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Who Invented the Lightbulb?

The question of who should get credit for inventing the lightbulb is deceptively complex, and reveals several aspects of the history of science and technology worth revealing. Most people would probably answer the question – Thomas Edison. However, this is more than just overly simplistic. It is arguably wrong. This question has also become political, made so when presidential candidate Joe Biden claims that a black man invented the lightbulb, not Edison. This too is wrong, but is perhaps as correct as the claim that Edison was the inventor.

The question itself betrays an underlying assumption that is flawed, and so there is no one correct answer.  That is really what people are referring to with Edison – not that he invented the lightbulb but that he brought the concept over the finish line to a marketable product. Edison sort-of did that, and he does deserve credit for the tweak he did develop at Menlo Park. Instead, we have to confront the underlying assumption – that one person or entity mostly or entirely invented the lightbulb. Rather, creating the lightbulb was an iterative process with many people involved and no clear objective demarcation line. However, there was a sort-of demarcation line – the first marketable lightbulb.

The real story of the lightbulb begins in 1802 with Humphrey Davy He developed an electric arc lamp by connecting Volta’s electric pile (basically a battery) to charcoal electrodes. The electrodes made a bright arc of light, but it burned too bright for everyday use and burned out too quickly to be practical. But still, Davy gets credit as the first person to use electricity to generate light. Arc lamps of various designs were used for outdoor lighting, such as street light and lighthouses, and for stage lighting until fairly recently.

In 1841 Frederick de Moleyns received the first patent for a light bulb – a glass bulb with a vacuum containing platinum filaments. The bulb worked, but the platinum was expensive. Further, the technology for making vacuums inside bulbs was still not efficient. The glass also had a tendency to blacken, reducing the light emitted over time. So we are not commercially viable yet, but all the elements of a modern incandescent bulb are already there. The technology for evacuating bulbs without disturbing the filaments improved over time. In 1865, German chemist Hermann Sprengel developed the mercury vacuum pump, which was soon adopted by lightbulb inventors.

In 1874 Henry Woodward and Mathew Evans filed a patent in the US and Canada for an incandescent bulb with a carbon filament. This seems to have been a commercially viable lightbulb, but the company did not sell well and eventually they sold their patent to Edison. Soon after that, in 1878 William E. Sawyer and Albion Man received a US patent for an incandescent bulb filled with nitrogen with a now familiar zigzagging emmiter. The bulb worked well, but the rigid design made it vulnerable to cracking.

At this point all the basic elements of a modern incandescent bulb are in place. Edison developed none of them. But still the bulb had limitations that prevented it from being commercially viable. It should also be noted that commercial viability was also limited by the batteries of the time and the vacuum technology. Once electrification and a practical way to evacuate a glass bulb existed, the lightbulb was ripe. This is where both Edison and Swan (a British inventor) come it.

Joseph Swan developed his own version of the incandescent bulb, with an evacuated bulb, platinum lead wires, and carbon light-emitting filaments. However, his design still had problems. The carbon filaments were thick and required lots of juice to heat up and glow. Still, Swan receive a patent in the UK for this design in 1879, and in 1881 developed his own lighting company, with improvements on his original design.

At around the same time, Edison was working on his version of the lightbulb. His innovation was to use a thin carbon filament with high electrical resistance. He eventually settled on a carbonized bamboo filament – really his primary technological contribution to the invention of the commercial lightbulb. Edison patented his innovations, and went on tour making sure to align his name with the invention of the lightbulb as much as possible. Swan and Edison eventually sued each other for patent infringement – and Swan won. So legally, one might argue that Swan invented the commercial lightbulb. Edison’s solution was to partner with Swan, forming a joint company, and then totally buying out Swan several years later. So Edison acquired the patents for the lightbulb from others as much as he earned them himself.

Edison does get credit for popularizing the electric lightbulb, and for connecting this to public electricity generation and distribution. Once he had all the patents, his company continued to iterate and improve the technology. This is also where Biden’s “black man” comes in. He was referring to Lewis Howard Latimer. Latimer received a patent in 1882 for a process for improved production of carbon filaments for lightbulbs. Latimer then went to work for the Edison Electric Light Company. Latimer made a significant contribution to the manufacture of lightbulbs, but he didn’t “invent” the lightbulb by any stretch, and is at best a footnote on this interesting history.

