In a series of articles, I’d like to recall and share some of my experiences as a dental product developer since 1987 and some basics about how our own product development process works at Practicon, Inc. Free advice is worth the cost, but maybe something herein will help someone who is equally excited about an idea for a better “mouth” trap.

In the first half of this article on the decision to pursue a patent, we discussed whether a new idea was free and clear of any infringement or prior art, and if a new idea worked from a patentability standpoint. Based on whether we got the green light on questions 1 and 2, we can move on to calculate an answer to the third and final question regarding whether to seek a patent or not: Is a patent worth the cost?

Let me repeat that whether an inventor chooses to patent his/her idea is up to the inventor and whatever legal counsel he/she has chosen. In answering this question, I am only speaking for Practicon specifically about product ideas brought to us by dental professionals looking for a manufacturing and marketing partner. Hopefully something here will translate to other situations, but I can only speak to our approach within the dental industry, where we work to put dental patients’ and dental inventors’ interests first. Larger companies in larger markets might take a different approach.

The bottom line on whether to patent something is exactly that: the bottom line. The purpose of any investment, IP included, is to create value and generate a profit. If one spends $20,000+ on a patent before an idea is ever manufactured and marketed, that is an additional $20,000+ one must earn in profit before seeing any return on investment (ROI), above and beyond other startup costs. Many inventors come to us having already spent $20k+ on a patent (or $10k with a “patent company”). That might be worth it, or it might be a waste of money. The smarter approach would be to try and figure out IF and HOW the patent will pay for itself, including USPTO filing and maintenance fees, BEFORE making such an IP investment. That includes figuring out, or at least considering in advance, how the patent subject matter will be manufactured and marketed to make money. Be aware that a US patent will protect your idea in the US only. Consult with an attorney before making any public disclosures if you have any notion of patenting a product internationally (or search on “PCT patent”). It’s complicated and expensive, upfront and ongoing, but it can be done if you think the EU, for example, would be a huge market fraught with copycats.

Practicon is not in the business of purchasing new ideas or patents because it is nearly impossible to evaluate them without any sales history. Any buyer of a newly issued patent would undervalue the patent to reduce risk, having no historical basis for evaluation. The inventor would naturally overvalue a patent, believing the product will change the world. As they say, ne’er the twain shall meet. This is why Practicon and most other companies choose to license ideas and patents as the preferred method of compensating inventors, usually in the form of a royalty paid as a percent (%) of Net Sales. So, outside any personal satisfaction or “bucket list” factors, as far as Practicon or another development partner is concerned, the question then becomes, “Is having a patent likely to increase my total licensing/royalty income more than enough to pay for itself in a reasonable time?”

Why a “reasonable time”? Any investment must return a profit within a certain time frame to be considered a good investment, IP included. An investment with a return of 1% will eventually double, if you are willing to wait 72 years. The breakeven point (BEP) you choose is up to you. BEP timeframes vary widely across industries and markets, depending on the speed of innovation and product life cycle. For product development, Practicon has the general goal of passing breakeven within a 3-year period.

One might ask, “What if Practicon pays for the IP?” If Practicon, or any another eventual manufacturing and marketing partner, is willing to pay for the IP as part of the licensing arrangement, the fact remains that the IP investment and its associated risk must still be covered. That additional risk would be absorbed in the form of a lower royalty rate, lowering the inventor’s payout over a given time. Unless patent protection is virtually mandatory and the added risk is relatively negligible (i.e., a no-brainer), it is rare for Practicon to pay for IP procurement. It is most common for the inventor to pay for the IP and retain its ownership as licensor and defender of the IP rights. Practicon usually takes it from there.

The final decision on whether to patent then comes down to some calculating. For example, if a proposed license royalty were 5% of Net Sales, and the product sells for $100 per unit, the inventor makes $5 per unit. If a patent cost $15,000 up front, then the inventor does not pass breakeven until 3,000 units have sold. For a 3-year ROI, annual sales must average 1,000 units per year to reach BEP. This is oversimplified, not taking USPTO maintenance fees, income taxes, or interest/opportunity cost into account, but it is a start. Add 25% to unit volume requirements to be safe. Then is 3,750 a realistic number of units to sell within the first three years? Of course that depends on the product and the market potential. Continue that exercise with any number of royalty rates, price points, and sales volume scenarios.

