The Monetary Value of Connecting the Dots

October 19, 2016 10:51 AM

I have a simple idea for a cottage business, but I don't want to get screwed because it's so simple the industries involved could easily shoulder me out. What should I do?

Recently, thanks in large part to my inner cheapskate, I have discovered a few things regarding a something or other that is sold all around the country.

Problem is: the basic parts already exist, but they are made by different companies for different purposes.

How should I protect myself in exploring this venture?

Non-disclosure clauses? A good lawyer? All of the above?

posted by rougy to Work & Money (10 answers total)

This scenario is why patents exist. You have an invention which is a novel combination of existing parts.

The trouble is, patents are expensive and time-consuming to get. You need a lawyer to search existing patents to make sure your idea hasn't already been patented by someone else and is sufficiently novel to be eligible for patent. And you might spend a lot of money on lawyers, only to discover that your idea is not patentable, or that someone else has already patented it, or that someone else has already patented it so long ago that the patent has already expired and anybody can make your invention.

If you don't want to get a patent, then you still need a lawyer to make sure the invention is not and cannot be patented, otherwise a larger entity will get a patent on your invention and essentially own it. You can fight this (your invention is "prior art" and can be used to invalidate a patent obtained by someone else, because a patent is an implicit claim to the novelty of the invention) but this could be an expensive legal battle against a larger opponent.

The flip side of a patent is that you must publish your invention and explain how it works. That's the price you pay for getting a limited-time monopoly on it: you have to share it with others. Eventually (after about 20 years) the patent will expire and they will be able to use it for free.

While you are trying to get a patent, you will want to use non-disclosure and non-compete agreements when discussing it with others.

However, once it's on the market, if it is not patented, then anyone can copy it. Even with a patent, there are some countries that are cavalier about patents, and you may face competition from companies from those countries. It can be expensive and difficult to pursue legal action against them.

A strategy that you can use in the case of a non-patentable or non-patented invention is to continually improve your product. By the time your competitors have their copy of your product out, you are producing a substantially improved version 2 that makes version 1 look primitive. This can be a tough treadmill to be on but if you establish yourself as an innovator, that reputation can give you a competitive advantage.

The other thing you can do is simply sell your invention. Approach one of the companies selling one of the pieces of your invention, tell them that you have a potentially profitable product that can be made with it, and offer the idea (and design) to them for a flat fee or a per-unit royalty. You will need a lawyer for this as well to make sure you are protected and that the company doesn't just steal your invention. (In fact, many companies don't accept outside ideas from random people because they may have something similar under development internally, and don't want to be sued by someone who incorrectly thinks the idea was stolen.) The profit you'll make from this may be substantially less than if you started a company and made and sold the widget yourself, but it is also much easier and less risky.

Bottom line: get a lawyer.
posted by kindall at 11:11 AM on October 19, 2016 [4 favorites]

See if one of the universities in your area has a startup/entrepreneurial incubator that is open to the community. Those are great places to get a sense of how to strategize and build your business, and get advice on how to accomplish your goals.
posted by Liesl at 11:31 AM on October 19, 2016

Response by poster: "The other thing you can do is simply sell your invention. Approach one of the companies selling one of the pieces of your invention, tell them that you have a potentially profitable product that can be made with it, and offer the idea (and design) to them for a flat fee or a per-unit royalty. You will need a lawyer for this as well to make sure you are protected and that the company doesn't just steal your invention. (In fact, many companies don't accept outside ideas from random people because they may have something similar under development internally, and don't want to be sued by someone who incorrectly thinks the idea was stolen.) The profit you'll make from this may be substantially less than if you started a company and made and sold the widget yourself, but it is also much easier and less risky.

Bottom line: get a lawyer."

*****

Kindall...Ken Doll? Kindall!!!!

I thought as much, and thanks for playing.

I'm 90% sure that the parts that I need are not manufactured by the company that sells them.

I should probably just call them up and ask "Hey! Where do you get your...."

But then they'll ask "why?" and I will have to think of something honest, yet evasive.

This will work. I'm pretty sure of it, partly because it's so simple.

But I can't make what is being made already by the tens of thousands every day.

It's a plastic thing...plastics, the wave of the future.
posted by rougy at 11:34 AM on October 19, 2016

Response by poster: Thank you, Liesl. I appreciate the reminder.

I see this as a two front dodge.

Tell company A I need their part for Reason 1.

Tell company B I need their part for Reason 2.

Buy a packaging machine.

It's a "do it yourself" startup, but the heart of it belongs to someone else.
posted by rougy at 11:47 AM on October 19, 2016

Response by poster: I don't want to rob them.

I'd be buying their parts, same as anybody.
posted by rougy at 12:08 PM on October 19, 2016

Why would the manufacturer ask why?
posted by rhizome at 1:31 PM on October 19, 2016 [1 favorite]

they're not the manufacturers.
posted by andrewcooke at 1:58 PM on October 19, 2016

You seem to be focussed on one of the two companies taking advantage, but if this idea takes off it is equally likely that a third party or even the customers themselves will realise that part A + part B = product.

Why not offer the idea for free - so you become an authorised re-seller/dealer for product A so able to offer it at the RRP, then become an authorised re-seller/dealer for product B and offer it at the RRP. Then you offer the combined final product without any additional markup.
posted by Lanark at 2:07 PM on October 19, 2016

Mod note: Rougy, AskMe is designed to be pretty much one-way, not a debate or response space. If you need to clarify something, that's fine, but otherwise please just read the answers as they come. Thanks.
posted by restless_nomad (staff) at 3:27 PM on October 19, 2016

Patent the idea. NDAs are not enough. Also, if a major company decides to infringe on your patent, you have the very expensive task of taking them to court and suing them, which may or may not be something you can afford to do, as lawyers are going to want payment up front.

Your next option (ideally post-patent) is convincing someone else to buy the idea from you. If you are not already involved in the industry you are selling to, it is VERY difficult to get people to take you seriously (if you give too little info) and not just swipe your idea (if you give too much). So. . . yeah.

I'm 90% sure that the parts that I need are not manufactured by the company that sells them.

Then do some research into manufacturers in that market and contact them directly. They will probably be in China.

I should probably just call them up and ask "Hey! Where do you get your...."

You can, but they probably won't tell you, either because they are protecting their interests or because you will only be able to get in touch with customer service, who probably won't have answers to this type of question, or be allowed to reveal the source on the off chance they do know.

But then they'll ask "why?" and I will have to think of something honest, yet evasive.

If they do know, and will tell you, "why" is not going to come up, because they won't care. If it does, just say you are curious about production standards. No one is going to judge you if you fudge the truth there.

If these products are sold by different companies, how would they ever find out you are combining them to make your item anyway?
posted by ananci at 10:59 PM on October 19, 2016 [1 favorite]