While Edison’s contribution to the lightbulb was significant, he did not “invent” the lightbulb. At most he put the last piece into place, acquired any competing patents, and then marketed himself as the inventor. This strategy worked.

But like many stories of both technological and scientific progress, many people contributed over time, and it is not even possible to give credit to any single person.

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Shark Tank’ investor Kevin O’Leary: When it’s time to close your business and call it quits

Key Points

‘Shark Tank’ investor Kevin O’Leary gives advice on when it’s time to close your business and call it quits at CNBC’s Small Business Playbook virtual summit on Wednesday.

Consumer behaviors have shifted and now may be the time to pivot your business in the digital economy, he said.

Never use more than one-third of your company’s free cash flow to service debt or you will never be able to reinvest and grow your business.

Investor Kevin O’Leary believes in tough love, especially now when entrepreneurs on Main Street are trying to figure out whether it’s time to hang onto their business — or shut down.

“This is the time to stay focused and positive,” O’Leary said, speaking at CNBC’s Small Business Playbook virtual summit on Wednesday. “Entrepreneurs are creative by nature and many will live to see another day through this [pandemic]; but others will not. You’ll know in your heart when it just isn’t going to work out.”

He should know. O’Leary started his first business out of his basement in 1986. In 1999, O’Leary and his co-founders sold the company to the Mattel Toy Company for $4.2 billion. He has had several hits since. In addition to investing in successful companies via ABC’s “Shark Tank,” O’Leary founded businesses including O’Shares ETFs, O’Leary Financial Group and O’Leary Wines.

Along with success, O’Leary has also had his share of failures, and that offers an important lesson for entrepreneurs. “Sometimes it just makes more sense to start fresh when you have more certainty about market conditions,” he says. “There is no shame in shutting down a business if you think it’s no longer viable.”

He notes many successful entrepreneurs failed two or three times before launching a venture that works for them. On a personal note, O’Leary projects that 20% of his small private portfolio companies will fail because they haven’t been able to reinvent their business models during the pandemic.

“Remember, you only need one hit to set yourself free in life. This may be the time to pivot and pursue something new in the digital America 2.0 economy right now,” he explained. “Consumer behaviors have shifted. It’s all about selling products or services directly to consumers who have gotten used to this method of shopping since the Covid-19 health crisis began. It’s a whole new generation of people who are planning not to go to stores anymore.”

It’s a brand new world

This is a fundamental shift and it is changing the way business works, O’Leary notes. There are some industries, such as travel, entertainment and weddings, that are permanently damaged until a therapeutic or vaccine is available.

O’Leary’s comments came as policymakers in Washington, D.C., debate another piece of coronavirus relief legislation. The Paycheck Protection Program under the CARES Act expired last Saturday for businesses who have not yet applied for a loan. Lawmakers have yet to reach any agreement over a new aid package for Americans, including new loan programs and second-draw PPP loans for businesses in need. President Trump’s executive orders signed over the weekend, which include unemployment assistance, a payroll tax hiatus, student loan relief and eviction protection, do not cover small business.

“It’s a brand new world,” O’Leary said. “The key is to communicate and forge a direct relationship with your customers. You need to reach out to them and explain the benefit of your product and services. Above all, let them know you are still in business, even if your physical store has closed.”

Shopify and Facebook offer a platform and other tools that can help you make that digital pivot, he said.

There is a big value proposition with a digital model since you can save a lot on operating costs including rent and distribution, but you need to assess another key factor. “Ask yourself, ‘What is my customer acquisition cost?’ and ‘What is the lifetime value of my customer?’ If it costs you $20 to acquire a customer, and you only profit $10 from each customer, you’re going to go bankrupt. This is the simple model everyone should be looking at,” he said.

As O’Leary explains, you must get your customer acquisition costs below their lifetime value (future net profit from the relationship), or your business will never make enough money to survive. You’ll blow it all on advertising.

Keep in mind, taking on debt when your business is in trouble is not always a good idea, O’Leary cautions. If you have no income or revenue I do not recommend taking on debt at this time. “Use this simple formula: Never use more than one-third of your company’s free cash flow to service debt. And that includes the principal and interest payments. That’s the magic number.”

