manufacture. They are generally more limited, and a blur the line between copyright law (which has traditionally protected artistic expression) and patent law (which has traditionally been used to protect functional ideas). A well-known example of a design patent is for the Statue of Liberty, patent number D11,023, awarded to August Bartholdi in 1879.
 

Design patents have, in recent years, been abused by many of the fly-by-night “invention promotion” companies about which the USPTO warns inventors. These companies take advantage of inventors by offering cheaply prepared design patents and charging top dollar for them, when the inventors really should have been filing for utility patents. Design patents are the simpler and cheaper ones to prosecute in the USPTO, because they contain only one claim: for the exact ornamental design and appearance of the product shown in a picture included with the patent. If your competitor makes even a minor modification to the appearance of the product, it may be very difficult (or impossible) to enforce your patent in the marketplace. This is not to say that design patents provide no protection or have no value. If your invention has an iconic look to it that others would want to copy, then a design patent is useful. Also, the use of a design patent with a utility patent provides greater protection to inventors, enabling them to protect the function and look of the product. The Apple iPod, for example has become one of the hottest-selling personal electronic devices of all time. Apple’s intellectual property includes utility patents (such as the click wheel) as well as a design patent on the iconic look of the product. While there are many other MP3 players available, none can legally function and look like the iPod.


 

Sometimes a Picture is Not Enough: Limitations of Design Patents

 One brilliant engineer, we’ll call him Dave Smith, learned the difference between design and utility patents all too well and, ultimately, too late. Smith showed a company representative the type of airplane propeller he had developed, and based on several discussions and a viewing of the prototype, the company was eager to license the invention. It functioned differently from anything out there. The prospective licensor asked to see his patent, and when they found it was a design patent, regretfully had to back out of the deal. The design patent didn’t give the inventor any rights valuable enough to license the product—anyone (including the company’s own engineers) could make a trivial modification to the design and avoid patent prosecution. Smith, in all likelihood, could have obtained a utility patent on the functionality of his invention.
 

Perhaps the most universal obstacle inventors face in turning a raw idea into a product is coming up with the necessary funds at each stage of development in order to keep the process going. The following is a critical checklist of costs to consider in your budget.

• Conceptual design fees: initial costs of designing you conceptual idea
   
• Early prototype: expenses to create "proof of concept" models to test the idea
   
• Patent fees: payments required to protect your idea
   
• Trademark fees: Payments to protect your brand
   
• Engineering: fees paid for having the product engineered
   
• Sourcing: costs to locate a manufacturer (travel) and secure manufacturing (samples, for example)
   
• Final prototype: costs of ordering or producing the final "looks-like/works-like" prototype
   
• Tooling: set-up fees and other costs associated with creating the molds or dies to begin production
   
• Initial inventory: cost of having product available for sale
   
• Shipping of samples: cost of transporting initial product samples from manufacturer to you
   
• Quality assurance: cost of having the product inspected before shipping
   
• Product testing/quality assurance inspection: fees for outside laboratories or agencies to inspect and test your product
   
• Freight: expenses of 1) transporting shipment of product to retailers and 2) delivering it to customers
   
• Duty: taxes imposed on your shipment if it originates outside the United States
   
• Customs: fees imposed on your shipment upon entering the United States
   
• Warehousing: cost of storing your product inventory prior to distribution to your customers
   
• Fulfillment (picking, packing, and shipping): cost of managing your inventory before it's recieved by your customer payment option
   
• Credit card processing: the fee for accepting credit cards as a customer payment option
   
• Customer service (customer support line): costs of managing the ongoing relationship with your customers
   
• Product liability insurance: cost to indemnify yourself (or your company) in the event someone is harmed or their property is damaged as a result of or while using your product
   
• Business license(s): costs for filing for and procuring license
  
  
   

1. A patent is just a piece of paper: View a patent as a tool to protect something that is marketable and therefore potentially valuable, not a piece of paper that's going to make you rich
    
2. Protect what is valuable: If you know you are going to file for a patent protection, do so sooner rather than later to protect your rights.
    
3. Use provisional patents in early stages of development: Use provisional patent applications before you have tested the markets and fully developed your invention.
    
4. Make sure your patent application covers your product: If you begin marketing your invention and later make changes that will add value in the marketplace, amend your pending application or file additional patents to protect those innovations.
    
5. Do your preliminary research: Use Google Patents to perform your own search, keeping in mind that you will need an attorney to search recent applications and foreign patent refrences.
    
6. Know your resources: Visit the USPTO website at www.uspto.gov and become familiar with the free resources that are available for individual inventors.
    
7. Read your patent application before your attorney files it: You, as the inventor, should fully understand every word in the claims and be able to assist your attorney in identifying possible additional embodiments of your invention that should be covered in your claims.
    
