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 Post subject: Patent or not?
PostPosted: Tue May 11, 2010 11:35 pm 
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Recently there has been some discussion about the costs and value of patenting. To me, it seemed that much on this had already been discussed but I realized that some of what I was remembering was in personal communications with other members and therefore not something others will have read.

As such I will attempt to restart this conversation and hope those who have had discussed this off forum can re-share their views.

We start with the question: Is it worth it to spend $20-$30k needed for world wide patent coverage (filing and maintenance fees) for a puzzle given how hard it is to enforce and the limited market for twistypuzzles

I will add some of my previous comments in following posts.

Dave

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 Post subject: Re: Patent or not?
PostPosted: Tue May 11, 2010 11:37 pm 
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I spent the $50 to buy the Nolo press book on patents when I was considering a patent for the Elemental mechanism as I knew I would be making a number of models using that mechanism and might want to consider mass production at some point.

In the end, I didn't think I was really going to see them through to a production that would be large enough to make the huge costs of a patent worth it. This was even granting that it would really be effective protection, which I think is in question.

As we've seen from the examples of Okamoto and Verdes, copying will happen whether or not you get a patent. What remains to be seen is whether or not having spent the money on the V-Cubes patent will ultimately allow for an effective remedy for Verdes. I really, really hope so as he has clearly put a lot of investment into his product (research, development and quality manufacturing) and so his is one of the cases where I would consider a patent should be worth the effort.

Frankly, I'm worried it won't be. His market and prospects have already been very damaged, which damages or delays any plans he had for the higher order end of his line. Can a judgement, even if he can get a Chinese court to rule in his favor, really compensate for what he has lost?

I think patent protection is valuable and an important body of law in society, but I think it has a high minimum threshold to see value. If you invent some new electronic device that will mean millions in revenue or profit, you want to protect it and will likely have the resources to do so.

In our market, particularly for someone not willing to quit the day job and mortgage their house, just trying to not loose your shirt is a struggle.

I admire Verdes and Pantazis and anyone else who goes all in and tries to make a serious business of it. It isn't easy, and I hope they can get all the protection they deserve.

Dave

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 Post subject: Re: Patent or not?
PostPosted: Wed May 12, 2010 12:09 am 
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Borrowed from another thread:
Kelvin Stott wrote:
drew11 wrote:
The problem is that it is very expensive to file a patent in the us (Close to $3000 even if you do all the work yourself). I tried to file a patent for some of the designs that i made but the cost enroached on my plans.

Not quite, in fact it costs only $82 to file a patent in the US, if you do it all yourself:

http://www.uspto.gov/web/offices/ac/qs/ ... mber15.htm

Then you pay just $110 for official examination, usually after a few years, and only if you have decided that you want to proceed with it.

That's less than $200 in total. Compare that with how much you spend to buy just ONE decent custom puzzle, or the materials or printing to make one puzzle!!

So there's no excuse not to protect your design if you believe your puzzle has any commercial potential whatsoever!

I recommend that puzzle designers take the time to do some basic research, learn how the patent system works, and use it to protect their ideas (after all, that's why it's there!), rather than just moan that it's too expensive without checking the facts, and then fall easy prey to "KO companies" that have every legal right to copy your unprotected ideas!
While $82 is the online filing fee for utility patent (and that may be the type you wish to get), that is not of any value without many more fees:
1.) Patent search fee ($270)
2.) Patent Examination fee ($110)
3.) If it is granted, patent Issue fee ($755)

Sure you can pay for the application but if you don't pay them to process it to acceptance what is the point?
Once granted you then have maintenance fees. One presumes you got this patent for protection longer than the initial 3.5 years, so let's add:
4.) 3.5 year maintenance fee ($490)
5.) 7.5 year maintenance fee ($1240)
6.) 11.5 year maintenance fee ($2055)

So assuming you do absolutely everything necessary to properly research (discovery) and properly draft your patent yourself, the fees needed to have your patent granted and kept up to date for the full 20 years is at least $5002 just in government fees.

Now factor in Europe, and Asia and all the countries world wide where you will have to pay their fees and discover and draft patents according to their laws. Multiply this $5000, assuming their fee schedule is at least somewhat comparable to the US.

So perhaps $20k - $30k depending on the number of venues.

Now, with an immense amount of work and money, you may have a patent for your puzzle.

