Is Product Patent Protection Worth It?

Protect your brand, product or invention from the hazards of consumer product launching and go from idea to product to big brand. With guidance from retail product design and development experts Tracy and Tom Hazard, get the insider secrets to put the right things in the right order with the right resources so you can out design, outsource, and out profit your way to retail success.

Hey, product launch hazards. I'm Tom.

And I'm Tracy. And we're gonna talk today about a subject that we've kind of been covering here, or at least some of the other experts have been covering. So we're. We have Jason Webb and we have Rich Goldstein on the platform, who are both IP attorneys, and they've been covering lots of topics around it. But we want to provide you, because we're inventors, with patents. I don't even know how many we have right now, Tom. It's like 37, 8. 38.

It's approaching 40. We've got a couple pending, but I think 37 or 8 issued.

Right. So what we really wanted to do was just talk to you about. We've been hearing a lot of that. It's really up to you as the inventor or as the product brand, because it's also a brand issue. Right.

Or you as a business.

Are you as a business to make the case for whether or not patenting is valuable to your business and so do patents have a value? Is the question really. But we're going to answer that in context of some typical business cases, because you may not be aware of the business cases that are coming up because you're new to this.

Right.

And we've kind of been through this with both clients and with our own. And so we really want to give you that sort of broad look at what business cases might look like, because it's not always a direct. I'm going to make money, and I know for sure I'm going to make money because it's early when you patent.

Wasn't there another office hours recently, like in the last week or so? Tracy, with one of these attorneys, and they sort of made that statement about is there a business case for patenting? Wasn't that the phrase they used?

Yeah. So what Rich said. Rich did this, and it says, should you patent? Right. And it was now, never, someday in the future kind of thing. And really, at the end of the day, what he really recommended was that you go back and you look and you make sure that you have a business case for it. You know that you're going to market it. You know that you're going to sell it. That there is a business model for which you have a case to patent it, not just because you want a pretty piece of paper.

And I admit, the very first time for me, it was all about paper and getting that patent. I did not have a business plan. And actually, I think it was one of the better patents, but one that.

That was one of the ones that we never really. I mean, we made samples, but we never really commercialized that.

One of the few.

It's one of the few we didn't. Didn't make it to market. And so as we cited before, we have about. And I mean, I think it's a little off because we haven't recalculated it in a couple of years, but it's an 86% commercialization rate, meaning that out of all of those 38 patents we have, we've brought them to market in some way, shape, or form, and they've made money for us or for our clients or.

Another way that I might say that, Tracy, is that we didn't follow through and file patents for things that we weren't sure we're going to go to market. That's why our hit ratio is so high.

Yeah, that's also the case we made this decision not to go to market that there was no business case for. So when we proceeded to go, we had a business case intent, with the exception of that very first patent, because Tom thought it was cool to get a patent. And so what I was going to say is, like, pretty much when I go to inventors forums and groups around the country, that's the model that most of them follow is exactly what you did back in college, because that was when you filed first one. And so we want to kind of give you a broader look at the different types of business cases that might be the case. So marketability is the first one. Right. Do you have a market for it and are you going to sell it?

Yeah, I think these days, certainly with all our experience in it, that's definitely it. You have to either know that there is a market that there's going to be a market for either the patent itself, or there's going to be a market for products that utilize that intellectual property that you're going to sell, or you at least. And this gets into maybe straying away from a business decision. And I do think you say business case, Tracy, and I sort of think of it as it's a business decision. Right, right. But at some point, I think it also becomes a personal decision because you might believe that there will be a market for it. That doesn't mean there will be.

