- Black Belt
- Posts: 1208
- Joined: Mon Oct 30, 2006 2:53 pm
- Location: USA
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.
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.
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.
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 is normally written for one market or all markets for the life of the contract.
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- An issued document by the U.S Patent Office that your patent claim has been recognized by the U.S. government and that you own that claim. It helps protect your right to that unique patent and claim.
Provisional Patent-is a cheaper method to file a holding spot with the patent office for one year on your idea. During that one year you need to be working towards preparing a full patent, getting your product to market or seeking a company to license the product from you.
Patent search- A search done by a patent lawyer or patenting firm 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.
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 agreement- Document stating the terms of payment both parties agree to for licensing the product. These include, minimums, advances, royalties, payment schedule, length of contract and assigned rights.
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.
Prototype- functional model that can demonstrate your products features. It can be crude to manufacture ready in quality.
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.
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.
Proof of Concept- The ability to demonstrate via a prototype, engineering model, 3-D animation, etc that your product actually will work as claimed.
Investor/Angel Investor- Person(s) or group that invests money for the development and production of your idea/product. This investment is for a portion/ownership of the company/product.
3-D printer- Utilizing CAD drawing input the printer makes a 3-D solid model of the design.
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.
Product launch- date the company plans to have the product on store shelves available to consumers.
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.
Invention Submission company- for a fee based payment provides services such as patent searches, prototyping, patent writing, sell sheets and negotiating licensing deals. Research these companies thoroughly for complaints, lawsuits, prior to using them.
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.
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.
Cold calling- contacting a company for the first time to pitch your idea/product and not knowing anyone within the company.
Minimums- Clause in the contract that states whether your product sells X-amount units or not, you still get paid X-amount per year.
Kill fee- amount you are paid for services rendered if the deal/contract is cancelled.
Wish list- some companies will send out a list specifying the areas they want to see new ideas .
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.
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.
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 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.
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.
Perceived value- What a consumer sees as value that prompts them to buy one product over the other.
MOQ – Stands for 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.
Market Share - The percentage share a company has of total sales within a given market.
Deliverables- Something specified to be accomplished or met in a contract.
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.
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.
Blow Molding - Method for making a product that requires a hollow space. Items such as bottles, cans, containers, jars, etc. The process normally uses two heated internal surfaces of a two piece mold, hot plastic and compressed air to make the product/part.
Injection Molding- Method similar to Blow Molding except you are squeezing the mold under high pressure. Molds are normally made from ceramic, steel or aluminum and used to make solid objects. Where Blow Molding objects are normally hollow inside.
Angel Investor- A individual or a small group of investors that provide capital for start-ups, new ventures and provides business advice and could possibly provide business contacts.
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
Wholesale Price- The price a company charges for a product normally sold to a retailer. The retailer will then increase the price they paid and sell it to the consumer. Note: This is normally the price used when referring to a royalty rate percentage paid per unit in a licensing agreement to an Inventor. It is not to be confused with the Retail Price that is charged to the consumer.
Retail Price- The price for a product or service sold to the consumer. Note: This price is not used when calculating an Inventor’s royalty rate.
Buy Back – Normally a provision in a contract where the seller agrees to buy back the merchandise for a certain price after being sold to the retailer if it arrives damaged, unsellable, customer returns, late shipment (such as a holiday item that arrives after the holiday) and other issues that the two parties have negotiated into the contract.
Test marketing – where the product is exposed to a select sample of the population so the company can get a snapshot of consumer’s reaction to the product and based on these+ results they may decide to move forward with the product or reject it before going to a full scale launch of the public. It can also be used to find and fix issues found by the test market group prior to full scale launch.
OEM (Original Equipment by Manufacturer) producer of the end product. Example- the motor for your car that was originally installed at the facility where the car was built.
AfterMarket- parts/accessories that were not originally installed or they can be replacement parts for the original parts. Example- various kits you can purchase for your car that were not original equipment when it was made.
LOI- Letter of Intent – in most cases a LOI shows that a company is interested in moving forward towards a contract and outlines some of the terms under which they plan on proceeding.
SBA- (Small Business Association) organization that helps small businesses with loan programs and mentoring/counseling. They also ensure a certain percentage of federal dollars are expended to small businesses.
Business Plan- Documents that summarize how the company will be structured operate, and how money contributed by investors will be used. It gives an investor an overall view of the company and the projected milestones they will meet and the proposed profit the company and the investor is projected to attain.