8. Make sure all contributing inventors are named: If anyone has contributed to the development of your invention, he or she must be named as a coinventer. Ask your attorney about having any coinventors assign their rights to you before filing the patent application
    
9. Stay involved in the patent prosecution: In the event of an "office action" with a USPTO examiner, you have the opportunity to talk in person with the examiner to help secure the allowable claims.
    
10. Understand the ongoing obligations of patent ownership: Ask your lawyer for a checklist of things you need to do after your patent issues, such as paying maintenance fees to the USPTO at 3 and 1/2, 7 and 1/2, and 11 and 1/2 years. Abandoned patents open the door to hungry competitors.
     

 Next Meeting: September 17, 2009 at 5:45 p.m.
Downtown Milwaukee
Absolute Technology Law Group Offices
135 W. Wells, Suite #518
Milwaukee, WI 5320

(Click here for information)

Recently Milwaukee Journal Sentinel did a three (3!) part series on the patent system, which included some “interesting” information about backlogs and disallowance rates.  It is interesting to me, because it is certainly not the experience in our office.  Patent applications filed in our office tend to get through the patent system in half the time cited by the Journal Sentinel, and our disallowance rate is less than 10%.  The patents  get issued, cover what our inventors need to cover to help them compete, and we do not go over budget without a very good reason. 

 I tried to e-mail the reporters and invite them to our Inventors' Forum, but did not hear back.  I would like to thank them for identifying issues that I think exist for lots of inventors, and we try to avoid for our clients.  However,  I do not think the patent system is so out of control, or that inventors lack leverage when they have novel subject matter.  Much of the success of the patent process depends on prosecution strategy.  I was recently interviewed about this issue on public radio.  I am happy to share our insights with inventors who are not clients.

 While interviewed, I presented the suggestion that disallowance rates and backlogs may also be due in part to the *public* behaviors/trends such a lack of understanding as to the requirements of the office (e.g., all of the software programs and do-it-yourself services on the market).  There is also a trend for attorneys and other applicants to seek overly broad claims (e.g., claims that are just too open-ended for the Patent Office to allow) simply because this is what they taught to do in seminars and in some law firm cultures.  These applicant (and attorney) behavoirs, as far as I can tell, seem to be escaping media and Congressional notice and a lot of blame is attributed to the poor patent examiners.

Can you imagine how overwhelming Legal Zoom must be for patent examiners?  I have seen more than one PhD try to write their own complex application using this service.  Patent laws are designed to protect innovation, and a patent must be specific as to what it is claiming. A patent is a “mini-monopoly” and forecloses innovation .  This means there is a lot of pressure on the patent examiners to get it right when they issue a patent.  The examiner has to decide whether to foreclose whole areas of technology for 20 years based on the document they have in front of them, not on the concept itself.

 Legal Zoom certainly has its place, and reading a book on patents can be helpful .(e.g. my book).  But using using software, etc., without the training to write an application can cause you frustration and jeopardize your rights.  Going to the other extreme and  hiring an attorney that treats your application as a treatise, rather than a commercial tool, can also delay things for you.  And none of this is really not the patent examiner's fault.

Patent lawyers are required have engineering degrees or backgrounds and must pass a special bar exam to draft claims to be called a “Registered Patent Attorney.” Only Registered Patent Attorneys (and Patent Agents) may communicate with examiners on your behalf . But this does not mean that they are always more efficient.  In fact, sometimes they are the worst.  They can get bogged down in case law and argue endlessly with patent examiners to get you legally broad protection.   Yes, “broad” protection is good, but it is worthless if it does not cover things your company is actually ever going to sell.   We attorneys love to brag about broad claims, and this can ramp up a client’s bill, delay issuance or get a patent denied outright without the client ever knowing why they needed such broad claims.  It’s important, as a client, to reign your attorney in to protect only what you ever reasonably contemplate selling.

 Also, the Patent Rules allow telephonic interviews.  Our office always conducts them to make sure we are on the same page with the examiner, and the application can be issued economically with a minimum of amendments and back-and-forth paperwork. Paperwork (in the form of excess office actions, Requests for Continuing Examination and appeals) clogs up the Patent Office, costs a lot of money and generally frustrates inventors.  But the Patent Office is not always the culprit.  Attorneys bill by the hour and certainly we make more money writing responses than making calls.

 I think the Journal Sentinel article was very valuable in starting a state-wide dialogue on this issue.  But focusing on examiners and Patent Office procedures is not entirely fair.  While we are all waiting for patent reform legislation there is a lot that you, as an inventor, can do to expedite the patent process on your end and improve your own allowance rate.

 I welcome responses and comments from those of you who have experience in this area.

