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Mr. Biz Radio: What To Do Before Applying For a Patent

Unedited transcription of the show is included below:

(00:05):

Welcome to Mr. Biz radio, Biz. Talk for Biz owners. If you're ready to stop faking the funk and take your business onward and upward, this show is for you. And now here's Mr. Biz, Ken Wentworth.

(00:19):

Alright, welcome to another episode of Mr. Biz Radio with me, Mr. Biz, Ken Wentworth. And,this week we're gonna talk about something literally, I, I, I can't believe this, we haven't really even had, we've scratched the surface on this topic maybe a couple times in some different episodes on almost seven years known the show now, but we've never had an expert on to talk through some of the specifics we're gonna talk about through, about licensing products, about,patents, about intellectual property type things. And again, we talked a little bit about intellectual property when we've had some attorneys on, but nothing like we've def definitely never talked about licensing products, and I'm very intrigued to find out myself. Selfishly, I'm gonna learn a lot, I'm sure I'll be taking a lot of notes here. And we have a preeminent expert in the space this week, as we always seek to have. Stephen Key is considered one of the world's leading experts on product licensing and intellectual property strategy. From a business perspective, he has had a very successful career developing products and licensing them. He loves to share his vast knowledge on the subject. He loves showing ordinary people how they can transform their ideas into tangible products that are found in stores. Welcome Stephen Key to Mr. Biz Radio.

(01:25):

Well, thank you so much for having me.

(01:28):

Yeah. Looking forward to this. Like I said, even selfishly, I mean, you know, I'm sure the listeners and and viewers are gonna get a lot outta this, but I know I'm gonna learn a lot as well, so I'm looking forward to it. But before we start diving into some of those tips you have and, and, and digging into some of the details on that, tell us a little bit, Stephen, about your, your entrepreneurial journey.

(01:46):

Well, I'm, I'm, I guess I'm a a lot like a lot of people. I have ideas and I wanted to be creative and I wanted to make a living being creative with my ideas. So I found a way to rent my ideas to companies, and if they like my ideas, they take those ideas to market for me, and they pay me a royalty for each and every one they sell. So I get the leverage, the power of these big companies that are already in business where I don't have to do all the heavy lifting. Ken.

(02:17):

Yeah. Well, I mean, so take, take us back a little bit, Stephen. So how did you even sort of get, get going into the, into the this space within the business world?

(02:26):

Well, I was studying economics as a young man, I didn't like it. I took an art class by mistake and I ended up just loving working with my hands. And I went home and I told my dad, I want to be an artist <laugh>. And he was like, really? And I said, yeah. He said, well, do you like to draw? And I said, well, no. And he goes, well, do you like to paint? And I said, no, <laugh>. So he gave me permission to jump off the ledge. So I transferred over to another school and I started taking art classes and I realized really quite quickly that I wasn't going to be this great artist. So what I did, I combined a little bit of the business knowledge that I obtained and a little bit of the art. And I started making things and selling those things at wine festivals and state fairs and county fairs.

(03:16):

And I realized I really love to, to make things that people really want. And by accident I started was reading the paper on a Sunday morning about the startup company called Worlds of Wonder, and they were creating the first talking teddy bear. And I went down there and knocked on the door and I said, you guys need me. And they hired me. And that's when I learned all about licensing, where I could take some of my work and show it to companies and they could take it to market for me. So that's how it all started.

(03:50):

Interesting. So I can imagine the conversation with your dad going from Econ to art. I mean, that's, that's quite a shift. Stephen <laugh>,

(04:00):

He, he told me one thing that was really important. He said, look, if you find something you truly love to do, you'll probably never work a day in your life. So he gave me permission to be brave, and I took it, and he, he was right. I love what I do, and I'm gonna keep doing it. And it, it's enjoyable. Yeah.

(04:19):

Well, kudos to your dad, because I know a lot of parents probably wouldn't have that same reaction. And depending on how, you know, strict and old school, they were, you know, to, to allow you that freedom to, to choose what you want. I mean, I had the same conversation type of conversation. It wasn't quite the same drastic change, but with one of our daughters and she wanted to change things. And I was, her mom was balking and I said, look, do you want her to get what you do? You want her to have a degree in what you want her to have or what she wants. Right. Big difference. And your, your career trajectory, your career happiness and everything like that, it's gonna be drastically different, right. I mean, you don't wanna get a degree you don't use and, and all that kind of stuff. So, yeah. I mean so again, kudos to your dad for allowing you to follow that passion.

