Patents, licenses…maybe a game of bluff

Unfortunately, the business of new products is a tough one with some products that seem like absolute winners somehow never able to succeed, yet others that on the surface would appear to be worthless, becoming raging successes.

My favourite example is the Rubik Cube. Who would ever have anticipated the success of this product, or indeed the failure of its fast follower that used triangular shapes to try and create a similar challenge?

No Patent – no profit!

The recent “Fidget Finger Spinner” fad is also a great example, so too may be the Yo-yo and the Tamagotchi digital play toy of some years back. Interestingly, the lady who invented the Fidget Spinner reportedly did not seek a patent and evidently she made no money from this amazing fad.

The question of patents is a difficult one, but one thing is for sure, too many are too quick to lodge patent applications, often at great expense and seeking protection in too many jurisdictions. This happens as people move quickly to protect what they believe is a great opportunity. This, even before they have done a proper technical feasibility study, costings, market research or even searched prior art.

All this and yet the percentage of patents that actually turn a profit is frighteningly small. Moreover, even with a granted patent, unless there is the wherewithal to defend an infringement, a patent may be of little value in any case. The exception here for the “small player” is to seek to license the product to a larger company that is prepared to fund an action against infringement.

License Agreements

This raises the issue of the License agreements and the need to spell out clearly on just whose shoulders the onus of defending the patent will fall. Of course, the aim is to put this liability on to the licensee, but in our experience no licensee will take this risk unconditionally. A license agreement is the aim of many, but beware the pitfalls and the tricks that can be played, even with what may seem a water tight agreement.

In one case we were involved with after the event, a license agreement was made and a Royalty agreed, but what was not agreed was at what time after the product was released the royalties payments would commence. This may seem surprising, but none the less this oversight led to unfortunate and costly legal issues, even though the product was an outstanding success.

What’s the message?

Unless you are a major corporation, patents and Intellectual Property Rights can be somewhat a game of bluff with many unforeseen turns, but it’s a game that if well executed can reap rich rewards.

More will be said about this in another post and perhaps an answer to the “64 Million Dollar question”, “what constitutes a good idea” and moreover, how does one systematically search for one?