Stop, Thief!

Know The Type

There are basically three types of companies to be wary of: invention development companies, knockoff companies and large corporations.

1. Invention development companies. If you've been looking through inventors' magazines, you've probably seen their ads. An invention development company or invention marketing company offers to help you make your idea a reality for a fee (usually upfront) and a percentage of the profits. These companies provide services such as a patent search, marketing reports, and development and distribution contacts, and their sales approach is usually high-pressure. They'll flatter you by telling you how great your idea is and play on your sense of guilt because you don't have what it takes to develop your idea. Steer clear of these kinds of companies.

2. Knockoff companies. You won't find these companies in the phone book under "Knockoff." They specialize in finding successful products in the marketplace, making another version of it and distributing it to retailers. They vary in sophistication from a one-person company with a P.O. box and a foreign connection to a manufacturer to multimillion-dollar companies that pay their attorneys to advise them on how to manufacture a product without violating your patent.

These companies fit a profile you should watch out for. Their product lines are generally less expensive versions of products made successful by other companies. The names of their products are very similar to the originals. Most of the time, their products are manufactured "off-shore," meaning in a country where labor is cheap, and they will more likely be privately owned, rather than publicly traded. They will not necessarily market the product under their company name but will private-label it for a store. They generally do not use registered or trademark symbols on their products.

You don't find these companies--they find you. They have representatives who attend trade shows. They monitor infomercials, home shopping channels and catalogs looking for the next product to knock off. Another sad reality is that many times retailers team up with them. The retailer gives them a product that is doing well, and the knock-off company makes it for them under the store's name.

3. Large corporations. The large corporation that markets a copy of your idea is a formidable adversary. It has strong brand names and established relationships with store buyers so they are able to distribute a product quickly and in larger quantities than you.

These companies have many advantages over you. In fact, many times these companies have been assigned or have purchased shelf space from retailers. You, on the other hand, are most likely a new vendor with the retailer. You'll have to negotiate to get your product in the store, which can take as long as a year.

The good news is big companies also have the Goliath syndrome: Everything they do is expensive and done on a large scale. Therefore, they aren't going to develop a new product unless they are sure it's going to sell in big numbers. The likelihood of your idea being copied by these companies in the beginning is very low. It's when your idea becomes a success that the big guys will want it.

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This article was originally published in the January 1998 print edition of Entrepreneur with the headline: Stop, Thief!.

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