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Tools Of The Trade For The Independent Inventor
COUNTER PERSPECTIVES -
Insights From Corporate Licensing Executives
Why Corporations Most Often Reject Independent Inventors
By Jim Harris
Have you ever wondered why some corporations welcome licensing
agreements, while others act as if they don't? Why some Directors and
Senior Management members go out the back door when an inventor walks in
the front? Or have you ever been invited to a corporation, only to find
that the person who is involved in the technology transfer division has
suddenly been called away on a trip? Well, if so, please don't take it personally. There are a variety of reasons, most even legitimate, as to why larger corporations are hesitant to involve themselves in outside technology. Please let me explain.
Subsidized R&D Departments:
For one, many Corporate Research and Development Departments are
federally-subsidized, often with matching funds contributed in the budget
process by the Company's Board. This Board of Directors reports to the
shareholders of stock in the company. How could they justify the existence
of the Research and Development money (and the Federal Aid) if just anyone
could walk in off the street and provide a newer technology? Think about
that as we continue our exploration of incentives for the Corporate
Another reason not often thought of in transferring "intellectual
property" is the fact that "huge" companies, like "huge" ships, take a long
time to come around to a new course. It is always a given that good
programs will have to advance the hierarchy of management before they are
funded, even from within the corporate infrastructure.
Therefore the consensus is that most huge companies have the perception that they may be
one day too late in bringing an outside inventor's device to market, because a much smaller
company may have already designed around it, changing directions like a
row-boat instead of a cruise liner, and beat them to the market first.
From that point on it is playing catch-up, not something a large company
likes very much or even deems necessary!
Another tactic I witnessed just a few weeks ago was a major leader in a
global industry who had talked about licensing, but when I presented the
Director with a Licensing Agreement, he wanted to buy the product outright!
This would have forever stripped my inventor client of any royalties, and after
consultation, we refused. The offer had not been significant enough. The
product is now undergoing a one-year test with this company, no license
in-hand, and therefore no exclusivity. My client company will be
selling to the largest company in this industry, at wholesale, acting as
both manufacturer and packager. If the huge company doesn't wish to buy
out for a more realistic figure after one year, so be it, we can always
license the product to another company (smaller). One benefit will be that the larger company will have already used a year to set up lines of distribution, and retail outlets,
that my client company can exploit as well. I would love to divulge the
name of both companies, but can only do this when the Letter
of Intent is replaced with a Purchase Order.
A Matter of Legality:
Still another reason the corporate executive in charge of technology
transfer might choose to overlook a new, commerically viable, product is a
matter of legality. The company may have already developed a similar product, and is sitting on it until they feel the time is right to introduce it to the market. By
previewing your invention, they may actually render the dollars spent on
the one hand as waste, or may be enjoined in a civil litigation for
exposing their product after being presented with a similar product. This
fear of litigation is very real, and if it should happen, the executive's
job security goes "right out the window!" That makes it a bit more
personal, wouldn't you think? Plus, it costs quite heavily to defend an
infringement suit, whether it is grounded or baseless. Bad publicity for
the larger company is always a part of such an ordeal as well. This upsets
the stockholders, and the other companies that are aligned with the larger
company; distributors, suppliers, wholesalers, etc. All of this because an
inventor merely wanted to create a possibility to have this particular company consider producing and distributing his product.
Then Who Should You Target?
We live in a very rapidly changing world. Technology has tripled in
several areas in the last decade. Transferring that technology around has
became a very difficult thing to do, and will continue to be difficult, as the "Information
Age" really dawns on us all. For those of you seeking to license, I would
first look at the smaller companies that can react much more quickly to
change than can the larger companies. You may not create the total
distribution your innovation deserves, but smaller companies don't have the
hierarchies of larger companies, and as a rule are much more aggressive
when they feel there is money to be made, or even an advantage to be gained.
Get Some Professional Representation:
If you are not a good negotiator, get someone to represent you. Nothing
will put off your potential Licensee off more than an amateurish license agreement
written by someone who may be a great inventor, but has no clue as to the
often give-and-take that makes a licensing agreement a win-win proposition
for both parties involved. If you persist, and wear out your welcome,
another day another inventor will reap the seeds that you sow, his course
will be diverted also.
I wish you good luck and godspeed to all of you! I would be glad to
answer any questions you may have concerning licensing and technology
Jim Harris, President of Princeton Products, has 18 years of retail management and 24 years of marketing and merchandising experience. He worked with WalMart for many years and has written and published 15 papers dedicated to the small and independent inventor. He is currently serving as Assistant Sysop to the Ideas to Invention Forum for Compuserve. He lectures around the country on the topic of bringing ideas to market, and was a featured speaker at the Invention Convention® Masters of the Invention Process[tm] seminar series.
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