(05:02):

Well, he loved what he was doing, and he knew how important that was. So he gave me permission. Now, he didn't know how I was, I was going to achieve those goals though, but it took me a few years. But I learned with this startup company, worlds of wonder how I could leverage my creativity, find those companies are looking for ideas from people like us, and then show those companies my ideas. And it worked beautifully. And they took 'em, and I collected royalties from some, from some of those simple ideas I came up with.

(05:36):

So from Worlds of Wonder, where, where, what happened after that?

(05:40):

Well, I was over in, in Hong, I was in Hong Kong, I was in China on the production line of Teddy Ruckman, the first talking teddy bear. Mm-Hmm.

(05:50):

<Affirmative>.

(05:50):

And I realized that the inventor of Teddy Ruckman, he wasn't there. That's when it dawned on me, I, I need to quit. I I want to come up with ideas and I don't wanna work on anybody else's ideas. <Laugh>. So I, I quit. I went back and said, look, I'm done. And started my own little company. I moved to a small town in California, Modesto. And the first idea that I licensed was a simple indoor basketball game. These Nerf indoor basketball games, the backboards are square. And at the time, I was a big Michael Jordan fan. So I took a poster, Michael Jordan put it on the backboard, and now the backboard, the shape of a change, it was in the shape of Michael Jordan and I showed it to a company, Ohio Art. They loved it. And it sold for over 10 years. I collected royalties and it was on tv. So that was really my first idea I licensed.

(06:49):

Oh, wow. Well that was a big one.

(06:52):

It surprised me actually, <laugh> I remember showing it to my wife. I had met my wife at Worlds of Wonder. She was a product manager, and I showed it to her and I said, Janice, what do you think about this idea? Because I, I fell in love with it. And she said, Steve, the chances of you licensing that idea are probably one in a million. So I did with what Every Inventor does, I sent it off to the company anyway, and three days later I had a contract and it sold for over 10 years. Yeah.

(07:21):

Wow. Now, so was this like early nineties ish? Mid nineties?

(07:26):

Yes, you're right. It was early nineties and I was surprised it sold for so many years. It was in every major retailer. There was even a little commercial with Michael Jordan, and he would look at the camera, he'd shoot the little Nerf ball, it would go in and he would look at the camera and he would say, the best looking backboard I've ever seen. <Laugh>. Yeah, no,

(07:48):

I was just guessing that, that timing, because that's, you know, the height of the, of his popularity, the Bulls are winning championships year after year and during that time. And it's so, it doesn't surprise him. I mean, he, he's still an endearing figure to this day. You know, obviously not, not, hasn't been playing for quite some time, but I can only imagine. I mean, they, that that, that Bulls team, especially him, was so popular back then with, you know, everyone likes a winner. Right. so I can, I I I can imagine how many, how many items that thing sold.

(08:17):

I was a big fan. I still am

(08:19):

<Laugh>. Right? Of course you are <laugh>. Well, guys, we're talking this week with Mr. Stephen Key. You can find out more in his website and we'll put this in the show notes as well. But inventright.com. He's got a YouTube channel you can follow him on LinkedIn as well as on Facebook. We're gonna come back, we're gonna hit a break here. We're gonna come back, give the Mr. Biz tip of the week, and then we're gonna talk about his company Invent, right? Sort of how it got started, why he started it. We got into that a little bit here, but, and then how he helps people. So we're gonna talk through that and then of course we're gonna de pick his brain a bit later in the show to give us some tips on licensing and things like that, when to consider it, and some initial critical steps. So come back on Mr. Biz Radio.

(09:01):

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(09:40):

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(10:11):

Got a question for Mr. Biz. You want answered on air, email it to This email address is being protected from spambots. You need JavaScript enabled to view it.. Now once again, here's Mr. Biz.

(10:22):

Alright, welcome back show. It is time, as always for the,Mr. Biz tip of the week. And this one, actually, oddly enough,kind of ties into a little bit what we talked about in the first segment with Stephen. Uif you aren't willing to take the risk, you are likely willing to accept mediocrity. We talked about that with Stephen and taking the leap going from his econ major into art and, you know, not knowing what, how the heck he was gonna make that happen and, and do all that. He took a big risk. And had he not done that and stayed the course on the econ, you know, he probably would be not as happy in his career. Uso that is the tip this week. Uand,we're gonna get back into talking with Stephen here. So Stephen, tell us a little bit about Invent, right? So you, you, you leave,the corporate world, so to so to speak start your, your invent right company. Uyou know, tell us a little bit about Invent, right? And, and how it got started.

