From Idea to Market
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On one side of the hall at this year's National Restaurant Association Show in Chicago, a first-time inventor was displaying a handsome menu folder that subtly lights up, letting diners read what's on order without destroying the dark-and-moody ambience. On the other side of the hall, another first-time inventor was proudly showing a check folder that, yes, lights up when diners are ready to pay the bill.
Two similar new products hitting the market at the same time--but what it took to get them there could not be more different. The menu folder's creator, Gillian Dinnerstein, of Miami Beach, Fla., spent four years and hundreds of thousands of dollars hiring engineers and manufacturers. Celestina Pugliese, of Melville, N.Y., needed just seven months and $11,800 to get her light-up check presenter to the show floor.
Part of the difference was complexity, but most of it came down to Pugliese using a network of new internet sites that lets you bring a hazy idea to reality for a fraction of the price, from hiring patent attorneys to linking up with manufacturers. The bad economy has driven thousands of these professionals to troll the web for work, which means if you have a bright idea, this is an ideal time to try to turn it into reality.
What does it take to bring a product to market this way? We took a close look at the experiences of Dinnerstein and Pugliese, who each learned valuable lessons, and we consulted experts and advisors, too. They were quick to point out that the odds of making millions off a first invention aren't high. Only about 10 percent of "new" ideas are unique enough to receive a patent, and only 2 percent of those are commercially successful, including patents granted to large corporations. Ronald Docie Sr., an Athens, Ohio, inventor's agent and author of The Inventor's Bible, estimates that barely one in 1,000 independent inventors makes more money from his or her creation than he or she originally invested. Which are most likely to succeed? Even seasoned product developers like Ken Tarlow, owner of Tarlow Design in Corte Madera, Calif., cannot predict.
"A few years ago, I had a woman who wanted me to design a motorized revolving tie rack," Tarlow says. "I was skeptical, but the manufacturer took our prototype to the Housewares Show in Chicago and came back with 200,000 orders."
Is This a New Idea?
Most first-time inventors get ideas straight from their own lives. Dinnerstein says that whenever she and her late husband visited a restaurant, "We could never see the menu." She hit on the idea of a menu holder with a little light that could be turned on. The light, she says, had to be energy-efficient, with a rechargeable battery.
While Dinnerstein was squinting at menus, Pugliese and her former boyfriend were being annoyed by waiters asking whether they were ready to pay the check. "He'd been in the restaurant business for years, so I asked him, ‘Is there nothing out there, like a light that guests can turn on, to alert the server that they're ready to pay?'"
And, voilà, Pugliese had the concept of a check presenter with a lighted check mark you turn on when you're ready to pay your bill.
The next step for both of them was to find out if their idea was unique. And that's the next step for anyone hoping to bring a new product to market. First, search through the more than 7 million patents for products that already exist. The U.S. Patent and Trademark Office reports that 2,620,632 "utility," or new invention, patents were granted between 1963 and 2009 alone. To begin your search:
Go to the site of the U.S. Patent and Trademark Office, uspto.gov, for tips on searching the office's vast online database. Check out the Inventors Assistance section, which has information for new inventors and links to inventors groups in your state.
Or drive to one of the 81 patent depository libraries (listed on the PTO site), where librarians can help.
Or use Google Patent Search. And do a keyword search, too, for references to products like yours.
For additional search tips, go to Docie's website, dimwit.com.
If, during your patent search, you find your invention already exists, "stop right there," says Dinnerstein's patent attorney, Laurence A. Greenberg of Lerner Greenberg Stemer LLP of Hollywood, Fla.
If you don't find a match, that doesn't mean one doesn't exist. At this point, most experts suggest paying for a professional patent search. Prices range from $250 to $1,000; for references, ask your local inventors group, such as a local chapter of the United Inventors Association of the USA, uiausa.org, or a patent attorney.
"You may not be happy with the result," Greenberg says, "but think how unhappy you'd be if you spent thousands of dollars to develop a product that someone else had invented first."
Dinnerstein and Pugliese got good news. Pugliese named her device Ready Check Glo and went back online to find a design engineer and patent attorney. Dinnerstein took a more expensive route with Dine-a-Light.
What If My Idea Is . . . Just An Idea?
Dinnerstein hired an engineer in her native United Kingdom to build a model, then talked to product development firms in the U.S., Great Britain and Holland about manufacturing. The engineer's monthly retainer and travel cost more than $100,000.
"It was a harrowing experience," Dinnerstein says. "The [product developers] either left unsightly wires dangling from the holder base or quoted prices that were much too high. I visited manufacturers all over Asia before a manufacturing consultant took me to a company in Hong Kong, where they solved all my problems in 12 weeks."
Pugliese posted an ad on the freelance website guru.com for an engineer to design Ready Check Glo. Her budget was just $250 to $500, but she hired one in Ohio for $500. She also used guru.com to locate a patent attorney, who charged $500 to file a provisional patent application.
Another internet search led her to a manufacturer in China who promised to make her item but really couldn't. "I found out later that they make signs, not small electronic products," she says. When she opened the box of samples she planned to take to the restaurant show, "they were terrible." A local engineer couldn't fix them, so Pugliese displayed her prototype in a glass case at the Chicago show, "where no one could touch it, just like the Hope diamond."
Hiring an invention development company that advertises on TV may seem like an easier route, but not all of them are legitimate. The PTO website includes a section on scam prevention, and the Federal Trade Commission's website, ftc.gov, includes a listing of published complaints against companies that don't provide results.
Beware of companies that offer to shop your idea to manufacturers first, Tarlow says: "They'll charge $10,000 to $15,000 or more to prepare materials that look impressive to an untrained eye but are really boilerplate. Manufacturers discard these ‘books' as soon as they arrive. Manufacturers want a prototype and a pending patent application."