According to the small business expert, the minute you go beyond that amount, you put tremendous pressure on your company. “Servicing debt doesn’t allow you to reinvest in the business. It doesn’t allow you to have any free cash flow to acquire new customers. It doesn’t allow you to grow,” O’Leary said. “It becomes a barbell of weight on you, and that’s very stressful. Sometimes it makes more sense to just let it go.”

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Walmart Marketplace seller additions surge following Shopify deal, up 3x from January

Walmart’s recent partnership with Shopify to expand its online marketplace appears to already be paying off. The retailer in June announced it was opening its marketplace to Shopify’s small business sellers with the goal of onboarding 1,200 new sellers by the end of 2020. Following the Shopify announcement, the marketplace added 3,000 more sellers in June and is expected to exceed 3,600 in July, according to a new report from research firm Marketplace Pulse. That’s triple how many sellers it was adding at the beginning of 2020, the firm’s numbers indicate.

The e-commerce intelligence firm, which works directly with retailers and marketplaces and produces industry analysis, looked into Walmart Marketplace’s accelerated growth following the Shopify deal. It found that within the first six weeks after the June 15th partnership announcement, Walmart’s Marketplace added more than 5,000 new sellers.

In comparison, Walmart’s Marketplace added only 1,296 new sellers in January 2020. That figure grew to 2,290 in April, then 3,296 by June. With July’s estimates included, the marketplace will have topped 15,000 new sellers in 2020 by this month’s end. To date, the marketplace has surpassed 50,000 sellers — which is double in size from June 2019.

Walmart’s marketplace growth is much slower than Amazon’s, the firm notes. But this is, in part, due to its process around adding sellers. Its marketplace requires sellers go through an approval process, which is something it does in an attempt to avoid counterfeiters and other issues. Amazon, meanwhile, adds thousands of sellers daily.

Of course, not all this recent growth can be attributable to Shopify. The pandemic has sent a surge of customers to shop online and sellers are arriving to meet that demand. But Marketplace Pulse believes Walmart has already surpassed its goal of 1,200 new Shopify sellers by year-end.

These newly added Shopify stores aren’t distinguished from other sellers on the website, so there’s not an automated way to count their numbers. But the firm says it manually checked dozens of new additions to confirm their Shopify affiliation and believes the accelerated marketplace growth is closely tied to the new e-commerce deal.

Of course, seller growth is not the only metric used to judge a marketplace’s success. Walmart’s catalog size has actually decreased despite all the new additions, the report noted. Since the start of 2020, the total number of products has shrunk by nearly 15 million, from around 50 million down to 36 million, the firm said. This was related to a few large sellers delisting their catalogs of mostly products in the Home and Books categories, though. Walmart disputes this figure, saying it still has 75 million, not ~35 million, which is stable year-over-year.

The report also added that what matters most is not the size or the number of sellers, but rather the sellers’ performance. On that front, the firm recently found that Walmart’s marketplace, though smaller, was outperforming both Amazon and eBay, driven by the significant increase in Walmart.com shoppers during the pandemic. That increased traffic was also aided by Walmart’s merging of its Grocery app into its main app, a transition that is still underway. Around a month after the merge began, the Walmart app on May 13th became the No. 1 shopping app on iPhone.

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Design Patents Are Useless. So Why Are They Getting a Boost in DC?

When we talk about patents, we’re usually talking about “utility” patents. Utility patents protect inventions that claim to have some practical application or use. (A lot of them still claim things that are actually useless, but they’re supposed to be potentially useful.)

“Design” patents, by contrast, protect only the ornamental or decorative aspects of a design. They don’t protect any kind of functionality. If there’s a functional work to protect, only a utility patent will do.

Because design patents can only protect non-functional works, they’re kind of like copyrights for visual works. And the bar for creativity and originality in a patented design is low—so low that even a standard-issue graphical user interface can get patent protection, as our latest Stupid Patent of the Month shows.

