Mr. Martin received his J.D. in Law from Nova University in 1986 after fifteen years of marketing experience in the computer industry. His intellectual property law firm handles legal matters regarding patents, copyrights, trademarks, unfair competition, franchises, general corporate procedures and litigation.
WHAT IT IS
A patent is a property right granted by a country to a qualified inventor. Qualifications for an inventor may depend on nationality or reciprocity. The property right granted takes the form of the right to exclude others from using, marketing or selling the invention in the grantor country for a set period of years. The period in America is 20 years from the date of filing and it is NOT renewable. Since a property right can be sold or licensed in whole or in part, a fortunate inventor of, say, a new hands-free telephone headset can invent once and live off the proceeds for 20 years. Three inventions should more than cover one adult lifetime. Yet few inventors find this life of ease.
HOW TO OBTAIN A PATENT
The procedures to obtain and enforce U.S. patents have been honed to a bureaucratic Mount Everest. First, the inventor pays about $750.00 for a search at the Patent and Trademark Office (PTO) for similar inventions. Some inventions stop here. An invention cannot be obvious in view of existing inventions (called prior art). A soupspoon might be obvious if a tablespoon exists in the prior art. Yet the small difference between inventions amazes newcomers. My favorite illustration of small increments is a beach towel with spikes in the corner to hold it down in the wind! One might think the anchoring means for a pup tent would render this patent obvious. It didn’t!
PROBLEMS AND SOLUTIONS OF CONVERTING A PATENT INTO MONEY
The proud new owner of his spiked beach towel waited 1-½ to 2-½ years to obtain his patent and generally paid at least $5000.00 in legal fees and filing costs for his little monopoly. When he strikes out to the market with his invention, his real problems begin. They are: 1) getting money; 2) mounting a court challenge against a blatant infringer; 3) mounting a court challenge against an engineered replica of his invention that simply doesn’t infringe yet benefited from his patent’s ideas.The solutions to these problems could be as follows. First, attend an RMIC1 meeting, stand up and tell an audience of 75 people how great your blanket is-and the line forms to invest. Second, Wal-Mart has been selling an exact duplicate of your blanket. You will need about $500,000 in legal fees to pursue them in court. You will wait at least four years for one trial and one appeal. Your chances of winning are about one in three. My favorite case pits an infringer representing himself (no attorney’s fees) for 10 years (3 trials and 2 appeals) while merrily counting his profits from the allegedly infringing patent! There is nothing called swift justice in any federal civil action (average 1-½ year wait for trial). A hanging judge for a patent case is unheard of. In short, the enforcement of a government granted monopoly in a free enterprise society is a tricky and expensive undertaking. Third, a competitor clever enough to engineer around your patent without infringing may simply leave you out of luck.
My advice to an entrepreneurial inventor is simply this. Find a need and fill it! Don’t collect patents for unmarketable commodities unless your ego needs the decorative wall coverings. If you’ve found a market niche, ask a patent lawyer how best to protect it. Patents, copyrights, and trade secrets make up your choices. Definitely invest in the best protection available before showing your wares to anybody except your dog. Trust nobody, especially big corporations with lawyers, engineers, and experience.
As in most business endeavors the success of a new patent is heavily dependent on the proper marketing. An entrepreneur with a new dishtowel to help the housewife has only a tiny chance of receiving any financial rewards for his inventiveness. How can his limited budget communicate his product to 50 million housewives? His alternative to self-marketing is a license agreement with a large corporation. Extremely few patents are picked up on the outside by large corporations. One major marketing factor is this-if the corporation must pay a royalty for a patent on top of its manufacturing and distribution costs, how can it compete with an entrenched competitor who invents a competitive model on his own? Other reasons large corporations avoid entrepreneurial entanglements include the legal hassle and pride (the not invented here syndrome).The inventor/entrepreneur must be a marketing man to succeed. To illustrate this point let us look at a hypothetical inventor of a magnetized stick on sign that says “made by elves in Bavaria.” The Patent and Trademark Office would most likely reject the invention as too obvious since stick-on signs are too well known. Bt an entrepreneurial businessman could put it on a brochure and potentially sell thousands to BMW, Porsche, and VW dealers nationally. The businessman could use marketing and not inventiveness to achieve success. This proper choice of a reachable market, the German auto dealers, inexpensive direct mail, trademark protection for his company, and an inexpensive product to produce could achieve success without any patent protection.