We’ve talked a great deal about protecting your invention by applying for a patent; there are other ways to protect your ideas and products, as well.
 

In many cases, a brand can become a very effective way to distinguish your product from that of your competitors. Being the first to enter the market or having an innovative product is important, and even more so if you can distinguish your product with a name and identity that are exclusively yours. In short, crossing the finish line first can be even more lucrative if your product looks good doing it. This is accomplished when you file for a trademark to protect the name and identity of your product. American businesses, from fledgling startups to vast multinational corporations, spend billions of dollars every year to develop and protect their trademarks. Inability to protect your marks can cost your company its competitive edge, which can mean that an otherwise superior product or service will fail in the marketplace.
 

Trademarks can be an enormously valuable asset for a company, the value of which is measured as brand equity. Take for example the beverage Snapple. The company was created in 1972 by three partners who sold fruit drinks to health food stores in New York City. The brand name was short for Snappy Apple, a carbonated apple-juice product whose brand they purchased from a Texas man for $500. As the company grew, so did brand loyalty, and by 1994 sales approached $700 million. The following year, Quaker purchased the company for $1.7 billion dollars. If you added up the inventory, equipment, and all other assets, the sum was far less than the purchase price. The difference was the value of the brand. The purchaser, Quaker, was buying the name recognition and goodwill associated with it.
 

It is also important to note, however, that brands can lose value when they are not managed properly. Following the sale of Snapple, other brands entered the market with better products, packaging, and marketing. As a result, Snapple lost much of its appeal, as evidenced by the 1999 sale to TriArc for only $300 million! Yes, that’s correct. In less than two years, the value of the brand decreased by more than $1.4 billion.

 

What Constitutes a Valid Trademark?

Trademarks protect the words and symbols that identify a product, not the product itself. Any word, symbol, slogan, logo, device, or design that uniquely identifies a product can be legally protected as a trademark.The sole legal purpose of any trademark is to identify the source of goods and services. Unlike other types of intellectual property, such as patents and copyrights, trademarks bear no relationship to invention or discovery. In fact, trademarks must not have a function other than identifying a product. If they do, their owners must generally protect the mark as a component of a product’s design under patent or copyright laws.
 

The Entrepreneur

I’ve Got My Brand On You

A brand is just as important as the product itself—and is just as necessary to protect. Think about the most successful products in America: Coca-Cola, the Big Mac, Google. Not only do these names recall the flavor, taste, or function of the product itself, but we see the products’ brands in our heads, as well. It’s practically impossible to think of a Big Mac without seeing the golden arches. Trademarking is vital to the invention business because it protects your product’s style—which is just as important in the marketplace as protecting its function.

Until fairly recently, U.S. businesses faced a miserable dilemma. Federal law wouldn’t allow them to register a trademark unless they could prove their prior use of it. This meant they had to spend money promoting a mark and risk associating it with another, emerging product or service line without the benefit of registration. In 1988 federal trademark law was revised to allow inventors to file “intent to use” applications on trademarks. Once an application is filed, you must engage in actual use of the mark within six months to make it valid. Extensions for additional six-month periods may be filed, but this can become costly.

 

Protecting the “Trade Dress” of Your Mark

One type of trademark asset inventors and businesses often don’t realize they have is trade dress. Trade dress is the total appearance of a product or service. Although you can register trade dress with the USPTO or file for design patent protection, it’s not always necessary. You acquire trade dress just by using it in the marketplace and being able to demonstrate that the public associates the appearance of your product with its source. There are many court cases in which one party has been found to be misappropriating another party’s established trade dress, or in which the first party is found to be using a product or package design that obliquely references that of another product (owned by the second party) that recognizably uses that form or mark.
 

This type of trade dress is called product configuration. If the shape or appearance of a product has no function other than identifying the source of the product, it can be protected as trade dress. Examples of protectable product configurations are the plastic ReaLemon brand lemon-juice container, which looks like a lemon, or the bottle for Mrs. Butterworth’s syrup, which is shaped and decorated to look like a plump woman in an apron.

 

Developing a Strong Mark versus a Weak Mark: Types of Protections 
 

Looking to save on future legal fees? Then it’s important to consider choosing a “strong” trademark rather than a “weak” one.
 