Right. So to go back to one of the things both Rich and Jason on our platform have talked about and both of them have said is that, look, if you are not reasonably certain that there is an absolute financial business case in this case, right. A marketable sales case for which you do this, and you have to, the minute you start selling something, you lose your rights to be able to file patents later. Your clock ticks. So it's a decision to make at that time is like, look, I reasonably believe this is going to sell. I have all of these indicators and all of these checkboxes that I've done research and focus groups and whatever they might have been, I've done some pre sales. I've. Whatever those things might be. That's the case for filing maybe a provisional, not filing a full patent. Right. Because you don't have great certainty. Right. But if you've already done those things and you have your provisional and you're now making the decision about do I file? Because my years up the utility patent and do full patent filing, that's a case at which you're saying, hey, I've given it a year and the things like sold 100 units, like, it's not going to sell. It's not going to be worth the thousands of dollars. I'm not going to recoup it. That's the financial business model that I'm talking about in terms of sales. So sometimes it's a. I have reasonable certainty. So I'm going to go file the provisional. I have definite certainty. I know it's selling, it's doing really well. I'm going to go file my utility because I want that. My design patent, whatever those cases might be that you, whatever types you might be filing, those are good cases to it. But in addition to the financial model, though, you might have other business cases like competitiveness.

Oh, competitiveness is a really good one.

Yeah.

So are you talking defensive or offensive, Tracy?

Hey, let's go for both. Let's talk both. Let's start first with defensive.

Defensive, okay.

Because that one's a little harder to define.

So in terms of a defensive patent.

Strategy, that may be when you're up against a bigger brand. So like, hey, you're coming in and you've carved out a niche for yourself. Like, maybe you're in a Procter and Gamble marketplace, heavy consumer product, good companies with bigger, deeper pockets are coming in. And so maybe you just need to make sure that you've carved out your little niche there. And so you need to go in because you know you have an innovation, but it's small, it's not gigantic. And so, and it is right in their wheelhouse. So you do need to protect yourself there so that they don't just knock you off and do it.

And actually it may be that your, your product or your invention and its potential is not small. It may just be you're small company. And they're like you said, these bigger companies, you're the David, they're the Goliath. To me, that's kind of defensive in that they've got enough money to drag things out in court for years and years if anybody ends up suing each other. But if you have a patent, it's going to be very hard for them to just completely ignore you. And that to me is a good defensive strategy.

Yeah, especially if you have a plan to get bought out by one of them. You might want that as a strategy because now you've hit right in their target zone and you've kind of carved out your little place there and now they're aware of that. Right. And so that may be a really easy way for them to buy you, fold you in, license you, if that's your case and that's what you're looking for doing. Now I want to caution you here though, because being paranoid about bigger guys knocking you off at Rich's office hour, I asked him that question. I was like, how often does that actually really happen that people knock off? And it's from a patented perspective, if you're talking about in the marketplace. Look, it happens with sourcing and other things and these types of things happen on the Amazon platform and E Commerce and but when we're talking about really knocking off true innovation, true invention, true patented products, it happens very little that you get infringed upon and actually go for lawsuit on it and actually go all the way out and do this. It's just not done as often as you think it is because most often you have an idea that actually is a marketable. And so like they're like, eh, who cares? Right. And so until it's selling really, really well. And then at that point the question becomes like with a big brand is like, well, let's just buy them. They'd be faster and cheaper than for.

The big guy to buy you buy your patent at least, if not buy your company, buy and make an asset purchase and buy your intellectual property and then it's win, win, they get to gobble it up, have it, and not have to worry about you trying to take some market share away from them and then you get the windfall of that purchase. I have to say, though, I was kind of chuckling. Tracy, as you're talking about how often does it happen? You get knocked off? Because it happened to us.

It did happen to us.

We did an awesome.

But it's pretty ra.

Okay, maybe it's rare, but it happened to be one of our earliest business ventures in our careers that we did patent as an offensive strategy. We patented this stylus pen and really for Palm Pilots. And I think we've talked about it in another office hour. But anyway, this was a utility patent in terms of the technology of what we did with the tip of the pen. It was really unique and we went and did our homework as to this. I'm going to pause. So we have the stylus pen that we invented and while we did not have any market research, I mean this was a new invention and the whole PDA market was new. It was kind of hot. It was actually very hot at the time. It's sort of pre smartphone, right? It was very hot. And I traveled. We were on the east coast at that point. I traveled to California. I met with the company Palm Computing 3COM at the time and showed it to them under non disclosure. Although if you've seen our office hour or listen to one of our podcasts on nondisclosures, we're no longer big fans of those. But I did have one at the time, showed it to them under non disclosure and they'd never seen anything like it. They thought it was fantastic. So there was some kind of corporate validation. I still think it was. But we also had sales case and no, we didn't have sales before we did this.

