Questions

I don't believe in the plan for execution of my partners, should I sell my % ownership in the company? Is it worth it to get a patent?

Me and and my partners are the inventors of a new handtool. We presented it at a competition at our University and placed well (top 4 out of 30 teams) and got alot of great feedback on the tool and even had some industry people tell us they'd buy it if it were on the market. It was to my belief due to conversations we've had that the goal was to try and to try and license/sell the idea/prototype/etc off. We got a provisional patent and procured the help of some great engineers to develop the product even further and make an even better prototype. Now, one of the partners has brought to the table of use procuring investors and trying to take the idea to market (that means manufacturing, molds, sample orders, patent, etc). This ride was not one I was interested in or planning on taking. I'm an internet/online/ecommerce entrepreneur, it's where my experience and success has been. The handtool market is not one I have experience or knowledge and neither do I want to. They know I'm not really interested in going further as they plan and it's been brought to the table to me for me to cashout my % when they get investors.

6answers

First, please understand that you didn't "get" a provisional patent. Provisional patents are simply filed. They are not examined, and there is nothing to grant. All they do is establish a "Priority Date" enabling you to cite the filing in "Related U.S. Application Data" if and when you file for a utility patent (which, in due course, will be examined). Further, if you do not file within 12 months of the date on which you filed the provisional, your application will be deemed abandoned and you lose that priority date.

Second, when industry people said they'd buy it, did they tell you at what price? Because without a price range, their statements, while earnest, mean nothing. Even if they knew the price, is that price sustainable and achievable based on fixed and marginal manufacturing costs? I don't know and neither do they.

Third, you're correct that since you don't know the handtool market, and you have no desire to, you'd be crazy to stay involved. Nevertheless, if you were an inventor, why should you be cashed out now? Why shouldn't you hold on to a percentage for your contributions to date? I'm not saying you get the same share as the other co-inventors, assuming that, if they even get investors, they remain on in a meaningful capacity, but certainly you should get some share, representing your contribution to date. I also don't know how much time you have left before making a go/no-go decision on the provisional-> utility.

Further, if all of this comes to pass, how are they going to sell it? If it's via e-commerce, rather than through traditional sales reps, WDs, and the like, then perhaps there is a role for you. Not enough information to say, but certainly a consideration.

Bottom line: this product is certainly not assured of success. If you can be handsomely cashed out, you may very well want to take it. If you can't be handsomely cashed out, why should you accept nothing? You have the leverage and, depending on how much time you have left until the provisional expires, you may have time. If there's very little time left and you truly believe in the value, and you're willing to risk the $10K-$20K needed to patent this device, then list your co-inventors, cite the provisional and have an attorney write/file it.

You may say: What about the rights of co-inventors? Here is where US Law becomes very strange. See: http://ladas.com/rights-co-owners-license-patent-rights/ -- but by all means, consult an IP attorney -- this is just so you know the basics of your rights. But basically this means that if you did file a utility patent, you could, without any other co-inventors' permission, sell to a different entity than they! Confusing? You bet.

Last, while your post is professionally worded after the first sentence, please, for your own sake, never in writing should you, as a businessperson, use as a subject the egregiously wrong grammatical construction "me and my partners" (obviously, it's correct as an object). If you're going to be negotiating for equity or a cash-out with investors, you can't sound like a high school student sneaking a smoke in the bathroom. My partners and I -- impressions count -- and ell the more so when the error is the first thing I read or they hear! Someday you'll thank me for the tip even if you think I'm an ass for pointing it out.

Good luck.


Answered 5 years ago

It is very hard to build a business and the most important qualities moving forward are perseverance and commitment. both of these are impossible in view of your "disbelief" in the approach of your partners. Therefore, IMHO you will find it difficult to satisfy a key role until you agree with the plan or accept your position as an underling. Both of these are hard to do.

I suggest that you evaluate the business to decide if you want to keep or sell your shares independent of the decision to move on.

That said, often times people view their partner's plans as flawed because they do not fully understand them and English is a horrible language for communicating ideas and plans. So, don't jump before you have somewhere to jump and spend time trying to understand the benefits of the current plan. Maybe you will come onside and realise that it is you who failed to see the bigger picture. This has happened to me before and to people who worked for me.

Don't rush unless you have somewhere else to be!


Answered 5 years ago

To keep it short, def go for the licensing route if you're not comfortable getting into the manufacturing business. I've done it and it's tough. You should be able to shop potential licensors by going to the local hardware store and seeing the main brands on the shelf & going after them. You will need a good sell sheet. Listen to this podcast, bud, it will help: http://www.smartpassiveincome.com/how-to-get-paid-for-your-ideas/


Answered 5 years ago

Let's keep it short and simple.

1. You shouldn't bother about worthiness of the idea to get patented as in no way you feel attached to the same. You said, you're an entrepreneur that loves to hover around internet et al.

2. Your partners are good and trust able people. In my decade of experience I've seen so many of them struggling to cash out their owndership at one stage or another.

3. Yes, go ahead and sell your ownership. This will be of help to everyone involved with the concept.

4. Do you need to discuss anything further please feel free to reach out to me.

Hope above help!!


Answered 5 years ago

Founders conflicts account for a majority of startup failures, so your storyline is not uncommon. The way other founders have dealt with the same thing can vary depending on their comfort level with the team, the plan, and the risk. From your vantage point, whether you as a group sell/license your design or you "cash out" when your team gets investors to develop the product themselves, the net effect is about the same because the second option is basically you selling your % to them. (Assuming you get a fair price for your shares.) There are a few questions you want to ask yourself:
1. A provisional patent is not a patent, and should the group ever get an actual patent, do you want to own a % of it? Do you really want to be on the patent for the next 14 years? There are pros and cons here. If you leave the team, my guess is that they won't want you on the patent. With only a provisional patent filed, timing is an issue b/c they could just wait for the provisional patent to expire before filing a full patent. If you were on the patent, it might give you lingering rights to the design that would devalue their product. However, if you were on the patent, you could generate a royalty stream from an exclusive license to their ongoing company (regardless of whether you own shares in the company). This is a very basic summary - there are intricacies here that would be best explored with a patent attorney.
2. Before you go and sell your %, make sure that you and your co-founders have the organization, shares, terms, etc. of your company documented properly. Otherwise, "selling your %" could mean relatively little (especially to investors who would rather not have to pay you out when the time comes). What do your organizational documents, if any, say? This is my area of expertise, and I would be happy to chat further about your particular circumstances.
3. It comes down to what is more valuable to you - the cash you get in leaving the company, or the possibility that sticking with it and contributing in your own way (which you could discuss with your co-founders) might result in something great? You certainly don't want to be a deadweight, but everyone plays their own role - and there may be decent options for you within the company.
This is typically a longer conversation with no easy answer. Let me know if you want to chat.


Answered 5 years ago

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