Shown below is a patented design owned by Siemens Healthcare GmbH, a company that’s part of Siemens, the most prolific patent-filer in Europe:

This patent, U.S. Patent No. D872,112, is a relatively standard GUI, with rows of circular icons displayed beneath a header bar. But the patent doesn’t protect everything in that picture—importantly, the portions circled by broken lines are not part of the patented design. The design also includes features that are not in the picture—namely, the colors used in the display. To understand what’s actually been patented here, a member of the public must do more: they can request and pay for a hard copy of the patent from the U.S. Patent Office or navigate through the PTO’s (extremely clunky) PAIR database in the hopes of finding a downloadable version of the originally-filed image.

Between the image’s poor quality and the broken lines denoting unprotected features, it’s practically to impossible to identify what the patented design even is. Is it the specific arrangement of circular icons in the three rows? If so, then why are certain circular icons excluded? Is it the icons that a Siemens designer created to represent things like “users” and “receivers?” If it’s this hard to say what the patented design actually is, it will be even harder to determine whether other designs are infringing. Infringement turns on the comparison between the patented design, the accused design, and the prior art. But that analysis can’t even happen until it is clear exactly what a design patent protects.

The low examination standards, lack of clarity, and resulting low quality of design patents already pose a big problem. But it could be about to get worse. Pro-patent lobbyists are pushing to give design patent owners more power over tech developers and users. They’ve introduced a bill that gives Customs and Border Protection the power to seize products at the border just by sizing them up and comparing them to design patents, whose owners are demanding this new type of special treatment.

Giving CBP so much power will pose a real danger to ordinary technology users. Imagine CBP trying to determine infringement for a patented design like the one above, which is a GUI for medical software. To assess infringement, CBP officers could examine a device, including software applications, to see if they match patented designs in the registry. When those applications pertain to health services, the medical privacy of users may be at risk.

Design patents owners don’t need more power than they have today. Instead, we should be asking whether design patents should exist at all. We already have copyright. It’s not clear that granting extra patent rights to works with no practical application provides any benefit to the public at all.

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Crowdfunding: How to Raise Money & Launch a Campaign

Crowdfunding is an increasingly popular option for any small business looking to raise money and it’s one of the most accessible ways of financing a new idea or product. But launching a successful crowdfunding campaign isn’t as easy as setting up a page on Kickstarter or Indiegogo and waiting for the money to roll in.

In this guide, we’ll look at how to plan, prep, and launch a successful crowdfunding campaign, as well as how to transition your idea into an enduring, self-sustaining business once your campaign is over.

What is crowdfunding?

Instead of seeking a large sum from a single source, like angel investors or a bank, crowdfunding raises small amounts of money from a large number of people—often in exchange for direct rewards—who want to see a project succeed.

 

The concept of reaching a fundraising goal through crowdfunding isn’t new, but over the past decade or so, online platforms like Kickstarter, Indiegogo, GoFundMe, and Crowdfunder have made the process of raising money online for a business, product, or charitable cause easy and accessible to everyone. They serve as virtual matchmakers for entrepreneurs and backers, provide the structure and space to host your campaign, and the ability to accept funding.

How does crowdfunding work?

Crowdfunding sites offer you a place to host your campaign, usually in exchange for a percentage of the money raised. Backers are given various “rewards” based on the level of funding they provide. These rewards can include an exclusive promotional item, advance access to the product being supported, or some form of public recognition—the more funding offered, the better the reward. (Some campaigns offer equity in place of rewards, but in this guide, we’ll focus on the latter model.)

Most crowdfunding websites require you to set a financial goal for your campaign, as well as a timeframe in which to reach that goal, usually between 30 and 90 days. Some platforms let you keep all of the money raised during a campaign, whether you meet your goal or not. Others, like Kickstarter, use an all-or-nothing model that returns funds to backers if your campaign falls short.

If your campaign is successful, you’ll be in an excellent position to transition into a sustainable business by leveraging the audience built through your efforts crowdfunding.

Other types of crowdfunding

Projects that rely on crowdfunding or online fundraising generally fall into one of three main buckets:

  • Equity: Equity crowdfunding gives contributors partial ownership of a business in exchange for the capital they provide.
  • Donation: Donation-based crowdfunding provides no financial rewards or incentives for backers, so it’s most often used for charitable purposes.
  • Rewards: As covered above, any type of crowdfunding campaign that incentivizes contributors with rewards (but not a stake in the resulting business) upon completion can be considered rewards-based. We’ll mostly focus on this approach throughout the rest of our guide.

