business plan
Business

How to Make a Business Plan for Commercializing Your Invention

A carefully thought-out business plan is an asset to any company and has been shown to be a predictor of a business’ success down the road. A business plan is especially important for successfully commercializing your business’ intellectual property. Many of the decisions you make as you develop your business and prepare to commercialize your invention can have significant implications for your intellectual property rights.

If you have an invention you’re looking to commercialize, you have a valuable asset worth protecting. Unfortunately, rushing to market to capitalize on the value of that asset without a business plan in place can hinder your success and endanger the protection of your intellectual property. Having a plan in place can not only help you avoid costly mistakes but also secure the confidence of potential investors.

This article will highlight some of the most important elements of a plan to commercialize your invention and how they interact with your intellectual property rights.

Market Research

An understanding of the market you’re entering is critical to making informed business decisions and profitable investments into your product. Some key questions to answer are:

  • What similar or related products are already on the market?
  • How successful are these existing products?
  • How much are people paying for these products?
  • What is the value of the market for these products?
  • How does your invention stand out? How will you be better than the competition?
  • What channels are these products distributed through?

Knowing the market ensures (1) that you’re making profitable agreements with your manufacturers, distributors, retailers and investors and (2) that you’re making an informed, value-driven decision when patenting your invention.

If the market for your invention is small, and you’re only likely to capture a small part of it, you may decide that investing in a patent is not a priority. If you don’t know your market, you may be disappointed when you invest thousands of dollars into a patent only to make approximately the same amount in revenue over the lifetime of your business.

If any of these questions stumped you, you might consider a filing strategy that protects your intellectual property while still allowing you to test the market before filing a full patent application. An option under United States patent law, called a provisional patent application, makes this possible. A provisional patent application is often described as an informal application, and is transformed into a full application within a year. The advantage of filing a provisional patent application is that it allows you to secure a filing date for your invention and label your product as “patent pending” while deferring sp,e pf the initial cost of preparing a patent application.

Development and Production

Key Questions:

  • Do you have a finalized product?
  • Who will manufacture?
  • Who will distribute?

An idea is a powerful thing but commercializing your invention will often require a finalized design, manufacturer, distributor, and retailer. Once you begin to have meetings with these potential players, you’ll want to make sure you’re not endangering your intellectual property protection through public disclosure. An almost universal requirement for the patentability of an invention is novelty. The invention claimed must be new. What will come as a surprise to some inventors is that even their own disclosure of the invention prior to filing a patent application can be used against them. In some countries, a grace period applies during which inventors can file for a patent despite having publicly disclosed their invention.

Knowing this and knowing you will need to have many meetings to get your product to market, should alert you to the fact that you may require a non-disclosure agreement to protect your invention.

Financing

While commercialization of an invention is a revenue-motivated undertaking, going to market also represents, in most cases, a substantial initial investment. Fortunately, entrepreneurs with innovative products may be able to garner financial support from investors on their way to market. As is the case with conversations surrounding manufacturing and distribution, meetings with potential investors can also constitute a public disclosure if no non-disclosure agreement is signed.

If you have already filed for or been granted a patent for your invention, not only is the disclosure concern eliminated, you may also find you have more success in securing financing. Investors may be more willing to invest in a business that has itself invested in one of its most valuable assets – its pending patent application or granted patent. In the absence of a pending application or issued patent, investors may share concerns about there being nothing proprietary to the business, making it easily reproducible and a risky investment.

Going to Market

There are two broad strategies for the commercialization of an invention: venturing and licensing. Venturing refers to building a business around your invention and being directly involved with its marketing and sale. Licensing refers to an agreement between you and another party wherein they manufacture, distribute and sell your product while paying you for that license. The licensing route gives inventors the chance to step back and leave the business side of things to someone else.

If you’re planning to license your invention, potential licensees will expect you to have a patent application pending or a granted patent. In the absence of one, there is nothing stopping them from making your product themselves and leaving you out. There is nothing motivating them to pay you for it.

If you plan to pursue the commercialization of your invention yourself, you will want to consider in what markets you’ll sell your product – in what markets. If you have plans to go abroad, you should remember that patent protection is territorial and you’ll need to file an application in every country in which you want to protect your invention. When you’re making this list, recall that some countries will require absolute novelty – meaning no public disclosure for a patent to be granted.

In either case, you will want to make sure your invention is protected. If you’re investing in a business, you want to make sure you can maximize sales and revenue from your product. Without a patent, competitors can replicate your product and offer it at a lower price. If you’re the only one who can make the product (because you have a patent), no one can look elsewhere for the same thing, enabling you to set your price as you see fit. If you’re investing in a product rather than a business, to later license, these considerations continue to apply as they are the factors which will drive licensing agreements. Your licensees have similar goals after all.

In order to maximize your success, regardless of the route you take, you will want to have a business plan prepared. Giving careful consideration to the market and the road ahead will help you to identify critical intellectual property considerations and make decisions that protect rather than endanger your intellectual property rights.  

Bio:

Christopher Heer is the owner and founder of Heer Law. He is an intellectual property lawyer, registered patent agent, registered trademark agent, and is also certified as a specialist in intellectual property law (patent) by the Law Society of Ontario. He believes that intellectual property rights add tremendous value to businesses by enabling them to raise capital, build asset value, and grow faster under the protection that these exclusive rights give them.

Headshot – https://www.heerlaw.com/images/christopher_heer_270.jpg

Co-authored with Annette Latoszewska.