There are now over 4,676,000 U.S. patents registered in Washington. About 42% of new applications are from overseas. This compares to only a trickle of overseas applications in 1945. The American entrepreneur faces enormous competition from Japan, England, Germany, and other nations. 115,000 new applications are processed each year. A large percentage of new patents never mature into a product and reach the market. Many large corporations never patent their ideas but use secrecy, trade secrets and marketing might to establish mini monopolies. Eighty percent of new businesses started in America fail within five years. Venture capital investors don’t provide the first one to two hundred thousand dollars of seed money to start a firm. With few exceptions, they invest only after leaders have left their jobs, started a new firm, created their product and proven the marketplace. This usually means several very lean years for entrepreneurial leaders trying to start a business. Sparse federal Small Business Loans are being cut even more. 90% of the new jobs in America are in service industries that do not involve new products. Service industry jobs such as fast food retailing, pay only 1/3 the average pay of manufacturing industries. Cost of living increases have forced over ½ of America’s mothers with children under six to work. Because of working parents, over 1/3 of America’s children under 14 need day care centers that don’t exist. Half of our inventive engineers work on federally financed Pentagon projects. These projects now face massive cutbacks with the fall of the U.S.S.R.In summary, it is quite clear that successful inventive entrepreneurs could provide needed manufacturing jobs in America. But something needs to be done to help entrepreneurs.
IDEAS FOR CONGRESS
Congress spent over $300 million to create a 30 trillion byte (30,000,000,000,000) automated patent computer database. The goal is to speed up and improve patent processing in Washington. Here are some alternative uses for some of this money:
- Call your U.S. Congressman and support the Helen Bentley proposed Bill. This pending legislation combines the patent, trademark and copyright offices into one streamlined organization answering directly to the U.S. Congress rather than the Department of Commerce. It also reduces filing and issue fees for individual inventors filing subsequent patents during their lifetime, reduces the total cost of maintaining a patent for twenty years to under $1000 for a small entity, and increases the total costs of maintaining a patent for twenty years to $136,000 for a foreign entity.
- 10% or $30 million if made available to small inventors for loans for seed money could give 300 of our best inventors a shot at starting their own firm which they may not get. If half of these firms succeeded and employed 30 people each, America would have 3000 new manufacturing jobs.
- Third World nations do not have the resources to pour over the 4 million U.S. patents to see what technology might best fit their nation’s needs. The marketing costs for a small inventor to reach the Third World are even more out of sight that to reach America! Yet many inventions such as these have little commercial value in America but hold potential for developing nations:
- A microbiology culture medium that allows a medical lab to diagnose diseases without electricity.
- A mini hover car that doesn’t need roads can travel over deserts and plains.
- A road building formula utilizing shells instead of pebbles makes road building on remote islands economical.
The U.S. Peace Corps is primarily an information distributing service organization in place in many developing nations to help those nations help themselves. A small part of the Patent project could be used to set up a categorizing and dissemination process to requesting Third World countries through the Peace Corps American inventors could expose their patents to over half the world’s population at practically no cost to the United States. Developing nations could prosper more rapidly, and U.S. inventors could find new markets.
- Composers and authors have been organized (BMI2 and ASCAP3). These organizations provide marketing, legal and invoicing services to their members. A government agency or a government loan could get a similar organization going for small inventors. Direct mail, radio and TV ads, venture capital meetings, and other catalysts could improve the chances of our striving inventors. More importantly a legal insurance fund could give some teeth to individual inventors facing $200 billion companies.
- Reduce the cost to defend a patent action in court from the present burdensome figures of $500,000 and up. Low cost administrative boards or arbitration boards or special trial courts or a combination of these approaches could enable a young business to prosecute known infringers based at home and abroad. Mandatory fines of ten times actual damages could be ordered by Congress in cases pitting large corporations against small businesses. How many small businesses can afford to spend $500,000 to prove they’re being robbed?
The multinational technical competition growing in today’s world is reshaping the American workplace. We haven’t really yet felt the impact of China’s entrance into free trade with the west and she holds 1/5 of the world’s population. America’s largest corporations have shrunk by 3 million jobs in our economy the past ten years. The Chrysler bailout so far has been a noteworthy federal intervention into private industry. America’s small inventor needs government help. We need to be inventive at all levels of government to provide the best climate to cultivate our homegrown inventions into our hometown factories.
Footnotes:1Rocky Mountain Inventor’s Congress, Denver, Colorado.2Broadcast Music, Inc.3American Society of Composers, Authors and Publishers