Ninety-seven percent of all patents never make any money.
What? This statistic should baffle you. Why do so many people continue to file for patents if the overwhelming majority of them don’t earn a profit? Where is the disconnect occurring? Because surely, people wouldn’t file for patents if they thought that they weren’t going to make any money. I’ve spent many years studying this phenomenon, trying to understand why so few patents become actual products. And I’ve concluded that there are two main reasons that this statistic is so high — so please, before you file for a patent, read this!
Too many inventors and entrepreneurs let a fear of getting ripped off guide them — a fear that is reinforced by patent attorneys and agents. They are more concerned with protecting ideas than determining if that idea has a potential for market success. Thousands of dollars are spent and years wasted waiting for a patent to file. And what’s the final result? Too often, just a framed certificate that hangs on an office wall.
It doesn’t make sense. What I’ve realized is, most people who file for patents don’t know how their idea is going to be manufactured. They’ve never asked, “Can my idea be manufactured at a competitive price?” Because it doesn’t matter how great your product is: if it cannot be manufactured at a price that is comparable to your competitors’, it will never be made or sold. That’s the bottom line. I’ve met inventors who have determined that their product can be made, but failed to research the price of the product before filing for a patent. If your product is 5 times more expensive than others, a retailer isn’t going to buy it, even if it improves upon those other products.
If you want to determine if your idea can be made, contact a contract manufacturer through a trade association. They will be able to give you an idea if your product can be made and at what price. Make sure to sign a non-disclosure agreement or work-for-hire before you reveal the details of your idea.
If you aren’t sure your patented idea can actually be produced, it’s just that: an idea.
The other reason most patents never make any money is because inventors and entrepreneurs cannot — for whatever reason — pick up the phone and start contacting the right potential licensees. They may spend years developing a prototype, but won’t dial. You’re not in the game if you’re not making calls. Even if you think you want to manufacture the idea yourself, it’s a good idea to do some homework. Are companies interested? What is their feedback? Their expert answers will help improve your product and prevent you from spending a lot of money on an unpopular idea.
At the end of the day, every company you work with is going to ask you two questions. How do we make this? And, how much does it cost? Know the answers to these two questions before you begin to consider filing for a patent, and you may end up becoming one of three successful percent!
Stephen Key is a successful award-winning inventor who has licensed over 20 products in the past 30 years. He is a board member of Accudial Pharmaceuticals and has a new book “One Simple Idea: Turn your dreams into a licensing goldmine while letting others do the work” due to release Spring 2011 from McGraw-Hill. Along with business partner Andrew Krauss, Stephen runs inventRight, a company dedicated to education. Teaching inventors and entrepreneurs the skills needed to successfully license their ideas. You can listen to the weekly radio show on inventing.
Preorder One Simple Idea now and get access to our database of over 1300 companies looking for ideas.
Visit www.inventright.com to learn more.