Some trademarks are legally stronger and therefore easier than others to protect against infringement. Marks that are easy to defend in the face of misuse or infringement by a competitor are known as strong marks. It’s generally true that the less descriptive your mark is of the actual product, the stronger your case will be against infringers. Trademarks are placed into four general categories, based on their relative legal strength: Fanciful marks (for instance, Google, which is completely made up) are the hardest for third parties to challenge, making them legally strongest. Subjectively chosen marks (Apple) are only slightly less strong. And suggestive marks, which suggest the characteristics of the product being offered (Jiffy Pop), are the hardest to protect. Purely descriptive marks (such as flying disc) can’t be protected at all, since they’d prevent people from using necessary language. If you choose a mark that is legally weaker, you won’t be able to exclude other users of the trademarked terms as broadly. You’ll have to prove that alleged infringers have a mark that is a lot more similar in look, sound, or meaning than you’d have to in fighting infringement of a stronger mark. Also, where products are not exactly similar but are closely related, the owner of the stronger mark will be able to exclude similar marks, whereas the owner of a weaker mark will not be able to do so.
 

Businesses such as Google and Microsoft opted for strong marks. They made up their own words, which were easy to register with the trademark office and to protect from competitors. These companies relied on the strength of advertising and marketing to build their brands and give these otherwise meaningless terms extraordinary value in the marketplaces. Other companies opt to use more descriptive marks (like Nutrasweet or Handi Wipes), knowing that they are legally weaker and harder to protect. These companies take the view that there is an advantage to a more descriptive mark because it has market strength: it educates, and is absorbed by, the public more quickly.

 

Death by Generocide 

 What do aspirin, baby oil, cellophane, and shredded wheat all have in common? They’re all perfectly good, distinctive trademarks that have become “genericized” over time. 
 

A trademark becomes a generic term when a court or the United States Patent and Trademark Office finds that, in the mind of the public, the mark has come to represent particular goods or services rather than to describe the origin of those goods and services (person or company). Though it’s a little counterintuitive, this spells disaster for a company. All of its prior advertising dollars and marketing efforts are lost.
 

In order not to become a victim of your own advertising campaign, as the marks in the table below did, take precautionary measures as to how your trademark is actually used. Jell-O, Band-Aid adhesive strips, and Google all provide excellent role models in this regard. Google sends letters to the media requesting that they not use the term “google” as a verb and instead use “Google” as an adverb, Google search, to avoid having their mark become genericized. While you might think a company would be happy that consumers are using its product name so frequently that it becomes synonymous with, say, a word as common as “search,” what it means to the company is that the consuming public has stopped recognizing the specific brand name that the company has worked so tirelessly to individualize. The genericized product essentially becomes no different from the field of competitors—the brand itself ceases to exist. Jell-O calls itself “Jell-O brand” gelatin for this same reason—watch for this next time you see a commercial. Johnson & Johnson now promotes “Band-Aid brand bandages.” They use the generic term “bandages” in order to protect their trademark and prevent other brands of adhesive bandages from benefiting from broad consumer identification with Band-Aid. Kleenex avoids generocizing its mark by making sure that its brand name for a tissue is always capitalized and that its advertising materials make clear that it’s a registered trademark for disposable paper products.
 

Trademarks are what visibly represent your product in the marketplace, and as such, need to be protected as fiercely as patents.

 

Maintaining Your Mark

 To avoid having your mark become “genericized,” here are some cardinal rules of trademark usage:
 

• Use the ™ next to the mark as soon as you begin the trademark process:
  This alerts the public of your intention to protect the mark.
• Use the ® symbol to denote a federally registered trademark:
  This symbol can be used only after you receive a federally registered trademark, and should be used in any materials promoting goods and services covered by the mark.
• Use the mark as an adjective:
  Don’t use the mark as a noun or a verb, but rather to describe the source of the goods. (“I’m going to use the Xerox copier” instead of “I’m going to Xerox it.”)
• Don’t use the mark as the object of a plural or possessive term:
  You won’t find Johnson & Johnson allowing a retailer to say, “We sell a lot of Band-Aids.” Instead, you’ll hear and see references to a “Band-Aid brand bandage.”
• Establish company policies and guidelines:
  Establish and enforce clear policies as to how suppliers, distributors, retailers, and promoters should use your mark by directing them not to use it as an adjective, as a plural, or as the object of a possessive.
• Use your mark consistently:
  Make sure that your mark is spelled and capitalized consistently and correctly and that correct punctuation, such as hyphens, is used. For example, Coca-Cola should never appear as Coca cola; and “Kids prefer Jell-O” should never appear as “Kids prefer jell-o.”

Making Their Mark

See how many brand names you recognize simply by looking at their mark. A successful mark is clear and specific but remarkably versatile .
As an inventor, you have an impressive arsenal of intellectual property assets that you can assemble to protect your invention. Patents, trademarks, copyrights, and trade secrets all serve to create barriers to entry and, more important, as appreciable assets that could be worth a significant amount if they are properly developed and protected.