Ask your inventors network for referrals to legitimate product design firms. Tarlow, for example, charges $95 per hour to design a working model. "We end up doing 30 to 40 products a year, and, of those, about 25 percent end up going into production," he says.
The company Pugliese finally found to supervise her manufacturing in China--Deltech Marketing of Woodbridge, N.J.--also does product development. "People come in with everything from a sketch on a napkin to three-dimensional drawings," says Deltech president David Boilen, who does not quote development costs. Ben Kaminski of Cincinnati, the engineer who designed the Ready Check Glo prototype, notes that "a lot of engineers are looking for work now," and finding one online will likely save you money. To attract a qualified engineer:
- List details about your idea without giving too much away.
- Ask how many designs each bidder has done in your field. Ask for--and check--references.
- Set a schedule before you sign a contract.
And don't accept a bid based on price alone. Many low bidders are overseas, Kaminski says. "You will have time differences and may have language barriers. There's also a question of accountability."
Will Someone Steal My Idea?
Until you have been granted an official patent for your product, anyone can copy it. To provide some safeguards:
Download a confidential disclosure agreement and make sure everyone who sees your invention signs one.
File for a provisional patent application with the patent office, says Frederic M. Douglas, an Irvine, Calif., patent attorney whom Pugliese found online. "A provisional patent is a place holder," he says, "and is good for a year. It allows you to perfect your design before filing for a regular patent and excludes anyone from filing for the same invention after you." Pugliese paid Douglas $400, plus the patent office's $110 filing fee for her provisional patent application.
Dinnerstein's attorney, Greenberg, says his fees for filing provisional patents start at $750, and complicated filings cost thousands.
Only hire a patent attorney registered with the patent office to file your provisional and regular patent applications. The regular patent filing won't be cheap: Douglas' and Greenberg's rates start at $4,000. Ask for references and ask how many patents the firm filed in the previous year. An experienced patent attorney will have filed several hundred.
Reveal only a minimum amount of information about your invention while shopping for design engineers, marketing companies and manufacturers. "The most conservative thing you can do," Greenberg says, "is not show your invention to anyone until your patent is granted. But that process can take three years, and most people don't want to wait that long."
Will Anyone Buy My Invention?
The best way to find out if there's a market for your product is to talk to people in the industry who make or sell similar products, says Docie. Some inventors of consumer products, including the woman with the revolving tie rack, set up focus groups to test demand. Arrange one using the guidelines at managementhelp.org.
Or, like Dinnerstein and Pugliese, you can simply go to a trade show where similar products are sold. Check out the competition and pricing. Is your invention an improvement? Can you sell it for a competitive price? If so, then you just might have found a market.
Next, exhibit at industry trade shows. Getting your products and yourself to a trade show, renting a booth, printing up brochures and other materials can cost $5,000 or more. To save, Pugliese recommends attending the show first as a spectator to see if it's appropriate, and to talk to other exhibitors. At the National Restaurant Association Show last May, with her prototype under glass, Pugliese still found potential customers and salespeople for noncompeting products who might be willing to also sell Ready Check Glo and attracted interest from restaurant owners and food distributors. She is now looking for investors for working capital.
Dinnerstein's Dine-a-Light is being tested in restaurants in South Florida and she's taking orders for more, selling them for less than $20. "The customers love it," she says. "I still can't believe I put all that time and hundreds of thousands of dollars into this teeny light thing."
How Will I Fill My Market?
Dinnerstein and Pugliese soon learned that the manufacturing of most small items has moved to Asia--and navigating that terrain is tricky. One consulting firm Dinnerstein worked with planned to have the plastic parts of Dine-a-Light completed in Malaysia, the battery in China and the electronics in Taiwan. "A logistical nightmare," she says. Pugliese says that if she had used the Chinese manufacturer she found on her own, "I would have run out of money before I had a working unit."
Find someone with offices in the U.S. and Asia who understands what you want, or your specifications will get lost in translation, says Pugliese. She talked to everyone she knew about her manufacturing problems, and a friend of a friend led her to Deltech. You can find manufacturers abroad by talking to other local inventors or by calling companies that sell similar products with "Made in China" or "Made in Taiwan" labels.
"Within any given industry," Docie says, "you will find people who are more than willing to share their knowledge."
The biggest manufacturing expense is tooling--that is, producing the machines that will make your item. Dinnerstein spent $120,000 for tooling in Asia, after getting quotes for hundreds of thousands more from companies in the U.S. and U.K. Average tooling costs, Tarlow says, run $18,000 to $50,000.
A less expensive option is licensing your invention to a company in your field that will finance the tooling and manufacturing expenses and share in the profits. "It's better to earn 75 cents a unit for millions of units," Tarlow says, "than to risk all you have on an invention that may never see the light of day."
Plus, he adds, "A lot of big companies have cut down their in-house design budgets and are more apt to look for ideas that come from the outside." Many companies, Docie says, pay a 5 percent royalty to inventors with little or no advance. Your product developers may be able to negotiate better terms, for a fee. Tarlow says his firm helps inventors license their ideas to manufacturers, then takes a 30 percent share of the royalties.
Rely on your patent attorney and product developer for referrals to a manufacturer. And don't sign on with an "invention development company" with a catchy ad campaign or with one that asks for money upfront. It makes its money, Tarlow warns, from fees from inventors, not from royalties.
Finally, don't give up too quickly. Pugliese has been a stock trader, a motivational speaker and a small-business owner. "I'm hoping this," she says, "is the idea that will take off."