We did have sales before. We didn't have provisional patents that we could file back then, but we did have sales. We started selling pretty much within four months of developing that before. Right about the time we met with Palm, we had already had. I mean, our business was in process.

We were in presale, but we had business validation. But I don't think we really had a good market test. I don't think you could say we had real market data that said it was going to work.

By the time we were infringed upon. We did.

We'd have infringed upon. But not by the time we filed the patent.

No, no. But we were building a whole business. This is an old case of old style patenting and venting and that kind of thing. So it doesn't apply here in terms of the business case of it being a defensive choice to.

Oh, no, I'm saying this was offensive.

Right, I know, but we were talking about defensive. So in the defensive strategy of it, yes, we had to defend it. And if we did it all over again, we may have made different choices we've come up with. We may have made completely different choices of it. But the reality was at that time that we were doing that, we had. Our whole business was based on it. And that's a whole nother one that I want to get to next, Tom, but I want to finish up with defensive strategies.

Ok, sorry. I thought we were moved on.

No, because there's one more because we want to talk about it in like defense of bigger brands knocking you off. Right. That's what we were talking about. What about the Staples case study? So I think that's a really good defensive one.

Well, it would have been, yes, it.

Would have went if our client had listened to us.

Staples was. Well, we had a client, we developed these many different things for, but in this case it was office chairs, the kind you would buy at Staples. And they had us come up with new unique designs that would sell better. And we did that. We did it very successfully. There's one particular design that we told them they should design patent. And we're not always fans of design patents, but in this case, it was a unique design.

It was a very unique stitch pattern on it.

Pattern design. It was very unique and attractive. It was especially selling to a lot of women, which was really important. And we told our client who was selling this chair to Staples under their brand, that we recommend you file a patent on this. And they had filed a lot of patents. They followed our recommendations on a lot of things. A lot of utility patents for different functional things we'd invented. But this was a design and we said we should do it. They said, you know what? We don't see the value in that. We're not going to do it. Well, this chair ended up selling three or four million dollars a year.

Really good chair for them.

And yeah, it was very good item for them. And they did well. Well, Staples decided they weren't making enough money on the item. They said, yeah, it's selling really well. We want to make more money on it. And Staples knocked it off. The dead nuts knocked it off. And that's a whole long story that I'm really shortening here. But they dead nuts knocked it off and had our client had that design Patent staples wouldn't have been able to go around them and solicit another factory in China to make a knockoff chair that they sold and they just cut.

Because in that case, it would have been against their vendor agreement as well. So it wouldn't have just been not the right thing to do and not the right legal thing to do, but it would have been against their vendor agreement to do it. But with no IP on it, they didn't have any obligation to not to adhere to that. So this is a case in which defensive strategy makes sense. Right? I mean, so you're thinking about that. So if from a competitive standpoint, it's going to keep you secure in your position in the marketplace, that's valuable too. And that can be a defensive and an offensive strategy. So tying that into the offensive strategies, sometimes that's what we do. We file provisional patents. We believe that we're going to be able to reasonably sell this item. We think it's going to do well in the marketplace. But we also want to make sure we protect our first to market entry as if possible. Right? I mean, whenever possible. So can we do that? Can we fend off that sort of early supplier knockoff? That can happen and that happens more often than the bigger brand knockoff. The bigger brand happens when you sell. Well, that goes the other direction. But you can have an early supplier where they're like, oh, Americans want to buy this, Let me knock this off. And that happens all the time. And so can you do that? Because you can push back and say, hey, I filed a provisional patent and so you have cases. And then of course, if you go further and it starts to sell and then it issues, it gives you also something to stop at the border from a customs perspective. And you have lots of other things that you can do. Utilize tools in your toolbox to be able to utilize that in a defensive way. But you started with this offensive idea that you really wanted to carve this market out for yourself. I think that's the best strategy if you already have access to that marketplace. So if you've got in the back of your mind that, hey, I've already been selling items in these kitchen tools and I've got some new really innovative ones I'm bringing in. I know the market, I'm doing really well. I know how to sell on Amazon or I know how to sell on Shopify, if I've got my own shop and direct response marketing, and all of this is working for me and how I'm selling this. And so I believe I have access to this consumer and I can sell a product. And I think because this product is great, it's going to sell even better than the other things that I have. If you're in that position and you're already in that marketplace, I think you're better off with that kind of strategy and saying it's a good business case for me to spend money on that. Again though, keep it small at the beginning, provisionals if possible.