(11:13):

Well, thank you. Well, I've moved to that small town in California, Modesto, and I started coming up with ideas and licensing those ideas to companies. And I was just having a really good time doing it. One of my friends said, Steve, these inventors, they gather. And I was like, what do you mean? They gather? Well, they get together once a month. Why don't we go to one of these events and why don't you bring some of the things that you have licensed and share those products with these inventors? So I went there and I was kind of surprised that they were doing things a little bit differently. My success, I wouldn't say it was easy, but it wasn't that hard, and I wasn't spending a lot of money and time, and I had this process that just worked. So I shared my ideas with this group of inventors and I realized, you know, maybe I should talk a little bit more about this. So I started sharing that knowledge, going to certain events, and I realized very quickly I met my partner Andrew Krause, 'cause he was running that event, and he said, Steve, why don't we start a company and let's call it invent, right? Because everybody's inventing wrong. And that was 24 years ago. And what I've been doing is sharing that knowledge through the YouTube channel and through books and articles of just helping anybody with an idea how they can commercialize it through this process called licensing. So that's how it all started. So

(12:46):

Let me ask, this is probably gonna be a very neophyte question But I'm learning here. At what point does a patent come into to the mix with, with licensing? Is it, are those sort of one and one follows the other, or not necessarily?

(13:00):

Well, that's a great question because I think a lot of people, they, they think the first thing they need to do is file a patent because that's what they've heard. Mm-Hmm. <Affirmative>, well, I didn't know anything about patents when I first started. I was licensing kind of simple ideas that didn't require patents. And there's many industries that are just looking for ideas. The reason why they don't require patents is because the, the lifespan of most products is fairly short. So I didn't know anything about it. And one day I came up with this one idea, and I showed it to a very large company. It was a packaging company. And I had read an article how there was never enough information on label. So I came up with this very clever idea of how to put more information on labels, and I sent it to a very large pharmaceutical company. And the first thing they said when I called them was, Steve, this is brilliant. Do you have a patent on this <laugh>?

(13:59):

I can Imagine, especially in the pharmaceutical world, right? Patents are huge on that side of the fence.

(14:04):

Well, they are, and I didn't know what to say, <laugh>. I, I kind of panicked. So I quickly got off the phone and started to investigate, you know, what's a patent? And I called a good friend of mine that referred this patent attorney to me, and, and I started worrying about patents, <laugh>. It's like, this is crazy. What is this? And I learned very quickly that in some industries, patents can be important. Not in all industries, but some they can. And I started learning quite a bit about the patenting process, and I do write quite a bit on it, because I don't think you need a patent on every idea. They're, they are expensive, they're not required. I, I like to talk a little bit about what people need, but they, they, they need a provisional patent application. It's called a P P A before they file a, a regular patent, because it does get very expensive. They're very time consuming too. So that was my first introduction to what is a patent and, and do I really need one?

(15:10):

So, so tell me, so you mentioned they're expensive. How, like, how about, I'm, I'm sure it varies, but about how expensive are they? What do they cost and, and what's the timeframe for obtaining one typically?

(15:23):

Well, they can run anywhere from $10,000 to $25,000 a patent, and most patents don't recoup the cost it takes to file them. So there's the big, like, why not Steve? What do you mean? Well, for me, my perspective, it's really about do I have an idea that someone really wants first? And so I'm all about why don't we investigate to see if your idea is marketable is licensable, and we can do that by filing a provisional patent application. And that's very affordable. You can do it yourself, and it's really easy to do. So it's really all about determining, should I file one? Why don't I test the market first and let the market tell me if I need one? So I like to tell everybody, just take a deep breath, relax, you'll be fine. Do as much homework as you can on intellectual property. Don't, don't file a patent because you're fearful or you're watching maybe some TV show that's telling you you need to file them. Just get good information. And if you need to file a, a patent do some homework. Because it, it is very expensive and time consuming. Yes.

(16:37):

Yeah. What, what's the typical again, I'm sure it varies, but what's the typical timeframe for, from beginning to end of obtaining a patent?

(16:44):

Oh, well, it's actually gotten a little quicker over the years. It used to, it used to take years. You can file a provisional patent application that will give you patent pending status for, for one year. Within that one year. If you wanna go forward with a non-provisional, which is like a real patent, you can start that process then. So once you file that non-provisional patent application, it takes about 18 months for the U S P T O, that's United States Patent and Trade Mark office to get back to you to look at your application and start to examine it. And that takes a little while too. And, but overall, you know, maybe two years, maybe three years. Yeah, fairly fast really. Or what you can do, there is a, a highway that you could apply for. It's a, it's a way to get your patent issued a little quicker. You're gonna pay a little bit more money and you can get that probably issued within a year if you wanna spend a little bit more money.