Verdes has done this (although I am sure he paid a lot in attorney fees to at least try to make sure the discovery and drafting was proper). Look what has happened to his business.

The missing part of patent costs in our discussion here is of course enforcement. How much time and money does it take to make use of your newly granted international patent to keep people from infringing (not possible) or get compensation for their infringement? So far China has not done much to help Mr. Verdes as far as I can tell. And given the distributed sales channel how do you squash thousands of individual eBay sales? Patent is a great tool to keep major distributors from bringing in KO puzzles but I wonder how it can be used against a flood of tiny sellers.

I want patent to be an effective tool. I don't want to make it sound hopeless. But from what I have seen it doesn't offer much in the way of protection that a small inventor can afford. The cost to acquire and keep up a patent is a big enough hurdle for a small guy even if you could assume that a granted patent would protect you.
But a granted patent offers no real protection at all it seems, just the ability to pursue a remedy after you have already been attacked.

Dave :(

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 Post subject: Re: Patent or not?
PostPosted: Wed May 12, 2010 12:31 am 
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I hope this is on topic enough for a patent discussion.

It seems to me the best business strategy for dealing with the KO companies and products is to ignore them in any market where they aren't having a significant impact. Litigation is expensive and time consuming and isn't a sure-thing anyways.

Here is my US-centric perspective. I own genuine v-5, 6, and 7 cubes. Many people do. If one of our friends wants to buy one, basically any Google search for "7x7x7 cube" will get you a link to buy Verdes' products. If they go to Amazon they are buying legitimate products. I fact, seems "hard" to find the KO products without turning to EBay. I assume this is the case in most countries other than China.

So, at least in the US market, it doesn't appear as though KO companies are having a big enough impact to make suing them economical.

I would think the biggest threat KO companies pose is in getting their products into retail stores where somebody that wasn't already looking for the product might see it and impulsively buy it. Without a patent you would have no way of fighting this. With a patent though, a letter from your legal team to the retail chain should be enough to get the chain to stop carrying the KO product and possibly even carry yours.

Without a patent, it only takes one KO company to undercut you and you're done. If you know you have a product that has a big market (V-cubes seemed certain from the start) then I think your only chance is to patent your product and protect in in all of your big markets. If you are making a great puzzle like the Helicopter cube, I don't think there is a big enough market to even consider a patent.

Put another way, this forum has 1766 members. Unless you have a product that will certainly sell 10x that, you shouldn't patent.

Obviously I don't know Verdes' finances well but I would be surprised if fighting the KO companies, save one or two, is a good business decision. For the few he does need to fight, he needs a patent.

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 Post subject: Re: Patent or not?
PostPosted: Wed May 12, 2010 12:45 am 
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A few bullet points:

  • Regarding international applications: It is not necessary to separately prosecute your patent in every region where you want protection. The Patent Cooperation Treaty established a procedure whereby you can apply internationally at your region's receiving office (assuming they're a member). It's still not trivial, but it's administered by WIPO and they're working to streamline it.
  • Regarding foreign infringement: If you obtain a domestic patent, you have rights against importation of infringing articles. Using V-CUBE as an example, I don't know of any retailers who carry the counterfeits in Canada or USA. I wouldn't be surprised if Verdes's patent protection is a factor because both countries have anti-counterfeiting laws.
  • Regarding value: Even if you don't commercialize your patent, it looks good on your résumé especially if it's pertinent to your field of work. If you ever have to testify in an IP lawsuit, your status as an inventor can bolster the credibility of your testimony. And it can make your opinions admissible as expert comment. (Yes, this happened to me.)


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 Post subject: Re: Patent or not?
PostPosted: Wed May 12, 2010 3:49 am 
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DLitwin wrote:
We start with the question: Is it worth it to spend $20-$30k needed for world wide patent coverage (filing and maintenance fees) for a puzzle given how hard it is to enforce and the limited market for twistypuzzles.

I find this question biased and misleading.

First, it is important to understand that there is no fixed cost: the more you pay the more protection you get. For example, you can apply for patents in as few or as many countries as you wish, and you can stop paying patent renewal/maintenance fees to extend or terminate the patent(s) whenever you like. It's definitely not a case of $20-$30k or nothing, and in fact you can end up paying a lot more, or a lot less. You have complete control over this and it's entirely up to you.