I think that defensive intellectual property strategies really come into play a lot with Amazon sellers, Tracy.

Defensive and offenses for that matter.

Yeah, for different purposes. But right now I'm thinking defensive meaning I think most Amazon sellers who've been selling for any reasonable period of time know that if you don't have something original you're selling, then anybody else could buy it from your factory or from a distributor. Then if you have a listing that starts rising to the top and getting a lot of sales, people are going to go to school on you. They're going to do Jungle Scout to going to know what you're doing and say, hey, I want some of that market too. I'm going to go and do it. I think I can work the algorithm and the keywords better than they can, or at least as well and take some market away. But if you have something that's patent pending or patented, I think that is a good defensive strategy, not only to keep your competitors at day from going head to head with you, but I think also we hear a lot about Amazon while Amazon is the marketplace. I think a lot of time Amazon becomes your competitor too in certain products because they're always looking for more products to sell direct from Amazon.

Yeah, we have an episode on that as well. That is in a part of the first 50 free that you can access when you come onto the site. And so there is our opinion on that. And the thing about it is that yes, Amazon can become your competitor, but you also have to remember that you don't have any power when you've only filed a provision or the patent isn't issued. You have no power to shut other people down.

Yeah, you can't enforce it.

You can't enforce it there. So it's a deterrent, but it's not an enforcement. And so trademarks are different. So make sure that you're also trademarking and branding your items with your name on it and other things. So one, in case it falls off the truck from your actual tool and your actual product, you can definitely shut that down. But secondly, that is more enforceable so if they're trading off of your brand and trolling or listing, you can stop them if they're utilizing a brand that you've registered and trademarked. So, so make sure you do that as well, because that's a part of what I would say is an offensive and defensive combination strategy. And so, so thinking about that, these are really important business plan ideas. But again, if you don't even know if you should be in this business, if you've never tried selling before, if you've never done, if you've never accessed the market, I mean, you really have to be dive deep into this and make sure that you are reasonably certain and you have outside perspective that is giving you the business case that I believe I can sell this, I believe I have the path to sell this, and I believe I'm going to make enough money to sell this to pay for and recoup the investment value of these patents. And so I think that leads to the kind of model that we talk about all the time, the really money making model, which is really building up an asset value, so an asset portfolio. So this is not a one product, one patent strategy. It's a selection of patents. Right. And so Tom and I talk about this as intentional invention. We've talked about that multiple times already on the platform. But intentional invention is where basically you have your core patent, you know your product is selling and you have your core patent and you surround it with smaller other patents, other ways to make things. So get you a portfolio of patents that makes sense, even if each one of those is very niche. And a lot of times we find that attorneys will advise you, oh, these aren't very enforceable, they're very narrow, they're not really worth it. But at the end of the day, if you're creating this silo, this kind of like fortress around your single, your core patent, that could be very, very valuable. And I think a great example of that, and we may have talked about this before, but I think it's worth mentioning again is the TV stands, Tom.

