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Top 10 Patent Myths

General

Myth 6: "General" or wide-ranging patents are more likely to have higher returns or royalties than specific ones. Minutiae makes for successful niche-building, even though the thought of making your claims cover as much ground as possible is much more ambitious. Take CEPTYR 's lead, and focus on one area that is your core expertise to start off with. CEPTYR Inc. founders William Ettouati and Nick Tonks decided to focus exclusively on a very specific kind of drug, and they're now sharing a sandbox with pharmaceutical giant Eli Lily just four years post-inception. Unlike most biotech start-ups, Ettouati and Tonks figured out what their unique specialization was and stuck to it. "Our goal is to develop the first drug of this kind, and we gained Eli Lily's confidence on the strength of our proprietary drug development technology," says the 35-year old Tonks.

Myth 7: If I need to change my business focus, then the money I invested in filing a patent will be wasted. You may not make money from a patent by applying it yourself, but you can pursue licensing royalties. Craig Nabat, 32, changed his focus from marketing his own invention, FINDIT , a device for locating keys and other lost items, to including other inventors' products in his business. When determining the value of your product or service, there are two ways of pricing: "cost-plus" and "demand." Cost-plus incorporates your fixed and variable costs and adds your desired profit margin (the "plus"). Demand pricing is based on what the market will bear-or what you can "demand" for your proprietary product. That said, you'll have to find the intrinsic value in what you could've delivered to market. What cost savings, what productivity increases, does your product provide?

Once you figure out the monetary benefit, you can price your product accordingly so you deliver value, but you're also maximizing your sale price. Don't forget to factor in the lifecycle of your product or service: Will customers come back for more, and how soon?

Next Step

Myth 8: Concentrating on a single patented product is amateurish-it gives the impression of a fly-by-night business that'll vanish once the product novelty wears off. Patents can provide what is known as a "maintenance" aspect to your business that doesn't require, well, maintenance. A healthy, small, continuous income is sometimes called a maintenance brand, product or service. Inventor-entrepreneur John Janning generated respectable profits from a product that needs very little maintenance, freeing up his time for marketing and inventing. It was the uniqueness of the product-a Christmas tree light string that stays lit regardless of whether a light burns out, falls out or is placed in the socket incorrectly-that finally got it into Lowe's and Target this past Christmas. This type of underlying value attributed to your patented product prevents a low seating in terms of market share from being looked upon as liabilities to potential investors.

Myth 9: The industry I'm in is mature-I can rely on other, more certain, marketing tactics. Starting out in an industry that's already mature means you have to work harder to communicate and reinforce the consistent values of your company, instead of grafting on a mélange of different faces. There's nothing like an in-house-developed patented product or service to build long-term trust and show that, even though you're a newcomer, you definitely know what you're doing. "The patents I hold are crucial to our marketing, our status as an innovative company and [our ability to keep] competitors at bay," Adamson says.

Not only can you name a patented product or service, but you can develop a consistent and distinctive advertising message around your company's main focus instead of going with whatever promotion fads are hot at the moment among your competitors.

Myth 10: Everyone who was at the staff meeting where we brainstormed gets to put their name on the patent. You'd be paying honorariums like mad if this were true! Unless the inventor is yourself or a partner in the business, royalties from patent licenses generally go to the company, not the employees who came up with the invention. The company is the assignee-the person or legal entity that has actual ownership of the patent.

Many entrepreneurs have figured out that aggressively pursuing patents is an integral long-term strategy that pays off. There's nothing like knowing you can do something to build confidence, and holding a patent is a constant reminder to yourself that your business idea will work.

The Skinny on Patents
There are three main kinds of patents: utility, plant and design:
1. Utility patents cover inventions like machines, something you manufacture, a method of doing something, a chemical or DNA sequence or the method of its use, and products of genetic engineering. Utility patents are effective from the date the patent is issued for a period up to 20 years from the date of filing.

2. Plant patents may be granted to anyone who invents or discovers, and asexually reproduces, a new variety of certain kinds of plants. There's also a 20-year period for this one.

3. Design patents cover the ornamental appearance of a useful device but not its function. For example, a unique shape of a toy building block can be patented as both a design and utility invention. A design patent has a term of 14 years from the date it's granted.


Jasmine Pui has patents pending in the areas of horticulture, museum and curatorial arts, medical instrumentation and artificial organs.

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This article was originally published in the February 2002 print edition of Entrepreneur with the headline: Top 10 Patent Myths.

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