Vocabulary for inventors
Terms inventors need to understand
Service providers will use these words when giving advice and you need to use some of the to show your level of awareness and professionalism.
3-D printer- Utilizing CAD (Computer Aided Design) drawing software data the printer makes a 3-D solid model of the design out of various kinds of materials, one layer at a time.
Abandonment - related to Patent Applications - An application for a patent that has been declared abandoned is "dead" and the USPTO will no longer review the application for a patent. A patent application often becomes abandoned for failure to file a complete and proper reply to a USPTO action within 6 months. After the USPTO examiner reviews your patent application, they may send you an "Office Action Letter" that points out any incorrect claims or other problems. You must then make corrections and/or appeals to keep the application process going.
A form of abandonment is not paying your USPTO maintenance fees on a patent, thus loosing your rights.
Angel Investor- Person(s) or group that invests money for the development and production of your idea/product. This investment is normally for a portion/ownership of the company/product. 95% of angel investment comes AFTER the investor and their friends and family have also put in some money.
Branding- Method used to promote the product to the consumer. A proper branding campaign can be more effective than patenting to protect your protect from knockoffs.
Ceiling Price - Frequently higher than the Manufacturer's Suggested Retail Price (MSRP). Many variables help determine the upper limit which is often seen in the automobile industry when a new model is in high demand and short supply, the price being way over the window sticker.
Copycats/knockoffs- product that is built similar to the original and is in direct competition with the original product. It may also be in violation of the original products patent. The term for this violation is called infringement.
Copyright – A claim of ownership of written and graphic material.
CNC - (computer numerically controlled) Usually referring to metal or wood cutting machines that make parts in multiple steps, automatically. Usually for quantity production runs.
Deliverables - Something specified to be accomplished or met in a contract.
Die casting – A process of metal forming where molten metal is forced into a mold/form and put under pressure to fill all the cavities to produce a part or object.
Exclusivity- An agreement between the Inventor and the company stating that the company will be the only party entitled to manufacture and sell your product. It can be written for one market or all markets.
FOB- Can be used as Free on Board or Freight on Board. It generally refers to which party the seller or the buyer pays for shipment and loading costs.
Injection molding – Plastic part making by squeezing liquid plastic into a hollow shape steel mold, made of two halves.
Kill fee- amount you are paid for services rendered if the deal/contract is cancelled.
Landed Cost – the total amount it costs of a landed shipment that includes freight, insurance, port fees, purchase price and any other costs that might be incurred to bring the product to the final port of destination
Letter of intent or MOU (memorandum of Understanding) Either document is used to state each parties intent and course of action to meet a common goal. These documents are normally followed by a formal contract between the two parties once everyone is in agreement.
Licensing agent or Broker- A Person that represents you and your product to possible investors, manufacturers, and licensing companies. They get a percentage of the royalties of any licensing deal accepted as part of their services.
Licensing agreement- Document stating the terms of payment both parties agree to for licensing the product. These can include, minimums, advances, royalties, payment schedule, length of contract assigned rights and whatever can be negoiated by both parties.
Market Share - The percentage share a company has of total sales within a given market.
Minimums - Clause in the contract that states whether your product sells X-amount units or not, you still get paid X-amount per year.
Minimum royalty payment - The lowest amount per your contract you will receive quarterly in royalties no matter how many units of the product are sold.
Non-Disclosure (NDA)- A document that both parties signs agreeing to keep any information discussed or shown confidential. Each party must get a signed original for their records of the document.
MOQ - Minimum Order Quantity. The minimum amount of product you have to order to get the product and the company selling to you to make a profit
Non-exclusive- An agreement that the company has the right to manufacture and sell your product, but the Inventor is still able to make the same agreement with other companies.
Patent attorney-Writes patent claims, researches the patent , and works to help the client obtain a patent on their idea/product.
Patent agent-works with the product developer/Inventor to negotiate patent agreements. Does similar work as the Patent attorney, but is normally not a lawyer.
Patent search- A search done to see if any other patent has been issued on the same or similar concept you have in mind. Any claims similar to yours will have to be addressed and rebuttal as to why yours is unique from the patent issued. The search can be for the whole product or any part of it, or even the process of manufacturing.