Next Inventors' and Entrepreneurs' Forum: June 10th 5:45 pm- Downtown Milwaukee Absolute Technology Law Group Offices - 135 West Wells Street (Germania Building). Topics:  Manufacturing Costs - U.S. Southeast Asia and Beyond; Positioning Your Company for Investment - No Registration Required Parking $6

Panelists: 

• Jeff Plitt, Plitt International,  Southeast Asian Manufacturing Expert (Author, Sourcing From China:  A Guide for Small and Mid-Sized Businesses)
• Richard Kranitz, Securities Attorney - will address issues in postioning companies for invesment capital
• Pradeep Nedungadi, Founding Partner, Visthar LLC, a company which has helped companies execute U.S.- India manufacturing for over 17 years
  
  Note: Several inventors will presenting software, medical, electrical and other products to our U.S. and overseas manufacturing, marketing , product design and funding experts. To present your company’s invention or product and/or business plan for feedback please call 414-223-1670. For more information, visit http://www.milwaukeepatents.com/inventors.html

Before you can decide whether your company has a profitable product or position for investors, you need to figure out how much it will cost to make it. This holds true whether your product is a complex software applicaton or a simple plastic molded product.

 Remember that manufacturing/programming  costs are only a starting point in determining the overall expenses for producing your product (don’t forget about shipping, advertising, packaging, insurance, and so on). These are all steps in the distribution chain you need to take into account to get your product to consumers.

Generally, costs to directly manufacture your product should be no more than 25 percent of your retail selling price, and the total distribution costs should be no more than 50-60%.

This means that you must ask prospective manufacturers specific and pointed questions in order to identify any hidden costs and make sure they can deliver the quality you need.

Approach all potential new manufacturers as if they are interviewing to become your partner, because in essence, they are. You are looking for a partner who will be responsible for producing a high-quality product at a competitive price with on-time delivery. Be selective and make sure it is a partnership that can last.

Here are a few questions you can ask, beyond cost per unit, to help you compare various manufacturers who may be considering producing your product, whether you are manufacturing a product domestically or overseas:

What types of products do you generally make? There are many types of manufacturers that specialize in the production of everything from heavy machinery to plastic molded items, chemical formulations to electronics, tools to mechanical devices—to name just a few. To find a manufacturer that has expertise in making your type of product, search www.thomasnet.com or www.alibaba.com.
 

Are you familiar with quality control standards in my industry and the type of quality control testing that will need to be done on my product? In the world of manufacturing, experience can translate into savings. A manufacturer who is familiar with your industry as well as with working with the materials you plan on using will know the effective shortcuts that don’t compromise quality. As an added benefit, they’ll probably be familiar with standards and regulations within your industry. In short, simply comparing cost quotes may not give you all the information you need to determine whether a particular manufacturer is valuable to you.
 

Are you familiar with quality and safety standards for my product or industry? A manufacturer with this knowledge and experience may be worth more to you than one who quotes you the lowest cost. The savings will be in time and research. However, it is ultimately your responsibility to become familiar with, and independently verify, applicable standards (such as “UL” standards for electrical products).
 

What types of materials and processes do you most commonly use? What materials and processes would you suggest for my product? Manufacturers have varying levels of expertise in working with various materials. Moreover, it is possible that your invention may be made from a range of materials (plastic, metals, textiles, rubbers, and synthetic materials). If your invention involves textiles, it’s important to ask questions and obtain samples in order to test for qualities such as laundering and resiliency. Similarly, if you’re working with plastics, it’s important to find out about all the types or grades of plastics and the qualities of each (resiliency, cost, biodegradability, dishwasher safety, and so on).
 

What is your minimum production run? You may not have the funds for large production runs in the early phases and may not have the capacity to warehouse them. Is the manufacturer willing and able to adapt to your changing needs as you begin ramping up your marketing efforts? In seeking sources for manufacturing, try to estimate the quantities you’re expecting to sell as you enter the market, and what your production needs might be if your invention proves to be successful. Ask the manufacturer about quotes for different-size runs (2,000 units versus 10,000 units versus 100,000, for example).
 

How will you charge for samples? How many are you able to provide to me? Good quality samples are important to getting initial purchase orders. Ask at the outset when the manufacturer can provide them, how many, and at what cost.
 

Do you produce product packaging and at what cost? What type of packaging recommended? Ask about the costs of various options and be sure to figure the cost of packaging into your total manufacturing costs, and to obtain packaging samples as well.
 

What are your payment terms? Generally speaking, most new relationships begin with payment up front. However, good payment terms may open up a number of possibilities and marketing strategies. For example, many inventors have been able to launch products without up-front cash by finding manufacturers who are willing to extend credit terms to them. For example, if you get a signed purchase order with a major retailer agreeing to pay you in 30 days, and have 90 days to pay the manufacturer, you are able to pay the manufacturer directly from the sales proceeds without any other type of loan or financing.
 

