Assessing the risk ahead

You should now perform a vital task that many inventors are too impatient to bother with. That task is to pause and ask yourself: ‘Is there enough evidence to justify taking my idea any further?'

This matters for three reasons:

• Even if an idea is novel and appears to have market potential, that does not automatically make it worth exploiting.
• Up to now, your idea should have cost you little. But if you decide to exploit it commercially, the costs and risks will soon become much higher.
• Thinking about exploiting an idea is easy. Doing it is much more difficult. You will therefore need to be confident of your own skills and abilities before deciding to go ahead.

To help you make the big decision - do I take this idea further or not? - you should address three key questions:

• Is my idea significantly novel?
• Does my idea have significant commercial potential?
• Am I ready for the personal challenge of turning my idea into a business opportunity?

Let us look at each of these in turn.

Significant novelty

Your idea should of course be different from existing products or documented ideas. But being only a little bit different will not be enough. Your idea should offer clear technical or commercial advantages that existing products or other ideas do not offer.

These advantages should also have the potential to be strongly protectable in law, because in most cases only strong intellectual property (IP) has commercial value. We will deal with this more fully in Part 5 . 

To estimate the degree of novelty of your idea, you need to look in detail at the products and patents you have found in your searches. Any element of your idea that can be found in existing products and ideas will reduce its novelty. And anything that reduces the novelty of your idea is likely also to reduce its potential commercial value.

Evaluating patents

Important: This is an exercise that must be done thoroughly, and patents can be complex, highly technical documents. You may therefore need the help of a patent attorney to do some or all of the following. If you think your idea has good commercial potential, this will be money well spent.

List, in order of importance, the novel features of your idea. Assemble all the patents you have found that seem relevant to your idea. Search each patent in full for similarities to your idea. Look particularly closely at the claims made or granted for it, and at official search reports. (If a search report cites other patents, you may need to look at them too.) Whenever you find a feature of your idea covered by prior art, remove it from your list. At the end of the exercise, how many features of your idea remain on your list? If one or more of its main features are gone, what remains may be too weak to be of significant commercial value.

If there are large numbers of patents in a particular technology area, there may be few strong prospects for new ideas. For example, there are currently over 60 patents for floating soap - a fairly simple product, so one has to question how strong many of those patents can be. Anyone with yet another idea for floating soap might find it difficult to acquire worthwhile IP.

Is there room for your idea?

If there are large numbers of patents in a particular technology area, there may be few strong prospects for new ideas. For example, there are currently over 60 patents for floating soap - a fairly simple product, so one has to question how strong many of those patents can be. Anyone with yet another idea for floating soap might find it difficult to acquire worthwhile IP.

Who owns what?

It also helps to note who owns the patents that are most relevant to your idea. If major companies have a strong IP presence in ‘your' technology area, it may be difficult to compete with them even if your idea is different from any of theirs. Inventors occasionally win in ‘David and Goliath' encounters, but in such a situation your idea will need to have outstanding commercial potential if you are to stand any chance of success - particularly when it comes to attracting investment.

Significant commercial potential

You may think your idea has good commercial potential, but something else matters more: other people have to think so too.

Significant commercial potential means the prospect of sales and profit on a large enough scale to make all the risk generated by your idea worth taking.

Businesses in particular will need strong evidence that your product will sell, as they are the ones who may have to spend millions of euros to get it to market. In business there is no such thing as a guaranteed winner. For every new product that sells well, there will be other new products that sell poorly.

What most companies will look for is:

• Something that can give them (usually through strong IP) a commanding or even monopoly position in the market.
• Something that consumers will want in preference to competing products.
• Something that offers a good return on investment.
• Something that offers a clear, low-risk route to market.

From your searches and investigations, what evidence can you present to companies or investors that your idea has the potential to meet these requirements?

For guidance, new products tend to fall into three broad categories:

• Exceptional products which dominate their market and set new standards.
• Good but unexciting products which offer opportunities for a business to increase its profits or its market share.
• Unexceptional products which offer just one more choice among alternatives.

In which category would most people place your idea?

You need to evaluate any opinion you have had so far from businesses or individuals with expert knowledge of relevant markets. A lack of evidence in favour of your idea could mean one of three things:

• The commercial prospects for your idea are poor.
• Your idea may need re-thinking to make it more commercially viable.
• Your idea may only succeed if you become an entrepreneur and market it yourself.

What about you?

Inventors often fail to appreciate how much of the spotlight will be on them when they present their idea to businesses. Experienced investors tend to back the person rather than the idea, so they will look closely at your ability to help make your idea succeed.

How do you think you might measure up to the challenge?

• Do you know how far you want to take your idea?
• Do you have a plan for getting there?
• How much of the actual work will you do?
• Who will perform the tasks you cannot do?

It is important to understand that:

• Few individuals possess all the skills needed to develop an invention.
• Many investors are reluctant to back one-person ventures.
• Many businesses will not deal with individuals.

Therefore, some kind of team effort is usually needed. We will deal with this more fully in Part 6 - Building a team and seeking funding .

Before you can answer this question, you perhaps need to consider the different ways in which you might benefit financially from your idea.