The benefits of crowdfunding

Crowdfunding offers several valuable perks on top of being a great way to raise startup capital.

Validating your ideas

The more you know about the target market for the product or business you plan to launch, the more you’ll reduce your financial risk, and crowdfunding can be an excellent tool for conducting market research.

Pre-selling your product via a crowdfunding campaign helps validate your creative projects by giving you a solid answer to the question, “Will anyone buy this?” Manufacturing your product without any indication of how it will sell could cost you a significant amount of time and money if it turns out the demand for your idea isn’t strong.

Knowing people want what you’re selling allows you to plan and scale your business with confidence.

Building a following

Having a solid following before you ship your first product is a rare and significant advantage. When done properly, crowdfunding, especially when combined with social media and press coverage, can help you build a dedicated audience that will ideally stay with you as your business grows.

Creating an accessible source of funding

Securing financing can be both time-consuming and difficult for many new business owners. Untested ideas or new business models may not appeal to conservative lenders, like banks, and while finding private investors to help raise funds is an option, you’ll usually need to give up a portion of ownership in exchange.

Running a successful crowdfunding campaign can be a big undertaking, but for many founders, it also can be easier and more rewarding than traditional methods.

What can I crowdfund?

There aren’t many restrictions on what types of products or businesses can be crowdfunded, but the most successful projects tend to have a few key things in common:

  • A specific product. If you look at the biggest crowdfunding success stories, you’ll find most of them focused on funding individual products, not stores. There’s a reason for that: backers tend to want to support tangible items, not broad ideas. For the best chance of success, seek backing for your best product. You can build a store later, after your initial idea has taken off.
  • A targeted, niche audience. Create a product that fills a need or a gap, then find the market that craves it. Often, founders create products that solve a problem that exists in their own lives, like MindJournal did when they couldn’t find a journaling tool designed for what they needed. Develop a prototype that taps into those needs.
  • Strong differentiation. To generate buzz and attract backers, your product has to be something that can’t be found elsewhere. Do your research to ensure your product is one of a kind.
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Before You Begin The Patenting Process, Read This

When I started to file patent applications, I was sure the United States Patent and Trademark Office was against me. My claims were always rejected! I know better now. The USPTO is your friend, not a foe. There is a specific process for examining patent applications. If you’re unaware of how that process works and how to win, you may feel surprised, upset, and indignant upon learning the claims in your patent have been rejected.

Don’t be. It’s all part of the process. To the extent that you can, leave your emotions out of it. Education can help you do that. You must familiarize yourself with what to expect, and act in kind. Don’t let yourself be motivated by fear.

Tariq Najee-Ullah is similarly passionate about empowering inventors and entrepreneurs with good information. He and I connected through the Inventors Network of the Capital Area. For 10 years, Najee-Ullah was a patent examiner at the USPTO who specialized in electrical engineering technologies, including telecommunications, digital communications, wireless and wired computer networking and storage area networks.Last year, he left the Patent Office to become a patent agent and began advising inventors, innovators, startups, and small businesses how to turn their inventions into intellectual property. He’s also an entrepreneur who’s sold on Amazon.

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“Searching for prior art is the number one function of an examiner,” Najee-Ullah told me recently in a phone interview. “They are not there to scuttle hopes and dreams.”

For an invention to be patentable, it must be new, meaning it has not been made public. Essentially, prior art is evidence to the contrary. It includes patents as well as commercial uses of the invention, published articles and other public disclosures.

Patent applications that have value include variations. Searching for prior art will help you come up with variations. In fact, it’s an essential component of studying the market, which is the first step I recommend to anyone who has an idea. Use what you discover in prior art to help you hone in on your invention’s point of difference, which is a fantastic selling tool.

When searching for prior art, you must adopt the mindset of detective. It’s all about peeling back the layers. Moving forward, I will be writing about how to search for prior art specifically, as well as when to let prior art stop you from moving forward.

