MAKING THE PRESENTATION
When Presenting Your New Product to Company Representatives, it Helps to Be Prepared for What Might Happen.
By James F. Riordan
In the last issue, we discussed a few key elements of a good presentation to company representatives. This time let's go a bit deeper and look at some of the possible responses you may receive.
When it comes to your asking price, wait for them to ask you how much you want for the product. DON'T BRING IT UP FIRST. If they like the product, they will undoubtedly ask, "Well, Mr. Smidlap, how much do you want for your idea" and you should answer them by asking "Well, perhaps I could trouble you to tell me how much the King Widget Company commonly pays for such an idea." ALWAYS LET THEM TELL YOU FIRST.
I have personally gone in to visit a buyer with one of my own products, with a certain figure in mind and had the company tell me they commonly paid MORE than I was going to ask for. The moral is always let them tell you what they think it's worth and then negotiate up from there, if necessary.
Don't be afraid of rejection, but don't anticipate an immediate answer and subsequent instant wealth, either. Be prepared to let the company have 30, 60 or 90 days to review the product. If they then want more time, offer them an "option" period for a mutually agreeable sum. Remember that during the option period, you are precluded from offering the product to other companies.
If they want to make more prototypes to test the product in-house, you may want to give them permission to, but be sure they mark any prototypes they make with "patent pending," "patented," and/or TM for trademark or "circle C" for copyrighted material, whichever applies to your prototype. If they eventually reject the idea, use it as a learning experience and try to get them to give you the real reasons for rejection along with any suggestions for improvement so you can update the prototype before showing it to the next potential buyer.
NOTE: IF YOUR PRODUCT IS COMPLEX, ALWAYS LEAVE DETAILED INSTRUCTIONS, PREFERABLY WITH PHOTOGRAPHS OR LINE DRAWING THAT SHOW HOW TO OPERATE AND MAINTAIN IT. FAILURE TO DO SO MAY RESULT IN THE COMPANY'S KEY PERSONNEL BEING UNABLE TO USE IT AFTER YOU LEAVE AND MAY RESULT IN A DECISION THAT THE PRODUCT IS NOT WORTH PURSUING. Remember--you know how to operate it and fix it, THEY DON'T.
Don't be alarmed if the company calls you back and tells you that their law department is reviewing your patent application to see how strong it is. Remember, the patent rights may be the most valuable commodity you're offering them and it makes perfect sense for them to check out the validity and strength of the protection they may be buying. If they decide you have a strong patent, they will be more likely to pay you their top royalty rate. If they decide your patent can be easily written around, they may decide to pass altogether or offer you a smaller royalty. That's why it pays to have a good lawyer write the patent, one who is familiar with your type of product.
If the company comes back to you with critical comments about your product, DON'T TAKE IT PERSONALLY. Bite your tongue and think about the answer which will alleviate their objection. Remember--AN OBJECTION IS A QUESTION IN DISGUISE, LOOKING FOR AN ANSWER.
After the review period, if the company likes the idea and wants to buy it outright or license it in return for a royalty, you will want to have them sign an appropriate sales or royalty and know-how agreement. The thing to keep in mind here is that a royalty agreement usually runs for the term of the patent, while a know-how agreement can last for the life of the product, or so long as the company is able to maintain a mutually-agreeable market share or annual sales figure. Here is where you may what your attorney to help you with the appropriate legalese and agreements. If you want to do the agreement yourself, David Pressman's book, PATENT IT YOURSELF, has a sample licensing agreement that can be modified to suit your needs.
WARNING: Some companies have been known to sign a licensing or cross-licensing agreement to make, use and sell an invention, then take the product to market and later challenge the validity of the patent in court. That's about as low as you can get, but remember, it's all business to most corporations. The corporation is not sentimentally attached to the new product developer or the product. The corporation sees only the business side. If a court then finds, for any reason, including YOU, the licensor, NOT HAVING ENOUGH MONEY TO FIGHT THEM, that the patent IS INVALID, the company can then break the licensing agreement, stop paying royalties and continue to make and sell the product. Yes--it's sad, but true.
ALWAYS INCLUDE A CLAUSE, IN EVERY LICENSING AGREEMENT, WHICH STATES THAT THE LICENSING AGREEMENT IS AUTOMATICALLY TERMINATED ON THE DATE THAT THE LICENSEE CHALLENGES OR THREATENS TO CHALLENGE, IN ANY WAY, THE LICENSOR'S PATENT, TRADEMARK, TRADE SECRETS, OR ANY OTHER INTELLECTUAL PROPERTY PROVIDED TO THE LICENSEE BY THE LICENSOR OR COMPETES IN ANY WAY WITH THE LICENSOR WITHOUT COMPENSATION.
Your agreement should ideally include a clause which covers unfair competition in the event the patent is found invalid by a third party. Many licensees will object to paying the full royalty if the patent is found invalid by a third party, but it never hurts to include it in the agreement and use it as a bargaining chip.
Another clause you should always watch out for is called "venue" or "jurisdiction." Always try to word this clause so that any disputes arising out of the agreement will be legislated in YOUR state and county. Otherwise, you may find yourself battling a bigger company on its turf, which can prove to be so costly, you might have to give up before you get your day in court.
And finally, if you feel uncomfortable presenting your product, you may want to have a professional assist you with your presentation.
Best of luck to you!
The above article was taken from James F. Riordan's classic book, HOW TO EVALUATE THE POTENTIAL FOR SUCCESS OF A NEW PRODUCT OR TECHNOLOGY. Riordan's highly-acclaimed, 36-point system is a valuable tool for inventors, product evaluators or anyone interested in the invention process. Each section is followed by a comprehensive questionnaire that can be used to evaluate your product.
The highly-recommended book can be ordered by contacting the James F. Riordan Company, 3110 Camerosa Circle, Cameron Park, CA 95682. The company can be reached by phone at (916) 676-4729. The book may also be ordered through the Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501. The phone number is (310) 328-1925.
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