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Fundamental advice for new inventors offered
by Wilhelm Law Service –
specialists in the management of Intellectual Property
Developing a business/management plan
While starting and running the business which arises from the invention is a role which the inventor must play to at least some degree, especially early in the life cycle of the invention, most inventors are not experienced in starting and running businesses. Even a person who is experienced in running a business needs a business plan as part of the process of starting and running a business. If the inventor is inexperienced, it is even more important that he have an invention management plan as a guide to his start-up and running of the business. Ask any banker, any accountant, if there is any person who does not need a business plan. The answer will always be that all business owners need a business plan. Consider even the largest companies, such those which trade on Wall Street - they all have business plans. So should you. Since the business at hand is that of managing an invention, we
will, from here on, discuss the business plan in terms of an invention "management
plan." Why bother with a Business/Management Plan? Particularly, why bother if the inventor intends to sell or license the invention, and not start a business? One of the biggest reasons is that in answering the question, I make the underlying assumption that you want to make money from the invention. It is also important that we acknowledge that it is easy to spend more money than you planned, whether in shopping for a car, shopping for a house, or simply shopping for groceries or clothes. For most consumer purchases, it is generally possible to gradually pay off an excess expenditure, and so many households can live without strict financial planning. Second, it is too easy to assume that customers will buy. Indeed, lack of sales is a very common cause of failure of new businesses, including businesses based on inventions. The greatest benefit that successful small businesses return to their owners is typically not the yearly cash flow. Rather, the greatest benefit which most small businesses return to their owners is the money the owners receive when they sell their respective businesses. And the amount of the sales price money is largely dependent on the profit left in the business after all expenses are paid, including paying the owner a reasonable salary/wage if he/she manages the business, or otherwise works in the business. If there are no profits left at the end of the year, what you have is a "job", not a business, and a potential "buyer" of the "business" will pay only a corresponding price, namely not much. The certainty of finding a buyer for a profitable operating business can be taken to an even higher level if the inventor presents the prospective licensee or business buyer with a business plan, or an invention management plan, based on the results of the inventor's own successful market launch. Assuming successful market launch by the inventor, finding desirable
licensees to fill market segments which the inventor will not reach is
a reasonable expectation. The key is to present prospective licensees
with a realistic management plan, which shows realistic expectation of
a good profit; and then to be able to defend that management plan. Without
that management plan, the prospective licensees are left to reaching
their own conclusions without the benefit of the best available data. How to get to the point where the business generates a profit You develop a management plan which predicts a profit, and you work the plan. This is simple to say, but hard to do. If changes need to be made in the plan at a later date, you make those changes keeping in mind that any time you compromise profits, you are also reducing the "sale price" value of the business, jeopardizing the viability of the business as an ongoing business. The management plan must always be thoroughly reviewed by a third party professional who has no family relationship to the inventor. A typical such third party professional is the inventor's banker and/or accountant. Ideally, both the banker and the accountant are provided with copies of the management plan. Overall, the management plan provides the primary
tool which a licensee company can use in deciding whether to investigate
the invention further.
The most important concept the inventor needs to grasp is that developing the invention, any invention, requires a variety of skills which is greater than what any one person can fulfill. Second, and the first permanent member of the management
team, is the business attorney. The inventor
needs to realize that, whether he starts his own business or licenses
or sells the invention, he will need the services of a good business
attorney. He will also need the services of an experienced accountant.
And almost always needs the services of an experienced banker. The only
time he doesn't need a banker is if the business will never amount to
much. Well, that is contrary to the inventor's expectations. So let's
just say that the inventor needs a
business banker as a member of the management
team. If he expects to have exclusive rights to the invention, whether
to start his own business or in licensing an existing business, he will
need the services of a
patent attorney. If he is thinking about starting
his own business, he should consider engaging, at least part-time, the
services of an experienced
business executive who can at least guide him
through the various aspects of running a business. Let's look at the question of whether you need or want a patent. Simply
stated, a patent gives you the right to prevent others from taking commercial
advantage of the invention. So the critical question asks whether you
care if someone else begins making, selling, or using your invention
without getting your permission. Restated, is it ok with you if someone
else makes money off of your invention, without sharing the profits with
you? If you don't care, then you don't need a patent. If you do care,
then you need to consider getting patent protection. Hire a patent attorney or do it yourself? The next question
is whether you will have a patent attorney do the patent work for you,
or do the work yourself. In principle, the process looks fairly simple.
You describe what your invention is, how to make and use it, and state
your claims as to what you think is patentably novel about your invention.
You send your application to the US Patent Office. The Patent Office
officials look at your application, and grant your patent. It doesn't
work that way. The process described above is generally true, but the
reality of the process is that it is much more difficult than that to
get the Patent Office officials to agree to grant the patent. And even
if you do get that far, any time you attempt to enforce your patent rights,
you can be sure your opponent will hire the best legal minds they can
find, who will try to show the court that your patent is invalid and/or
that they do not infringe your patent. Given that imbalance of expertise,
between you being the one who obtains the patent, and your opponent's
attorneys who seek to negate your patent rights - the probability of
the inventor winning in court is fairly slim. So you need to hire a qualified
patent attorney. Find the patent attorney the same way you find other members of the management team. You ask, and ask, and ask. You interview, slim down the field, and then make the best decision you can make, based on the best information you can gather. Look at patents the attorney has done. Do your best to judge the quality of the workmanship. Look for patents which address generally the same types of technologies as your invention. For example, if you find that the patent attorney has done only electronic
inventions and your invention is mechanical, that attorney may not be
a good fit. But if he has done several mechanical cases, and your invention
is mechanical, his technical skills may be a good fit. In general, in
a patent attorney, look for experience, matching technical skills, and
a compatible personality. Execute the Business/Management Plan While it is critical that you have a good business plan, you benefit from having the plan only to the extent you follow the plan. While that may seem obvious, it is surprising how many business owners prepare a good plan, and then put it away and go about their business, assuming the planning is done. Especially for those who did not "grow up in business," it is vital that to continue to think in terms of planning. However great your business plan is, events never turn out quite like you expected, and so you need to regularly revisit your business plan, and to adjust the plan, and your business activities to events as they unfold over time. While you should not be a slave to your business plan, it is your carefully thought-out plan about how you will run the business in the next few years. Your day-to-day activities should be focused on making that plan come true. At least every six months, revisit your business plan. Compare it to what is actually happening in the business. Decide what you need to do to adjust to actual events in the business, and make those adjustments. Ask yourself a few critical questions:
These are just a few of the considerations you must consider on a regular
basis in order to stay ahead of the changes in your business. Manage
them actively, or risk some nasty surprises down the road. We invite you to contact us at iplaw@wilhelmlaw.com, or call us at 920-831-0100 to speak with one of our attorneys. We will discuss your need for legal representation - and our suitability to represent you.Return to the News/Views page
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Earlier we alluded to the thought that the inventor will need to engage
the help of other people in developing the invention into a full-fledged
successful business. Why is that? How many people does the inventor need
to involve? How should they be selected?