6 Tips To Get The Most Out Of The Patenting Process

1. Teach yourself how to search for prior art. Even if you end up deciding to hire someone to help you, every inventor and entrepreneur should develop their own basic understanding. When I had my first ‘big’ idea, the two non-provisional patent applications I had my attorneys file right away turned out to be worthless. Why? Because the Washington D.C. firm I had paid to do a prior art search had failed to find two patents that described my invention exactly.

My attorneys told me to move on, but I poured over those patents because I couldn’t let it go. Eventually, I realized they did not include a method of manufacturing, which I could — and did — patent. Take your fate into your own hands.

2. But don’t obsess about finding every bit of prior art, because you won’t. It isn’t a good use of your time. Even when Najee-Ullah visits the USPTO facilities in person to use their software for prior art searching, he said the examiner often finds something he did not.

“That’s their job. That’s how they protect the public,” he stressed.

Here’s some additional food for thought. My longtime patent attorney John Ferrell (who primarily advises technology startup companies) told me that he discourages founders who have big ideas from spending much time researching prior art. The risk being, if they find something, they might give up.

3. Provide your attorney with the best information possible. Najee-Ullah and I agree: Your representative will only be as effective as the information you provide him or her with. You must be the expert. What is your plan for commercialization? Are you truly able and ready to start and grow a company? Have you considered licensing? Other forms of intellectual property might serve your goals better.

4. Take the time to identify the right patent practitioner. Finding someone who is going to be honest with you is best, Najee-Ullah said. Before you begin working with a practitioner, do your research. Get referrals. Read patents the practitioner has written. My student Diana Hertel showed me a great tip.

Visit USPTO.gov and click the green box on the upper right side of the page labeled “Quick links.” Under the column Patents, click PatFT. Then enter the practitioner’s last name in Term 1 and select “Attorney or Agent” in Field 1.

That way, you can find out how recently the practitioner has had a patent issue. You can also assess their experience. When you read a patent, do you understand what is being claimed? It’s important that you do.

Najee-Ullah encourages people to go one step further, and try to determine whether the technology in question was commercialized. How so?

You should also do your due diligence and confirm the practitioner is in good standing with the USPTO.

5. Seek out a representative (be it a patent attorney or a patent agent) who plays well with others. There were times when Najee-Ullah can remember being screamed at by a practitioner for an hour during an interview. Needless to say, the issues at hand were not addressed, let alone resolved. Make sure the individual you hire has the right temperament to get the job done. Your practitioner must be able to dialogue with the examiner.

“Respect the rules and the process,” Najee-Ullah advises. It’s not that examiners want to be tough. If they miss something, and someone else catches it later on, they’ll face consequences, he explained. They’re expected to be very thorough.

6. Take advantage of the resources the USPTO offers — there are many. For example, Najee-Ullah encourages inventors to schedule a meeting with their examiners. Look at the experience as an opportunity to negotiate, not attack.

“Examiners will help you,” he said. “During your interview, give them something to look at. Ask them, ‘What do you think of these features?’”

The USPTO offers free legal assistance to under-sourced inventors as well as classes, events, and trainings.

At the end of the day, you must take responsibility for learning about the patent process. No amount of money can replace education and insight.

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Why You (Probably) Can’t Sell or License Your Patent

Potential clients frequently ask if they can successfully sell or license their patents; unfortunately, the answer is, far more often than not, “no.” Be it a cultural construct of “inventor exceptionalism,” repeated viewing of late-night infomercials by folks who like to tinker, or lazy journalism that elevates human interest stories about successful inventors over a deep explanation of the realities of generating business success, there exists a belief that “if you build a better mousetrap, the world will beat a path to your door.”  The truth is that the only person who is guaranteed to make money from a patent is the patent professional that the client hires to get the work done for them.
This topic is on my mind because I had to, once again, give bad news to someone who was expecting to monetize his patent rights that he believed protected an innovative consumer product. In hearing him explain the concept I thought (and you likely would think, too) “wow, why didn’t I think of that?”