(17:45):

Gotcha. Okay. Yeah, my only experience really in that side of the world is I actually got, we, we had got the trademark for Mr. Biz.

(17:54):

Okay.

(17:55):

And going through that, you know, IP process obviously different than the patent process, but it did take us a while because we went out and researched. First of all, I tried to do it on my own, and I got, I got rejected

(18:08):

<Laugh>, of course, <laugh>.

(18:09):

So I'm like, well, let me, let me get an expert here. So then I got a, an IP attorney to help me. And of course she just knocked the ball outta the park. And, and, and we were successful. There was there was a, I initially got rejected because there was someone who had the trademark of Mrs. Biz. Oh. And they said, and there was in a similar line of work that I do, so they said it would be too confusing to consumers. So they rejected it while my IP attorney went out and looked and said, you know, did a bunch of research. So this woman hasn't used this, this trademark in years, and it's about to expire, so let's wait a little bit, see if she does it, and we will refile after hers expires. And so we went through that process and thankfully we're successful and, and all that good stuff, but, so that's my only experience really with it. But interesting side of things. So again, guys, this week we're talking with Mr. Stephen Key. You can find out more at his website, inventright.com. Check out his YouTube channel, LinkedIn and Facebook. We come back, we're gonna get some tips from Stephen on licensing.

(19:09):

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(19:39):

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(20:10):

Check out all three of Mr. Business best-selling books at mrbizbooks.com. Now, once again, here's Mr. Biz.

(20:19):

Alright, welcome back to the show. Let's dig in here. Stephen, I got, I got a lot of questions, but I wanna start with to get some, some tips from you on licensing. But I guess really where I would start is, when should, so someone out there that's listening or, or watching the show and they say, man, I don't, where, when should I even consider licensing? Let's start with that.

(20:40):

Well, first of all, you have two options. If you have an idea, you have a product idea. You can either venture, which means that you're gonna start, start a company, raise money do all the marketing, the manufacturing, you're gonna do everything that's venturing. That's a very typical method for, for someone to commercialize one of their ideas. Licensing is very, very different. What we're going to do, we're gonna come up with a great idea that we think a company might need or might want reach out to that company to make sure they want to work with us inventors, make sure they're inventor friendly, and then we're going to show them our idea. Now, how do you do that? Well, we like to use what we call a sell sheet. It's a one page advertisement of what your product is and the benefits of your product to their particular consumer.

(21:28):

It's just a one page advertisement. Mm-Hmm. <Affirmative> at the very top, there'll be a one line benefit statement. Why would anybody even care? A big picture of your product idea could be a photograph, it could be a prototype, it could be a 3D generated, computer generated prototype, a virtual prototype, and then some of the benefits. That's a one page sell sheet. You might even do a one one minute video showing someone use it. Those are great tools. So it's really quite simple, but you have to find those companies that have embraced this concept called open innovation, meaning they wanna work with us inventors, they're looking for ideas outside their walls, and those are the companies we want to find and then show them our great ideas. But here's the catch. You have to make sure that those companies are the right companies for your products. A lot of people make that mistake. It has to be a good fit. Also, ask them do you take outside submissions? That's very easy. And before you submit anything to a company, do a little bit of homework on them and file a provisional patent application to give you patent pending status.

(22:42):

Yeah, that's what was, I mean, my next question is, is there a risk? Is it, I mean, i I that you would show your, your idea to a company and they go, no, Stephen, we're not interested in that. And then you find out six months later you see your product, that they're, they've developed it.

(22:56):

Well, there's always a little bit of risk, but I think if you look at the history of, of the company, look at the reviews, see how they treat their customers, ask them if they work with inventors, and you can do a little bit of homework up front. If they don't, they will most likely tell you. So just do a little bit of homework, see if they've worked with other inventors, go on the internet, type in complaints, things like that. And just do, do just do a little bit of homework first. Your best protection is finding companies that wanna work with you.

(23:31):

Gotcha. Okay.

(23:33):

Yeah. So

(23:34):

What does a typical, and again, I'm, I'm, I know this's a very broad question. I'm sure they're all very different. But generally speaking, what does a licensing deal look like?

(23:44):

Well, it, it's actually a licensing agreement. It's, it's a document. It's a contract. Mm-Hmm.