Exploitation routes

Licensing

One or more companies enter into a licensing agreement with you that allows them to use your IP in return for payment to you. This payment normally takes the form of royalties paid at agreed, regular intervals for the duration of the agreement.
The exact terms of the licence must be negotiated in a process that can be lengthy (often many months) and complex. The licence is a binding legal document, so it is usually essential to involve patent attorneys and other legal professionals.
Broadly, a licence:

• Benefits you by making the licensee reward you for the use of your IP.
• Benefits the licensee by giving them a product or technology advantage over competitors.
• Allows you or the licensee (depending on the terms of the licence) to take legal action against others who steal or copy the idea.

For many inventors, licensing is the best way to benefit from an invention. The main reasons are:

• The licensee bears the costs and risks of production and marketing.
• Only established companies may have the resources to exploit an idea with major potential.
• Licensing can provide the inventor with an income over many years for relatively little effort.

Some inventors - mostly in high technology fields - set up companies solely to license out their IP and monitor the progress of their licensing agreements. This is a possible option if you want to start your own business but do not want it to grow too large.
Types of invention that may be better licensed include:

• Components that many companies depend on, such as the drinks can ring-pull.
• Accessories or peripherals dependent on a specific existing product. These may have little future unless licensed to the company controlling the host product.
• Products with high set-up costs.

However, only the strongest forms of IP will interest potential licensees. In most cases this means a patent. If your idea cannot be patented, or if the claims you are allowed are not very strong, few companies are likely to want a licence from you. Even if they are interested, they may not want to pay much for the licence.

Business start-up

Business start-up may be your first choice if you have ambitions to be an entrepreneur, or it may be an option that you have to consider if you cannot interest any companies in a licensing agreement.
It may also be worth considering as a way of persuading companies to take a licence from you. Proving that your product really does sell - even if only over a short period in a small market - may make them show much more interest in it.
Types of invention that may succeed as business start-ups include:

• Products in knowledge-based industries - for example information technology or high-value medical technology - where small companies can thrive.
• Cheap-to-make products which depend primarily on marketing.
• Products that cannot be patented strongly.
• Products that do not have enough profit potential to interest larger companies.

Starting a business is not for everyone. However, experience suggests that inventors who become entrepreneurs tend to be more likely to succeed than those who rely on finding licensees.

Joint venture

An alternative to starting your own business is another form of entrepreneurship: a joint venture with a company - or an individual, or perhaps a university - whose expertise and resources you need. For example, your joint venture partner could be a company willing to help you to develop your idea further in order to give them a better idea of its potential.
Such a joint venture is perhaps best viewed as an experiment that may or may not succeed. You should therefore not expect to make a profit from it. If successful, it could result in a licensing agreement, a spin-off company or some other form of more permanent business relationship.

Outright sale

It is possible that a company may offer to buy the IP in your invention for a fixed sum. In the case of an invention with good market potential, it might be wiser to refuse. But a sale may be worth considering if your idea is of relatively low or short-term value, both to the company and you. The company benefits by not being tied for years to a licensing agreement. You benefit from (a) a cash windfall and (b) freedom from all responsibilities and expenses of ownership of the idea, which may include the maintenance of patents.  
Much, of course, depends on the size of the sum offered. You should seek professional advice on a realistic valuation of your idea, but for both sides it will always be something of a gamble. You may regret it if the product goes on to make unexpectedly large profits. The company may regret it if the product fails to sell.

Invention promotion companies

Some companies would like you to think that there is a fifth option - paying them to market your idea. Be very cautious about dealing with any such company.
Invention promotion companies tend to operate in broadly the same way.

• They will offer to give you an opinion of the market prospects of your idea, for a fee of typically a few hundred euros.
• They will usually send you a highly favourable report, with little or no mention of prior art. (It is not in their interests to tell you about prior art!)
• They will then tell you that for a fee of several thousand euros, they can help you market your idea.
• In many cases, their ‘help' amounts to little more than a supply of stationery and a list of company addresses. You have to contact the companies yourself.
• Often the invention promoter will be based in a different country from you, making it difficult for you to seek compensation.

These companies are not necessarily operating fraudulently. Often their terms and conditions are cleverly written to keep them on the right side of the law. Pressure from governments occasionally forces individual companies to close down, but it is usually only a matter of time before others take their place.
Untrustworthy invention promotion companies only thrive because of the gullibility of some inventors, so you must be suspicious of anyone who praises your invention and offers to market it at your expense. (It may be instructive to search the internet for their business name, or use search terms such as ‘invention fraud', ‘invention promoter', ‘invention broker', ‘invention company' etc. You might also ask your local trading standards department for advice.) As a general rule, walk away from any company that wants your money but shares none of the risk.
While legitimate companies may also charge a fee for assessing your idea, they should not demand any further large fees. They will reject the majority of ideas offered to them, wanting to take a risk on only a few of the ideas they see each year. If they genuinely think your invention has good prospects, a more ethical practice is to ask for an agreement with you which entitles them to a share of future profits. In other words, they will get their reward from sales of the invention, not from you.

What if your idea is not novel but does have commercial potential?

If there is prior art for your idea but no commercial product, and you are convinced that a product could be successful, a possible strategy is to stop trying to be an inventor and consider becoming an entrepreneur.

Try contacting the owner of the IP in the idea. If the owner is not ‘working' the IP, it may be worth discussing a deal in which you take a licence to exploit the idea.

Or there may be an existing product but it is not being sold in your country. You could consider becoming an importer, or a manufacturer under licence.

Or you might discuss with the IP owner the possibility of your redesigning or modifying the invention for a different application or a different market.

If you are entrepreneurially minded, something may be possible!