Second, the application process is very slow (at least 5 years or more), and you have every option to change your mind and strategy during that time over what you want to pay for. During this time you have every chance to test your idea on the market. So you initially pay just the filing fee (less than $100 if you do it yourself), then you have 1 whole year to decide if you want to file an international application, then another year or so before you need to decide if you actually want to file in other individual countries, etc, then another couple of years before you must decide if you want to pay for examination, then another few years before you start paying serious renewal fees. And you can stop paying any of these costs if and whenever you choose.

The costs increase only if you want them to, but the process is so slow that you have every opportunity to try to commercialize your puzzle before the costs go up too much. If you find there's enough interest then your gut will tell you that you want to continue paying patent costs. But if you find that there is no interest in your puzzle then you can simply stop paying further patent costs before you have spent a few hundred dollars. Not a big loss, and at least you've given yourself a chance to see if your idea will take off.

Of course, if you just sit on your bottom and expect someone else to do all the work for you to commercialize your puzzle (and take all the risk), then you are living in a dream world, your puzzle will go nowhere and paying for patents in the first place is a bad idea.

On the other side, if you don't protect your idea and somebody else takes the risk to make it big, then they have every right to reap all the rewards. In that case you have no right to complain. Invention is 1% inspiration, 99% perspiration. But I'm sure you will feel very bitter if you had the opportunity to protect and bring your puzzle into the world, but didn't take that opportunity, then someone else did and made a fortune from it.

Finally I appreciate that patents do not PREVENT KOs, they simply give a right to sue the offender, and as we know that is a very expensive, risky process, unaffordable by most individuals, including myself. However, it is still a deterrent, since in theory I could raise funds from an investor if I could convince them I would win the case and get big rewards. And for that reason, a KO company would rather copy an unprotected puzzle than one which is protected by patents. It's simply a matter of risk vs reward. Why would they copy a patented puzzle if there are plenty of unpatented puzzles out there which are just as appealing and not yet mass produced? Plus, a patent acts as a deterrent not only because it gives the threat of a potential law suit, but also because it shows that the inventor intends to commercialize the puzzle himself. That means more potential competition and therefore more risk for the KO company, so why would they take this risk rather than the safer option of making an appealing puzzle that has no protection and no sign that anyone will ever mass produce it? These companies are not stupid, they are made of human beings who think, act and manage risk just as we all do.

Be honest and ask yourself this question: how many patented puzzles are currently being mass produced by KO companies? Apart from maybe the V-cube (TBC), I can't think of any. Remember the void cube and super floppy cube are not protected. As far as I'm aware, most "KO companies" are mass producing only unprotected puzzles that nobody else is making on a commercial scale. They are simply filling a market demand that is not being met by the original designer, and in many cases (admittedly not all), they have every legal right to do so because the design is not protected. One would normally call this a good, low-risk, completely legal business opportunity to fill an unmet market need. And there's nothing wrong with that!

So in summary: patents provide an initial cheap deterrent to KOs, and they give you plenty of time, options and full flexibility to strengthen protection as you test the true commercial potential of your invention: if the product takes off then you will want to pay more to protect it, if it doesn't then you can always cut your losses. But at least filing a patent gives you options that keep you in control.

Nobody who understands how patents actually work should ask: "Is it worth it to spend $20-$30k needed for world wide patent coverage (filing and maintenance fees) for a puzzle given how hard it is to enforce and the limited market for twistypuzzles?" That's simply not how patents work, because it's not one decision. It's a whole series of options and decisions, and it's all about managing risk vs reward during this entire decision making process. If you don't understand the process and all the decisions and options available, then you don't understand the real value of the patent system.

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 Post subject: Re: Patent or not?
PostPosted: Wed May 12, 2010 6:59 am 
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When chatting with Uwe more than a year ago, we agreed that for a puzzle business to be successful,
it also needed to be "camouflaged" as a toy. The reason Rubik's cube became so popular, it was just
because of that. Everyone thought it was a toy, and Ideal marketed it (at the Toy Fairs) as a Toy.

Even Erno Rubik, who had licensed as well as manufactured the cube, probably did not get much as a
return after endless legal battles with KOs producers. When I asked him at our meeting in Hungary
what he thought about the KOs, his answer was an interesting one. He said:

"I am amused about all the different types and ideas that came out of the 3x3x3!"

He did not seem worried or angry or anything. He was simply amused!!!