What is your policy with regard to defective products and returned products? Find out if and how your manufacturer will reimburse you for defective products, including shipping costs associated with returns and replacements. Also try to negotiate with the manufacturer to guarantee that if an agreed-upon percentage (say, 5 percent) is damaged, they will do a new production run.


Always look at your product and be receptive to what can be changed to improve its quality and make it more appealing to the future user. Likewise, be open to improvements or changes that can make your invention less expensive to produce. It is helpful to get some input from a manufacturer early on. Your goal is to identify alternative, lower-cost, higher-quality ways to make your product and to ask others to do the same. Manufacturers, whether domestic or overseas, will tend to produce what you give them. If you give them a talking dog dish to manufacture, they will give you back a talking dog dish. They won’t necessarily tell you ways in which your dish could be made for half the cost or with improved sound quality, or made more visually appealing for consumers, unless you ask for their assistance. By working with manufacturers who specialize in your industry or product type, you gain from their experience and expertise.

 A Final Tip:
 Consider Both Long and Short Term Costs: Be sure to ask your manufacturer to help you consider the long and short-term economics of using a particular process. For example, an aluminum mold may be less costly than a durable steel mold, but if you’re going to make a large quantity over a long period, a steel mold with multiple cavities will produce less expensive parts when you actually calculate the cost of the mold per part. If your goal is to present your concept, and you’re not yet at the mass production stage, it may make sense to forego the mold altogether and go with a rapid prototype.

Upcoming Inventors and Entrepreneurs Club Meetings:

Mequon Inventors Forum:  March 19th 5:30 - Mequon Public Library (Frank L. Weyenburg Public Library) - Three experts (see below) explain how recession is the best opportunity for small efficient businesses and competitive new products:  "Recession is the Mother of Invention."  No advance registration required.

Downtown Inventors Forum:  Apri 29th 5:45 - Downtown Milwaukee Absolute Technology Law Group Offices - 135 West Wells Street: "Patents, Prototypes and Profit."  Speakers TBA.  No advance registration required.

For more information, go to http://www.milwaukeepatents.com/inventors.html

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Next Inventors' Forum:
Downtown Inventors' Forum:  January 29th  - 135 West Wells - 5:30 -7:30 p.m. 
Four Successful Inventors tackle the topic of "The Inventors' Budget:  Patents, Prototypes and Beyond."  No advance registration required

Panel:  Patty and John Mueller, Reed Felton and Darrin Reasby

Next Meeting of the Inventors Club:  January 29th 5:30 - Downtown Absolute Technology Law Group Offices- 135 West Wells - 5:30 -7:30 p.m.  "The Inventors' Budget:  Patents, Prototypes and Beyond"    by Patty Mueller, CEO, The Idea Factory"   (Part II of our Mequon Program) - No advance registration required

For More Information- Visit http://www.milwaukeepatents.com/inventors.html

Questions from the Clubs....

Since we started our Fall 2008 programs, over 400 seasoned and aspiring inventors have already attended meetings at our community Inventors Clubs seeking guidance on a spectrum of questions to get their ideas off the ground.

Questions on disclosing inventions often come up at our Northshore, West Bend and Downtown community Inventors Club meetings, for example …

·         What is a patent? 

·         Will Angel Investors be interested in my product…if they are can I discuss it with them? 

·         What if I publish a thesis on my invention? 

·         Should I tell my employer about my invention? 

·         How can I get manufacturing help without having the manufacturer take my idea?

Do any of these questions pertain to you?

To kick off our year, we will have a JOINT MEETING and wine reception for the Mequon, West Bend and new Downtown Club at the meeting in the Germania Building at 135 W. Wells to discuss the manufacturing, marketing and legal issues that plaque all inventors trying to bring new ideas and products to market whether they are individuals, corporations or involved in large scale research and development.

THURSDAY, SEPTEMBER 25, 2008 from 5:45 p.m. to 8:00 p.m.

Absolute Technology Law Group

135 W. Wells   - Suite 518 (The Germania Building)

Downtown Milwaukee, WI  53203

(Driving directions are available at http://www.milwaukeepatents.com/downtowndirections.html

(NO registration is required. Call 414-223-1670 with questions or visit http://www.milwaukeepatents.com/inventors.html  for more information.

We would especially like to thank the Ozaukee County Economic Development Commission and the Mequon and West Bend Libraries for their continuing support!

Parking is available directly across the street on 2^ND and Wells, and is $6.00 for the evening. 

This brainstorming session/reception will give you an opportunity to meet the manufacturers, marketing design experts, funding experts and patent professionals, including the following:

Corporate Marketing and Licensing:  Jeff Lindsey and Cheryl Perkins from Innovationedge, a company specializing in marketing, commercializing and presenting innovative technologies to businesses and in helping bring new ideas to corporations.  Please visit their website and view their bios at http://innovationedge.com/.