Perceived value- What a consumer sees as value that prompts them to buy one product over the other.
Price Position - After a comprehensive analysis of a target market, one would determine their selling price based on Cost Of Goods and Cost of Sales ratio's along with considerations for industry margins and markups. Think about the Ford, Mercury, and Lincoln brands or Chevrolet, Buick, and Cadillac. With each price jump there is a slight increase in luxury detail. In service its normally defined as Platinum, Gold and Silver where the offerings vary based on the amount being paid. In summary:
LPP (Low Price Point) channel , MPP (Mid Price Point) channel , HPP (High Price Point) channel
If you are an inventor who has a product that falls into the LPP don't take it to Tiffany's!
Product Development - normally consists of a business, a division of a company or companies that work on all or a single branch of the process that has dealings with design, innovation/creation and marketing of new products.
Product launch- date the company plans to have the product on store shelves available to consumers.
Product Search – Can be a company that holds an innovation search for a sponsor/company looking for innovation in a particular area.
It can also be the process of doing a search to see if a product already exists within the market place.
Proof of Concept- The ability to demonstrate via a prototype, engineering model, 3-D animation, etc that your product actually will work as claimed.
Prototype- functional model that can demonstrate your products features. It can be crude or manufacture ready in quality.
Retail Price- Price charged for the product to the end user or end user representative. (The retail price can become the base price of a wholesale price when it is marked up for resale. Ticket scalpers do this.)
Retainer or hold fee- monetary payment made to inventor to allow company to keep your product/idea longer for further evaluation or development without the Inventor sending it to another company.
ROI- Return on investment- This is what investors look at before putting in any money. What will the return in profits to them be versus how much they have to put in? This is where they decide what the risk factor is.
Roto molding - manufacturing method for large - multi-shaped plastic parts like wheel barrow tubs and kayaks.
Sell sheet- A one or two page document with drawings, and benefit explanations specific to the product. This allows the reader to get a full overview of the product and its marketability.
Trade Secret – Information that is crucial to a company that is not disclosed to the public. The information is usually only known or available in whole key officers of the company.
Wholesale price- The price the manufacturer charges distributers, vendors and stores for the product. This price is what is used to base the inventors’ royalty percentage payment.
Upfront payment or “advance on royalties”- payment made prior to the product going to market to the Inventor. Once the product is on the market the Inventor does not receive any royalties until the advance is equaled in royalties paying the company back for the advance.
Vacuum Forming - A manufacturing term used when a thin sheet of plastic is warmed and then sucked down over a mold to create a part. Thin plastic paint trays are usually made this way.
Walk Away Price - Sales managers in many industries monitor the "walk away" price very closely. The term speaks for itself and is typically found in a transaction dependent on negotiation such as a License Activation Fee, or big ticket item.
What the market will bare - the top price the consumer will pay before they decide it is too costly for what they are wanting/needing. Example music CDs could sell at $8 and still make a profit but they know consumers are willing to pay $12 and up for their favorite music group.
Wish list - Inventors give a list of features and benefits they would like to have in a finished product.
Work For Hire - Normally a fee paid for services rendered where the person providing the service has no legal ownership of the finished product. Example- you have a prototype made by a company. They performed the work but you own the finished product. If you sell a million of them they do not get any further compensation than the fee you paid for the original service of having the prototype made.
Enhanced and Shared by:
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David Bruce Savage ♦ Founder and leader of Inventor’s Education Forum in Jacksonville Florida
Pointing the way for Inventors and Product Developers with Connections, Resources and Advice
404 323-8686 ♦ Dave@InventorsEducationForum.org ♦ Jacksonville Florida • InventorsEducationForum.org
From my varied work and personal experiences, as well as my leadership of two inventor’s education groups, I provide advice for saving time, money and frustration for inventors, product developers. And I’ll point out the devilish and challenging details that others often avoid sharing.
Whether you are just exploring the viability of your ideas or have products on the market it will be well worth your while to spend some time with me. Dave