Sure. Yeah, that's a good one. So we have a client who already had a very well established business at mass market retail in a certain kind of TV stand that was of particular, I would say, value and interest to the market as less expensive flat screen TVs came to be. And they filed for a patent and they had never filed for a patent before. This was really their first big foray into filing a utility patent. And they decided, well, we don't know anything about patents, we're Going to trust the lawyers. And they gave all the information in the files to the lawyers and said, well, the lawyers don't know what to do. And then the lawyers analyze it based on their experience and decide how to structure the claims and what to file. In reality, they didn't really understand the business case for this patent and structured the claims incorrectly, not understanding that. And the patent kept getting rejected in limbo and was never getting over the finish line to become an issued patent. Meanwhile, half a dozen other companies went to school on what our client had invented and made their own manufacturing, their own versions, different designs, but functionally definitely tripping over their intellectual property.

That's the case here. In fact, they didn't do anything inventive. They pretty much just did the exact same thing, believing that it was never going to issue, that it was like some people put patent pending on their products and this is how they saw it. It's like it gone on so long in this patent pending stage, it was entering almost like, I think five years or something like that, and it still hadn't issued yet. So they felt kind of like free rein, like this is never going to issue. It's a false claim of patent pending. Right. And so they treated it, which happens.

It was actually not a false claim.

It was not.

They were still in a pending status anyway. We were clients of theirs in another product category and heard about this trouble they were having and they asked us if we could look at the patent, analyze it and see if we could help give them any advice and guide them. And when I looked at the file and I saw the history of what had happened trying to get this patent, I could see where it got off track. It actually got way off the rails, so far away from what they had really invented. So when I reviewed this patent and this filing, I could see not only had they really invented something, I could see the patent examiner had really no clear understanding of what they had invented. And so we got through that.

Right. But more important than that, in doing so, what we also discovered were three alternative ways to make the product that wouldn't infringe on their patent. Other people could immediately do so if you decided that, hey, this patent's issued, which it eventually did and fairly quickly after Tom got involved, that it issues now, then you send the cease and desist letter. They have to stop. And if they. They're supposed to stop, right. They're supposed to stop right up being a fight.

It does, but least a significant negotiation.

They should stop. But what they could have done was immediately gone to one of these other methods. So instead the company bought those three other methods from us and acquired the rights to make them patentable. And so now they had a whole circle patents. Now they had four patents that surrounded the technology. And actually at the end of the day they found that one of the three ways that we had designed was actually more efficient and cost effective to.

Make less expensive to manufacture and achieve the same result. So ended up being better, it ended.

Up being really valuable to them. So this was a case in which because of that enforcement around it, they made it even more difficult for them to do anything but settle with them and resolve the patent infringement. And so it worked out really well in their favor. And that's what we like to do is we like to fortress around a core patent to really make it valuable there. That's one of the things that we do. But you look at it, if you've only got one product and if you've only got one innovation, it makes it really hard for you to be to command a high value in the marketplace. Because what if interest in your product dies tomorrow, right? So having multiple assets, multiple value, high value products with patents associated with them has been a strategies that we've utilized and helped our clients get multipliers when they go and get evaluated and then possibly their brand acquired and or licensed and so it helps to make that more valuable. So this is a business case as well. I say this because overall I don't want you guys to go willy nilly and spend money on patents. On the one hand, unless you really do have demonstrated value, like there's going to be a business case and for it. And on the other hand I want you to also have build a bigger brand with bigger value and I want you to build that in along the way. So they kind of go in, you have to evaluate them. You really have to weigh those for the stage of business you're in. And so early on in the stages of proving you have a market, stay conservative, right? I mean, I think so, yeah. Stay conservative. File provisionals only until you know for sure that the product is going to take off and has it. Don't file international PCTs too soon because they're very costly. Make sure you have some sales going and make sure you have a plan to get sales in that one year time period. Because that's when you want your answers, right? You want as much indicator that you have a market as possible during that timeframe before you start spending more money. And then the second side of that is that, hey, Once you have a market and you know you have it and your brand has value and it's growing in value now, start doing sort of an asset buildup so that you can command a higher value. Right. And don't do it. False. You can't. I mean, this is not. You don't follow file false patents. Actually invent stuff. Right. So actually do that. Come up with innovative things that are worth patenting and valuable. And Nooch pointed out, it's like, too often you think you have something valuable, but then you go to do a search and you're like, oh, they've done that.