Domestic and Foreign Manufacturing and Sourcing:  Jeff Plitt is an expert in China and Southeast Asian manufacturing alternatives for businesses.  Please visit his site at www.PlittInternational.com.  You will be able to ask questions of experts in India sourcing.  We will also have a number of plastics, tooling, electronic and other manufacturers in attendance (TBA).

Product Design and Prototyping:  Our club is very fortunate to have the continuing support of the talented industrial design firm of Brooks Stevens Design (http://www.brooksstevens.com/) and experienced product designer and prolific inventor Reed Felton.

Funding the Costs of Bringing an Invention to Market:  We will be discussing the launch of Bizstarts, a non-profit organization started by entrepreneur Dan Steininger.  Bizstarts is a new Milwaukee-based organization founded by Dan Steininger to foster entrepreneurship and match promising inventors with seed money.  You’ll also be able to speak with an expert at financing the costs of fulfilling initial production and purchase orders of new products.  (Dylanʼs site is at http://www.prairiebiz.com/).

Patent Issues - Patent Attorneys:  Our staff and attorneys from other firms in the Milwaukee area (TBA) will also be discussing upcoming changes in the law.

We will be announcing the agenda for the upcoming West Bend, Mequon, and Milwaukee Downtown Clubs at this reception.  Attendees will be surveyed on topics of interest and a calendar of meeting dates will be distributed after we convene.   Please bring your ideas of what you’d like to hear about

Suggested topics and speakers we will discuss for the clubs this year include the following:

-- How companies decide which inventions to commercialize

-- Prototyping resources in Wisconsin

-- What it takes for a start-up to succeed

-- When to apply for a patent and why (and when to go to market without one)

-- How to bring your invention to major corporations

-- How to estimate the value of your invention

-- Understanding consumer products companies and the opportunities for outside innovators

-- "Secret" resources at Wisconsin universities and technical colleges that can accelerate your business

-- Finding funding for your business: pitfalls and tips

-- Common mistakes inventors make in protecting their invention and how to avoid them

For more information and upcoming programs click: http://www.milwaukeepatents.com/inventors.html.

If you are an individual inventor or are involved with  a business which relies on patent protection,  you probably struggle to make sense of the patent system as it is. The prospect of new legislation affecting rights that are difficult to understand in the first place can make any inventor feel like a speculator.

Patent Reform Act of 2007 passed the House in September 2007; placed on Senate calendar in January 2008.

Here is a quick summary of the major provisions of the Patent Reform Act of 2007, which we’ll be following closely in the I&E clubs this fall.

What can an inventor recover from and infringement action?  1)  Damages are calculated based on a reasonable royalty for the use of the invention determined by envisioning the result of a hypothetical license negotiation at the time infringement began.  2)  Damages may be awarded for infringement occurring within 6 years of the filing of the complaint or counterclaim for infringement.

How would this legislation change the process?  1) Reasonable royalty limited not to the invention, but to the inventive portion of the invention.  This will significantly limit the damages that may be awarded for patent infringement.  2)  Prohibits damages for infringement committed more than two years before the filing of the complaint or counterclaim for infringement, except on proof that the infringer was notified of the infringement by the patentee.

How would the proposed  legislation change the process?  The public would be able to petition the USPTO to cancel one or more claims in a patent within one year of its issue date.

What is done now?  When determining whether a patent should be awarded, relevant prior art consists of that disclosed by the patentee and that found by the examiner.

How would this legislation change the process?  Anyone may submit prior art for any patent or pending application with an explanation of why the art is important.

New Requirements for Searches Prior to Filing

What are the search requirements now?  Patent applicants do not need to submit a search report and analysis relevant to patentability.

What is done now?  Currently, patent infringement suits may be brought in any district where the defendant is subject to personal jurisdiction.  Generally, this means that a patent suit may be brought wherever the product accused of infringement is sold.

Who wins and who loses?  Restricting venue to congested jurisdictions may increase the time for a patent case to be resolved on the merits, resulting in increased litigations costs.

What is done now?  The Federal Circuit will not consider interlocutory appeals regarding patent claim construction. 

How would this legislation change the process?  A party would be permitted to appeal a district court’s claim construction order before a determination on infringement has occurred and prior to a final judgment on the merits.

Who wins and who loses?  Claim construction is often a key issue in a patent case.  Allowing an immediate appeal of a district court’s claim construction order may reduce litigation costs by avoiding trial based on construction of patent claims that may change on appeal.  On the other hand, this will likely increase the number of appeals, which may cause a delay.  Because the trial court proceedings must be stayed during the appeal, this delay may prejudice the patent holder.