Puzzles are indeed a niche market, it is a million dollar market. But toys, are a billion dollar market.

So, if you come up with a new concept which is easy to design, and it is able to amaze people, then
go for it! And if the design is simple enough, then that is an extra plus. And when I state concept,
I don't mean another twisty-type design, that won't be a hit anymore (as I explained before).

V-Cubes is a special case of twisty puzzles. They are more sought than other ones, because they
are directly based on the success of the 3x3x3 cube just like other logical expansions or simplifications,
such as the 4x4x4, the Pyraminx, etc etc etc.

Filing a patent and then going with licensing (instead of manufacturing it), is not good enough. Unless
you see a patent as a showoff! (like I do in some twisted way LOL). Licensing will give you very little in
return, and it will certainly won't pay your legal costs.

In the end of the day, the most important part is to be able to push your puzzles through the right distribution
channels. If, for example, you have a US patent, then any exports or imports which infringe your patent rights
can be blocked. But the focus of any legal action should be on the big companies/retailers/distributor channels,
and not on the small firms, as you will never be able to recover losses from the "little fish".

Summarising:

1. Must have a new puzzle concept that can amaze.
2. Must be simple to make (i.e. not many molds).
3. Must be a design flexible enough to also enter the toy market.
4. Must know the right distribution channels.
5. Must have connections to market it properly (ads, TV, internet, etc).

I believe that if the first one + any of 2,3,4,5 are satisfied, then it is a good start.
But Nr 1 is mandatory!


Verdes filed patents to a large number of countries, but he never regrets doing so. Because, had he not
everything would have been KO'ed in all the "puzzle-strong" countries, mainly USA, a few European countries,
and Japan. China is getting better, but corruption fight and law enforcement will take time.

Some fake 9x9x9s and 11x11x11s have certainly been damaging his efforts, but nothing official (e.g. direct
distribution to large companies, competitions, etc) can happen in the "puzzle-strong" countries within those
20 years of the patent if illegal products are being used. So in that sense, he still holds the "key".

And although financial return is something included in long-term planning, patents always ensure some
acknowledgment, and why not, fame (so I surely agree with some of VerWetPaint's last comments).

Finally, paying $82 to file for a patent, that is, if we write it down by ourselves, is an extremely risky option.
I would never ever recommend it, because lawyers use their own jargon. In the future, some other lawyer
could use this jargon to easily bypass normal "every-day" words.

In any case, for serious commercial purposes, this *has* to be done professionally, or not at all.
There is much more in that jargon that meets the eye. It is almost like a legal code language.

;)


Pantazis

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 Post subject: Re: Patent or not?
PostPosted: Wed May 12, 2010 7:23 am 
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From a purely business standpoint, it doesn't make sense to take out a patent unless the costs are less than some fraction of expected (or preferably, actual) revenue. I'd put that threshold at somewhere around 10% or less. Most patented puzzles have had the costs of patenting wind up being well over 100% of revenue.

Especially early on, I'd say it's better to take whatever money you'd have spent on the patent, and use it to keep prices down, which will do a far better job of stopping cheap knockoffs from happening. If you enter the market quickly using big distribution channels and with a high quality product which can't easily be undercut on price, there's a lot less potential money for knockoffs to make.


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 Post subject: Re: Patent or not?
PostPosted: Wed May 12, 2010 7:27 am 
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kastellorizo wrote:
Even Erno Rubik, who had licensed as well as manufactured the cube, probably did not get much as a return after endless legal battles with KOs producers. When I asked him at our meeting in Hungary what he thought about the KOs, his answer was an interesting one. He said:

"I am amused about all the different types and ideas that came out of the 3x3x3!"

He did not seem worried or angry or anything. He was simply amused!!!

In fact Rubik was the richest private citizen of communist Hungary, which may explain why he was amused. That certainly wouldn't have been the case without a patent.

But yeah, I agree that a puzzle needs to be very unique and special with big market potential (as you suggest) to be worth applying for a patent in the first place.

Otherwise, Bram's approach (above) is probably more suitable in most cases (>90%).

