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 Monetizing an invention:  License or 'make and sell'

In the world of business, innovation means turning an idea into a product that creates value to a customer. The customer is motivated to buy the product and the maker gets a return.


Basic science research is fundamentally different from research into new product development for commercial applications. Basic science research is founded upon objectivity, not popularity. Profit is never an issue. But the inventor whose goal is to monetize an invention needs to focus on some basic market realities that will determine if an invention can potentially be successful in the marketplace. A large part of this depends on the proposed path that could lead to the invention becoming commercially successful. There needs to be some kind of narrative developed which will provide a path that leads to success. The inventor should outline the nature of the problems that are solved by the invention. The more serious and more widespread the problem, and the better the solution provided by the invention, the greater will be the expectation of success. This can be confirmed after a sufficiently large number of potential customers have shown a positive opinion about the product.

The role of Patents in a start-up business venture depends on the type of business operation, as well as the initial capitalization available. The value of a patent is only as great as it's owner's ability to deter any competitive threats from infringers or from those claiming to be infringed, and that requires a large amount of cash. It is worth repeating that a patent is a sword, not a shield. If you hold a patent, but have few resources to launch an assault against an infringer, then what is its value? In fact, in such a case, a much more effective strategy is to publicly disclose the invention to ensure that it falls into the public domain, thus preventing any strong competitor from attaining the advantage of exclusive ownership of the invention. Such an action allows a bootstrapper freedom to grow by developing a superior product designed to outperform any competitor.

A Note about software: It is important to note that in the case of software, this does NOT mean that the developer should necessarily release the source code in an open source forum, without understanding how such a decision will affect the developer's business. Releasing the source code may not restrict someone else from obtaining a patent on functionality performed by the software whose code was released, then retroactively blocking originator from using his own code. (just one more rathole in IP law)

The simple fact is that a patent is very low on the list of determining factors.


But let's stick to the real world of business. The following applies strictly to the minimalist inventor whose mission is to convert the invention into a world-class business operation. Many factors determine the direction to be taken, including, but not limited to, the personal preferences of the inventor, governed by such things as dedication to the invention (is it a sideline or primary goal).


1. Define your goal

Whatever the goal might be, it essential to try to remain as objective as possible. Far too many inventors tend to fall in love with their creation, lose their objectivity, and pursue a path that leads nowhere. Let's assume that we are past this obstacle, and on the road to a  well thought out decision.

2. Value Assessment

The first step is to get a rough assessment of the value of the invention. This does not mean undertaking a full-blown market study at this stage; however, it is essential to get some understanding, however preliminary, as to whether the invention has some genuine value to the prospective customer. Does the invention address and meet a real and defined need, or does it merely solve a problem that no one cares about.

3. Prototype

Build a working prototype. No matter how clunky, it is important to demontrate that the idea actually works, and will do the job it was designed for.
The very next step is to show the prototype to a few potential end users in order to get outside opinions and frame an estimation of its value to others. Don't include your Aunt Sally, or cousin Jim in this group, for obvious reasons. They won't give you an honest opinion, but instead will tell you what they know you want to hear. Therefore, bouncing your ideas off friends and relatives is pure self-deception.
So you have a working prototype and some indication that the final product may have some value to the end user.

  4. Eureka,  it works, what now?

At this point it is time to decide  the  fundamental process to be used to monetize the invention. This road has two paths: Make or Licence.
The decision can be fairly straightforward. Unless you have the energy and ambition to take on the heavy lifting task of a maker, you should choose the licensing path. Let's take a brief look at each of the paths to show how to get started:

A. Licensing
This is the relatively easy approach to undertake, but not so easy to complete successfully. You can start the process while sitting on your sofa with a laptop on your lap. Go online. Start by preparing a list of potential companies that may be interested in your invention. Examine their products and product lines. If your invention falls neatly into their product line in such a way that it fills an empty niche, there may be a fit. If your invention allows a company to perform an essential task better, faster, or more cheaply, there may be a fit. Contact such companies directly, by identifying the most appropriate person to contact. You can Google the company website, and select the "About Us" web page to identify names and email addresses of individuals. Large multinational corporations likely have a head office where that person can be found. He or she will likely hold a high position, such as Vice President of a technical area, such as Research, or Manufacturing, or something similar. Getting this person's attention is important, since he or she has the required authority and potential interest level to focus attention on your offering. Anyone in lower positions will likely ignore your proposal, especially in a corporation that has a culture of
authoritarianism. In such organizations, employees are less likely to want to
raise issues outside the scope of their job description.

Investigate legitimacy of companies that advertize services to find licencees for inventors. Better yet, avoid dealings with such companies entirely, and focus attention on more likely possibilities.

B. Becoming a Maker
You don't necessarily need a lot of money to begin a business to manufacture and market your invention, provided you have access to some form of production facility, such as a garage, or basement workshop. Why not; Bill Gates started out in a garage. Depending on the nature of the product, you may need more than a simple space to begin production. But you also need to create a business plan and have the vision and passion to carry it out.              
In addition, you may need a team of people who share the passion and willingness to devote their lives to making this work. Such powerful resources can move moutains. However, even this is insufficient without a winning product. This makes it all the more important to establish the markers of a potential winner: clear, unambiguous indicators of high potential demand, not just mild interest.
The maker who is a software developer has the advantage of starting in a home-based office, and expanding into larger premises as the business grows.

Becoming a maker is hard to carry out successfully, because of the high risk. There are various estimates ranging from a low of around four out of  five, to 99 out of one hundred attempts which will fail trying to create such a business.



    

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