Licensing is a topic that comes up week after week at the Northshore I&E Club as our inventors progress down the path of turning concepts into products. I'm especially pleased to see so many of our local inventors successfully negotiating and procuring licensing agreements.  But I caution that expectations must be realistic, and I've yet to see any of our members become a millionaire overnight by landing a licensing agreement.

That said, licensing can be a good way to turn a tidy profit on a product if your expectations are realistic, and you take the time to learn the ropes.  It is an arrangement where a company pays you  a royalty in exchange for the right to make, sell and use a product which you have patented.  Companies rarely license un-patented ideas.  On the other hand, the patent is worth only as much as the market and development research that underlies it.

Licensing can be a great way for an individual inventor to  profit from an invention without risking a lot of funds up front to develop manufacturing and distribution capability. However, it is almost always less profitable than manufacturing a product.  The real rewards generally go to the party that has the financial wherewithal and is willing to assume the risk of actually bringing the product to market, as opposed to merely conceptualizing it. When you enter into a license agreement, you generally agree to take a small share of the profits from a product you let someone else produce using your patent rights. Manufacturing often yields profit margins in the 50% range.  A typical royalty is 2-5% of the sales price per unit.

The discussions you have with a prospective licensor in the early stages of negotiating a licensing agreement should center on the market for the product, and how close the product is to being ready for market. 

Usually, at the initial stages the inventor and licensee (e.g., manufacturer or distributor) review the projections of profits to be made and come to a sort of shared vision of the market. Remember, the manufacturer is taking a financial risk, in deciding whether to market this new product at all.  At this stage the inventor should build a sense that the economic interests are aligned and that this is too good an opportunity for the prospective licensee to pass up.  Bringing a visible, verbal lawyer in too early sends the wrong message. It can play into something we call the "greedy inventor" scenario, which can kill a deal.

The inventor should be careful to form a good relationship and come off as someone the manufacturer will want to work with at this stage, and possibly on future products. However, the inventor should not give up important legal rights by disclosing too much too soon. The inventor should be careful to check with an attorney before providing copies of patents, patent numbers, etc. at this stage. Unfortunately, some manufacturers lull inventors into a sense that a license offer is forthcoming, when really all they want to do is get information to design around the invention or get the inventors' market concept down. It is by no means the norm, but it happens.

 Licensing is basically contract law, and the specialized aspect of a license is not so much the contract law itself, but rather the overlay of specialized practices to each particular industry. I am not aware of rigid or standard royalty rates in any industry for products, but I am aware of ranges. There are ascertainable ranges for royalties based on industry comparables, but royalty rates within these ranges truly depend on a variety of industry, competition, market and other factors unique to each product. It is the job of the inventor (or agent) to know and address these factors well in pitching their product, and to research comparable products. Advances and minimums (i.e., up-front payments before actual product sales) are negotiable but not standard, since these things depend on the leverage of the inventor and the risk the manufacturer perceives they are taking. Many license agreements do not offer them at all, and sometimes it is quite reasonable they do not.

With the understanding that all products, markets and stages of development are different, here are a few more tips for negotiating a license for an invention that is near-ready for market.

 Consider  leveraging interest expressed by one manufacturer to contact others. There is no prohibition on this. Don't drop off communications with the rest of the industry just because one prospective licensor has started a dialogue with you.  In fact, rev it up. Generating a sense of competition at this stage, when done appropriately, can help an inventor negotiate a higher royalty.  Plus not every deal goes through; it's a good idea to be in contact with multiple prospects. Consider non-exclusive and territorial licenses, and do not rule out the possibility of manufacturing yourself later, which means that the manufacturer will have to view you as a source of potential competition as well. (Manufacturing yourself, when possible, inevitably leads to higher profits.)  

Once the parties have a sense of the market, hopefully the inventor has done their homework. At this stage the inventor should:

•  Know rates of royalty for similar products in the industry.
•  Be prepared to argue why their product justifies a royalty at the
   high end of the range.
•  Work with an attorney to identify additional points for negotiation
   such as actual payment terms, rights retained by inventor, etc

As the inventor, you  should be prepared to make good, logical arguments based on facts and market analysis as to why their product justifies a royalty at the high end of the range. The Licensee/Manufacturer/Distributor will then make a counter offer, etc. Once the parties have reached a general agreement, a lawyer can look at the terms or draft an agreement to ensure that expectations are met and there are no clauses which will surprise the inventor unfairly down the road. Sometimes, there is an advance payment to seal the deal, but many times not. Inevitably, attorneys will look closely at the method for verifying the sales on which royalty payments are made and exclusivity issues.

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How Much Should Inventors Disclose About Their Invention?