You definitely need to do your due diligence. Yeah, you really do have something. Because just because you think you do it before, you hadn't seen it before, doesn't mean that it hasn't existed. That's actually a whole nother subject.

It's totally another subject.

But, you know, you mentioned about having a portfolio and an asset portfolio pattern, Tracy, and I think that's true. When we did this pen, this was it. I mean, we had a couple other things we invented a few years later in that company. But this was. Our entire company was based on this one patent.

Right. There were four versions of it. And so. But that doesn't count. Like, essentially, it's still the same thing. Right. You don't have a full product line of product brand.

You have different sizes and different colors and different models.

Right.

And that's not the same thing as having a product line. Let's be really clear. A product line diversifies you. So. Yes. I mean, when you're thinking about that is like, how valuable is your company? Well, it's just one thing, really. At the end of the day, it's one thing.

It might be a big thing, Might be, might not also. But yeah. And this is the one we actually did get knocked off on, just to put that out there, because you say it doesn't happen. That are. Rich said it doesn't happen that often. And I agree, it may not happen that often, but it happened to one of our clients and it didn't file a patent, and that happened to us, even though we did file a patent. And.

But I think that where it happens, though, is it doesn't happen to paranoid inventors who still aren't on the market yet. Like, this is really the case. So you've got patents and you're sitting on a shelf somewhere. It doesn't happen. Okay. That happens accidentally in sort of scope of things. And maybe it wasn't just so innovative and it wasn't in or it was already kind of out there in the mainstream and you just happened to patent it sooner. But it's very rare that without sales, without proving that you have a marketplace that people are even thinking about this. In our case, this was a high intensity new market that people were examining and working within. And you can see how that would happen like in cell phones, right? You can see in cell phone cases and all of these things, everybody's tripping over each other and patents because there's so much form and function you have to work within. And so the innovations are like minor, right? So you can see how. And everybody's working on one, right? Because there's lots of market. So you could see how that could happen in that space. Right? So to truly do something, stepping out and very, very innovative, though, is highly unlikely that they would do that. Right. And in this particular case, the whole way that it happened was sort of an insider intellectual property leak way, for lack of a better way to describe it. But basically they knew what we were working on and then just ignored the.

Fact that we had a patent pending and then actually filed one of their own in the process. The good news is we actually prevailed and invalidated theirs and they ended up. Actually we ended up owning theirs at the end of the day, which then we killed that patent application. But so our patent was very valuable and we sold it off eventually as the palm economy changed all sorts of things. But so we're big believers in patents, no question. But we're not believers in patenting everything. We're big believers in patenting things that have enough value, that have enough potential, business potential, market potential, and patenting for the right reasons. Things that are really going to help move your business forward, not just be a big expense that is going to suck more of your precious capital unnecessarily.

So valuable patent protections come from having a business case, having a sales case, having a marketability, having commercialization available to it. And that's what we really just wanted to stress with you today, so that you could go back and take the advice that Rich and Jason have been giving you on this platform about whether or not what types of product patents you need and should you do it and all those things. But go back and think about what that looks in practice in a business that maybe you don't understand or you don't know. So we want to invite you to ask us questions about that at any time. Come on another office hours and just ask us questions about that. But we wanted to jump on today and just follow up these episodes so that you could have a practical experience and practical understanding of what that looks like as a product inventor or product brand. And look at that from your eyes and not from the outside looking in from an attorney looking towards you. Right. So kind of get a perspective of that. And that's what we hope you really get off of all of the office hours on Product Launch Hazards is you'll get from the many different is these different perspectives on what that means for licensing, for patents, for developing products, for sourcing. Like you get different viewpoints all along the way on so that you could sort of form a more well rounded picture of where the hazards lie, where the problems happen, but also where the opportunity is and where you want to build your business.

Sounds great, Tracy. Why don't we leave it there?

Yeah. So thanks again for joining us and thank you for being a member of Product Launch Hazards and we look forward to seeing you on another Office Hours.

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