(23:50):

<Affirmative>,

(23:50):

And it states kind of what, what you are, what, what do you own? It states that how are you gonna work together? It has a royalty rate, and that's gonna come off the wholesale price. It's usually five percent's pretty standard. It's gonna talk about well, what's really important here, let's, let's, let's really nail it. What's really important is the minimum guarantees that they're gonna take it to your product and the, and each year they're gonna pay you a certain amount that's guaranteed. If not, you get the product back. That kind of protects you if they sit on it, or maybe they lose interest, but that way that company's going forward with your product idea. So it's just basically a contract where they're going to perform and pay you a royalty on each and every one they sell.

(24:39):

Okay. You said five percent's typically the standard. When does it go above or below that?

(24:46):

Well, if it's a consumable, meaning if it's a product that's gonna be used every single day, it could be a little bit lower. Depends on the volumes. If it's a, a product that has a large profit margin in there, the, it might be a little bit higher, maybe seven or eight. If you have an issued patent, it could be a little bit higher, maybe nine, maybe. It never usually gets above 10. 10%, that's, that's a lot.

(25:13):

Mm-Hmm. <Affirmative>,

(25:13):

Right. So it's usually about 5%. It can vary a little bit either way. Sure.

(25:19):

So Stephen, with your, with yourself at least, do you typically look to, you know, invent products that are kind of in the same realm? So maybe you're targeting the same, same companies over and over with different ideas?

(25:33):

That's really a great question. When I first started out, I started out in the novelty gift industry, which there's a big demand products go in and outta the market really quick, so quickly. So that was really fun to do. No intellectual property or patents were required. And then I, I moved into the toy industry, which has a little bit longer lifespan, and then I eventually went into the packaging industry. I had a, a toy that was selling in all the Disney theme parks and stores around the world, and that same toy turned into a packaging device that's a little bit different. So I played in all these different industries, but getting to your question, I would highly recommend that you stay in one industry. So you, you're building relationships with these companies. They know who you are, and once you submit that first product, you build a relationship.

(26:26):

And let's say they say no, but you come back with another one, right. And show them that you're going to invest your time with them. If you do that, eventually they're going to invest time with you. They're gonna show you what they're really looking for. That makes it easier to hit that target. Now, if you're really smart, find an industry that you're fascinated by and look at a company's product line, study it, and try to imagine what are they gonna do next. So you're really targeting your creativity to that particular company. And then build a relationship, keep on submitting ideas. That's an easier way to hit the target if you're studying what they're going to do next.

(27:10):

Yeah, that's why I was gonna ask that question, is I would assume that that would be the, the, the, the, the good play there would be to establish those relationships. So you've, you've got relationships with these different companies. So let me ask you a question. You mentioned Disney. I assume that Disney has a huge department of people who are inventing things and different things like that. So is it typically those larger companies where they maybe have a, a large staff of their own? Are they less invent inventor friendly? Well,

(27:37):

Sometimes yes, sometimes no.

(27:40):

Okay.

(27:41):

Open innovation it's really kind of an amazing concept. Open innovation means that, Hey, I'm gonna look outside my walls, that maybe I have these wonderful designers in the back and, but if I open my, my doors for people like me and you and everybody else, I can increase the chances of me finding a great idea. I might have 10 designers in the back, but I could have 10,000 people sending me ideas. So a lot of companies have embraced that, but some of them haven't yet. Right. They, they, they really wanna keep you out. That's okay too. Avoid those, those companies, but find those companies that have embraced open innovation and they wanna work with, with you. It's a great business model. It is growing in all different industries. I get to see at invent, right. Products that get licensed in probably 30 to 40 different industries. So it is growing and it's really kind of exciting because you're knocking on doors of opportunity. It's wonderful.

(28:41):

Well, what's always interesting to me, Stephen, is when I see, you know, some of these, these inventions that have ha you know, the pet rock back in the whatever it was, seventies, eighties, you know more recently the fidget spinner, those goofy thing. I'm, I, and you sit back when you see those and they become ubiquitous, right? They're everywhere. And you're like, gosh, how much money did someone make off of that thing? You know? It's it is very intriguing.

(29:05):

Well, absolutely. In fact, that's what got me started was Gary Dah invented the pet rock, and he was in my town, and I thought, gee, he, if he could do it with the pet rock, maybe I could do it too.

(29:15):

Yeah. I love it. I love it. Well, again, guys, we've been talking with Mr. Stephen Key inventright.com check him out on YouTube, LinkedIn and Facebook. Stephen, thank you so much for coming on the show. I really appreciate it.

(29:25):

Thank you so much for inviting me.

(29:27):

Yeah, absolutely guys. Thanks for watching. Thanks for listening. Have a great rest of your week. And don't forget, as always, cashflow's King

(29:39):

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