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 Post subject: Re: Patent or not?
PostPosted: Wed May 12, 2010 1:01 pm 
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Kelvin Stott wrote:
I find this question biased and misleading.
Perhaps. it came out of conversation and I didn't include the entire context for this thread.
Kelvin Stott wrote:
First, it is important to understand that there is no fixed cost: the more you pay the more protection you get. For example, you can apply for patents in as few or as many countries as you wish, and you can stop paying patent renewal/maintenance fees to extend or terminate the patent(s) whenever you like. It's definitely not a case of $20-$30k or nothing, and in fact you can end up paying a lot more, or a lot less. You have complete control over this and it's entirely up to you.
Indeed. But I am approaching it from the perspective of "what is the end goal". If the end goal of getting your patent is protecting a market, one has to question whether or not it can protect your market, assuming everything goes well. Being able to drop out earlier and save some of the fees is fine but ultimately indicates you have no market to protect. So I suppose the question is more "at what point from $100 to $25k do you actually get protection?". I think if you pay your $82 you secure a path to some form of protection. Going through the fees over time you give yourself more options. But if all of these options, up to and including the full $25k, do not produce tangible protection what is the point of getting started?

I am not saying patents can not be useful, but I question how much use they can provide in our specialized market. Note that many people are agreed that for a patent to make sense you likely have to break out of our niche and get bigger. The general trend I seem to hear (and with which I agree) is that a patent helps you if you are big and can afford a lot of enforcement.

Kelvin Stott wrote:
Of course, if you just sit on your bottom and expect someone else to do all the work for you to commercialize your puzzle (and take all the risk), then you are living in a dream world, your puzzle will go nowhere and paying for patents in the first place is a bad idea.
I don't think that is being advocated. I think the question here is: "If I do everything proper with regard to patent, will it matter?". If I am going to pay for protection I want to know that protection can be provided before I spend the money. So far I see some question.
Kelvin Stott wrote:
However, it is still a deterrent, since in theory I could raise funds from an investor if I could convince them I would win the case and get big rewards. And for that reason, a KO company would rather copy an unprotected puzzle than one which is protected by patents.
I wonder if we have enough information to make this statement. I am not sure the Verdes patent was any deterrent to the multiple companies infringing it. I was shocked to find there were two different 11x11x11 productions!
Kelvin Stott wrote:
It's simply a matter of risk vs reward. Why would they copy a patented puzzle if there are plenty of unpatented puzzles out there which are just as appealing and not yet mass produced? Plus, a patent acts as a deterrent not only because it gives the threat of a potential law suit, but also because it shows that the inventor intends to commercialize the puzzle himself. That means more potential competition and therefore more risk for the KO company, so why would they take this risk rather than the safer option of making an appealing puzzle that has no protection and no sign that anyone will ever mass produce it?
Indeed, then why are there KOs of Verdes products? I would submit that they have *more* incentive to copy a product for which an inventor has already spent the time an energy to "go big" and market. Keep in mind that marketing is not something in which a KO company seems to invest a lot. And if an inventor has put in this effort it can then help his competition (by building a market) and even does the market research for them. If your business is to copy others, you will probably trust that where they choose to invest is a market worth stealing. I don't think the existence of a patent deters them but it certainly telegraphs that someone considers there is something to protect.
Kelvin Stott wrote:
These companies are not stupid, they are made of human beings who think, act and manage risk just as we all do.
I agree! If you are a thief who can easily pick locks and not get caught by the police, wouldn't it make sense to rob the houses with big gates and locks? Clearly they have something worth stealing!
Kelvin Stott wrote:
Be honest and ask yourself this question: how many patented puzzles are currently being mass produced by KO companies? Apart from maybe the V-cube (TBC), I can't think of any.
I think this just reflects the low number of patented puzzles in our market. Turn the question around: How many patented puzzles are *not* being KOd, and do you have any information to indicate this is because of their patent?
Kelvin Stott wrote:
So in summary: patents provide an initial cheap deterrent to KOs
I wish this were the case. I know it is the intent of patent law. I have not yet seen any evidence to support it in our market.
Kelvin Stott wrote:
But at least filing a patent gives you options
I agree. Where those options lead is of interest to me. We are seeing some of this play out in our market with Mr. Verdes unfortunate situation and I hope it goes in his favor.
Kelvin Stott wrote:
If you don't understand the process and all the decisions and options available, then you don't understand the real value of the patent system.
Understanding the patent system is valuable and I think I have a good sketch of it. Understanding the application of a patent in our niche market is a separate matter which greatly affects the decision to start down this path.

Dave :)

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