If an inventor is simply not able to invest in a full non-provisional utility patent, or if the numbers simply don’t add up, what other choices are there? The good news is several, or four at least:

1) Custom made for a situation where an inventor needs to “test the waters” before investing in a full blown patent, a “provisional” patent allows an inventor to establish a priority date and market the invention for up to one year before filing for a non-provisional patent. Again, consult your attorney or at least several web articles for more details, but provisional applications are faster and cheaper to complete, usually costing under $3,000 plus USPTO fees. Provisional patents DO NOT get reviewed by a patent examiner for patentability or prior art infringements, and they provide no patent protection per se. They only serve to establish an inventor’s place in line as the originator of an idea.

The 12-month grace period granted by a provisional patent is usually enough time to get a handle on manufacturing, or produce functional prototypes, and hopefully discover if the market will respond as hoped. It is important to include all future claims and features within the body of the provisional description. The Practivations Questionnaire in Article 5 is an excellent starting point on what to provide your attorney for a provisional application; and yes, I would still use an attorney to make sure all Ts are crossed. Patent claims and details added later are not covered by the original priority date.

2) A design patent is a patent that strictly covers the visual, aesthetic qualities of a product, for example, shape, decoration, or configuration. These patents take far less time and money to obtain than a non-provisional utility patent, usually costing under $3,000. They provide narrower protection in that their one claim is the ornamental aspects of a product, but if an invention’s uniqueness is heavily dependent on appearance, they can help eliminate competition from direct knockoffs. Design patents do not protect function or “utility.” Design patents expire 15 years after being granted, rather than a utility patent’s 20 years after filing (priority) date. You can tell a US design patent by a patent number beginning with D-. An experienced attorney can help get the most out of a design patent with knowledge of how to draw the product for maximum protection and USPTO acceptance.

3) If a new patent is simply not in the cards, consider developing a registered trademark for the product. A strong, clever, well-conceived trademark can provide more protection and market advantage than one might expect, especially if a product is first to market. Sometimes name recognition is the key to a successful launch and building market share, even when the product is not one of a kind. Dentally speaking, think Jeltrate®, a registered trademark for the most popular dental alginate impression material and a term often used (erroneously) to describe the entire category.

Federal trademark registration can still cost $1,500 or more in legal and application fees and requires a product to already be marketed and/or labeled (or soon to be) under the mark to be applied for. I would highly advise consulting with an attorney who specializes in trademark/copyright law to handle the process, and for advice on the differences between “free” common law trademarks (TM) and federally registered trademarks (R). We’ll revisit the topic of dental product trademarks in a future article. They are harder to obtain than you might expect, but the hunt can be fun.

4) There is always the option of proceeding to launch a product without any IP at all, or only a no-expense, common law trademarked name. Patents do not sell products! Practicon is among the few companies that I know of willing to license an unpatented idea, or even an idea that cannot be patented, if possible (refer to Article 3). If an original idea is brought to us that we deem worthy and able to be developed, we will do our best to honor that inventor with a royalty, if the idea makes it through to manufacturing and marketing. If an idea becomes patented by the inventor during the initial license period, that usually does have a positive effect on the length and royalty rate of any renewed/upgraded license agreement.

In the end, all inventors and entrepreneurs must be willing to take risks. Deciding whether to pursue a patent is only one of the risks that must be managed in dental product development. And in almost all things, risk is proportional to reward. The key is understanding the cost of a patent in advance and weighing it against the potential return. We do our best to help inventors with the patent decision but recall the “rollercoaster” of development from Article 1. The best anyone can do is develop products with a grand purpose, and never give up until physics or cost signals a red light.

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Next up: Practivations Article 8: The Product Development Triangle

Practicon was founded in 1982 with a vision of advancing dental health and increasing practice success through improving patient education. Building on a mission to Make Dentistry Better, we have grown to become a trusted developer and marketer of “Practical Innovations” that provide effective solutions for common problems, sold alongside a growing line of brand-name supplies. Customers describe Practicon’s products as creative, unique, and hard-to-find, many inspired or designed by dental professionals looking to Make Dentistry Better. Our product development mission is to develop exciting products that are relevant and useful in everyday practice—or in short, practical innovations.