 and “I can’t wait to buy that!” The product clearly solves a long unmet need, and the world may,  in fact, beat a path to the door of whomever successfully gets this product to market. But therein lies the rub: who and under what circumstances will this product get to the consumer?
To this end, the potential client, let’s call him “Bob,” has been a working professional in a particular building-related area for many years. His experience gives him unique insight into problems that exist for consumers in this space and, just as importantly, how to meet longstanding needs with functional product solutions. However, Bob has no desire to be in the product business. This means that in order to get the product to market, he must find someone who is willing to do the hard work of both developing the product and creating a market (i.e., finding customers) for the product.
In my experience, the latter is often the hardest aspect of successful product introduction, but both of these efforts require substantial risks to be taken, often with long-odds. If the product folks, let’s call them “Acme,” are successful in developing a strong customer base for an innovative product—which is the whole point of the risk-taking exercise of getting a product to market—invariably, competitors will want a piece of the action. Notably, these competitors would be required to take fewer risks, which means less investment to achieve as good, or even better, financial returns on their investment, if only because these competitors were effectively given a roadmap for success by Acme. The overall negative effects for Acme may even be worse because it may now be competing in a price eroding market, with these lower prices creating fewer profits. If Acme had realized at the start that its expected profit margins would not be achievable, it is possible that its management would not have even entered the market with Bob’s innovation.
Which now brings us back to Bob, his patent, and whether he can extract any value out of his efforts to date, given his lack of desire to be in the product business. We can use an analogy here that aligns with the understandable world of real estate.
Consider a house that is for sale that exhibits considerable flaws: it has a cracked foundation, the kitchen and bathrooms are outdated, and the roof leaks. If the house is in a desirable neighborhood, those problems may be irrelevant to a buyer because the neighborhood will drive a buyer’s decision. But, if the house is in a less desirable location, other factors will drive a buyer’s decision, for example, whether the flawed house can be renovated for a reasonable price to allow the house to drive a next purchaser’s buying decision or whether the neighborhood will be up and coming in the future such that it might make sense to buy the house and hold it for a market upturn. In either of these situations, the buyer’s tolerance for risk is different from that of the person buying in the desirable neighborhood. All things being the same, the latter will likely be willing to pay much more even for a house with significant flaws.
Much in the same way, a buyer of a patent is either “buying because of the neighborhood,” or “buying in anticipation of something good happening in the neighborhood.” In other words, if there is already value in the patent because there is an existing product with customers, the risk of buying that patent (and the attendant business) is markedly less than if there was only a patent that is not aligned with a business today. Moreover, if there is no product in the market to drive value, the “condition” of the patent (e.g., claim scope, attorney competence etc.) will be of more significance because that is what will drive the price paid today for that asset.
For Bob’s innovation, I could see that his concept was potentially a big deal for the relevant consumer but that the patent covered only a small aspect of the value brought to consumers by his concept. Also, unfortunately, the work done by the attorney to protect that aspect was not very competent. Thus, Bob’s patent was both too narrow and too flawed to drive value in a patent licensing or sale context at least because the risks for someone bringing a product to market that was aligned with that patent would be high, which would mean that a price for that patent would be set very low by a potential buyer. In short, I had to tell Bob that it made no sense to attempt to bring the patent to market.
This was tough information to give, but I am happy to say that Bob accepted my assessment with grace and with a learning attitude. The good news is that Bob’s innovative insights can still be leveraged to generate patent protection that is meaningful. This is possible because his patent did not disclose these innovative concepts. Ironically, this means that the weaknesses of Bob’s patent create business strength that can, in turn, be leveraged to generate valuable patent protection that aligns with that business strength.
After our call, Bob is no longer a “potential client,”– he is an actual client. We plan to generate a series of patent filings that allows him to protect the value obtainable from his innovative thinking. The focus of our patenting efforts will be on the unmet customer needs solved by his insights, as opposed to products that can be defined. Moreover, we will endeavor to hire competent patent people to execute on our patent strategy to make it more likely that Bob will obtain patent protection that will survive patent due diligence with value intact.
Bob and his team now understand that the goal is not to get a patent, but to get a patent that covers customer solutions that are embodied in functional products. This means that he and his team will also be working on generating customers for his innovative product concepts while the patents are being obtained on an accelerated basis. I look forward to reporting to you in a year or so that Bob has not only obtained broad patent protection, but that he is also in conversations with a licensee or buyer for his innovative and well-protected product(s) to which customers are flocking.