Commercialising Innovation

21 Oct 2009

Wayne Hudson

Authors
Wayne Hudson
Categories
Intellectual Property
  1. Make sure your invention is novel.  Too many inventors think they are the only ones to have developed something new and are reluctant to do a novelty search just in case they might find out that they are not the first to come up with their invention.  I have seen more than one inventor spend thousands, and in some cases hundreds of thousands of dollars, developing a product without doing a search to see if there is anything similar already out there.
  2. Patent searches.   To make sure you are not reinventing the wheel – and spending too much money doing so – it is essential to see what others have already come up with.  This can be done by conducting a “freedom to operate” search, which usually means engaging a patent attorney who will use proprietary search tools to look for patents that have been registered throughout the world.  There are, however, a number of freely available tools, including Google Patents, Free Patents Online and Espace, which enable anyone to search some patents.
  3. Prior art searches.  Patent searches may not be enough, as a lot of inventions have not been patented.  Instead, many inventors are happy to share their inventions with the rest of the world on websites such as YouTube, so it is important to search as widely as possible using the many available search tools.
  4. Public domain.  If a similar invention is already in the public domain (i.e. nobody else has asserted any intellectual property rights) or has been tried before and failed, it is important to understand why that invention has failed and why you think your invention will succeed instead.
  5. SWOT analysis.  At this stage it is important to step back and, as objectively as possible, carry out a SWOT analysis, identifying the Strengths, Weaknesses, Opportunities and Threats that may affect the commercialisation of your invention.  This will help determine whether it is worth while proceeding, either on your own or with the assistance of others.
  6. Identify potential partners.  If in the course of your searches you come across a patent or similar invention, this does not necessarily mean the end of the game.  Instead it may mean an opportunity to share your invention with the owner of the patent or other invention.  This could involve,  amongst other things, licensing your invention or entering into a joint venture with the patent holder. 
  7. Collaborate. New Zealanders have a reputation for inventing useful things and the Number 8 fencing wire is regularly held up as a shining example of our innovative skills.  However, the downside is that too many inventors keep their inventions to themselves and, even though there are others doing something similar, they want to do it “my way”.  If the number of GPS solution providers in New Zealand is anything to go by (of which there are reportedly over 30 different companies), too many people are competing for the same dollar in a country of just 4.2 million people.
  8. Raising capital.  If you don’t have the funds to develop your invention on your own and need to raise capital, you have many options.  In some case grants are available from entities such as TechNZ and NZTE, while the other sources of capital include friends, family, angel investors, venture capitalists, private equity investors and members of the public.  When raising capital you need to be careful to avoid breaching the Securities Act.  If you propose to solicit funds from members of the public, you must register a prospectus, which is a time-consuming and expensive exercise.  If you wish to avoid the time and cost of registering a prospectus, you will need to be careful who you select as an investor, because a failure to ensure that even one of the investors is a member of the public could result in the entire capital raising being void, and the directors and promoters of the capital raising becoming personally liable to repay the capital to the investors.
  9. Securities Act Exceptions. There are some cost-effective options, which involve a reduced level of compliance:  where the only investors comprise wealthy or experienced investors (defined in the Securities Act as “eligible persons”); where the minimum amount of capital being raised from each investors is at least $500,000; where the investors are close business or family associates, habitual investors or have otherwise been selected as not being members of the public; or where the Securities Act Venture Capital Schemes Exemption is used, which allows companies to raise up to $5 million using an approved Scheme Administrator, such as the Economic Development Association of New Zealand.
  10. Look for smart capital.  If you need to raise money to bring your invention to market, choose your investors carefully.  If possible, get an investor who has “been there, done that” in the same space as your business.  Conversely, beware of investors who have made their money in a different  sector, as their experience may not necessarily be portable to your business sector.
  11. Let go of control. Be prepared to have your shareholding diluted when investors  come on board.  Many business founders have refused to allow their shareholdings to drop below 50% for fear that they will lose control, because others (usually investors) will take over their business and oust them.  This fear is really only justified if the founder is incompetent or fraudulent.  Otherwise, lack of voting control does not of itself mean losing control over the direction of the company.  An investor is most unlikely to want to take over running the company.  Instead he will be more interested in ensuring that the company keeps as close as possible to its path to market.  Not every founder has the full set of skills to be able to control the entire direction of his business.  While he may be good at product development, he may not have the financial management, HR, marketing or sales skills.  It is important to allow people with the right skills to grow the business rather than trying to keep control for personal or emotional reasons.
  12. IP ownership.  Make sure your intellectual property is where it is meant to be.  It is cheaper to get the ownership sorted out at the beginning than when an investor comes calling.  For example, if you have come up with an invention in conjunction with someone else, you will jointly own it.  If you then set up a company to commercialise the invention, you need to be clear as to whether you will transfer the IP in the invention into the company or license that IP to the company.  Remember too that, if you are looking to raise capital, an investor will almost inevitably require the IP to be held by the company in which he is investing.  Make sure you document the transfer of ownership, if for no other reason than it will create a better audit trail for investors and reduce the costs of due diligence and investment.

Search

Or use our sitemap

Browse by category

Browse by industry

Browse by author

Browse by date