I'm afraid an invention company stole my money and invention

Alfrida asks: We trusted a company to submit our invention but now we feel alone and that nothing is going to happen. We paid them $13,000 and all they did was send 120 letters to the manufacturers. Seven letters came back to us because the address was incomplete or incorrect. We also asked to them to give us the production drawings but they want more money to give us that information. Now they said that the construction of the prototype will cost around $100,000. We feel that we were very naïve now think that they just stole our money and idea.

My question is Mike, in this position what can we do to sell our idea to a manufacturer? Do we have to start everything again? We cannot forget that we signed a contract with them.

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I'm sorry to hear your difficult story. On the surface it sounds like the company “stole” your money and by not providing you with $13,000 worth of services. You signed a contract and the contract may dictate what you can do now. Let's break down the elements you mentioned:

1. You paid $13,000 for the company to send letters to 120 manufacturers.

In my experience there are rarely more than 5-10 manufacturers appropriate for a specific invention. However, a broad list of maybe 100+ could be constructed where the odds that the 100th company might buy or license the invention are tiny but not impossible. Creating a good list of prospects takes time and knowledge. Companies that sell lists price them accordingly. I would gladly pay $100-$500 per name for a list of names and addresses of appropriate people at companies that have bought or licensed inventions (similar to the one I am offering) in the past five years. That would be very valuable list indeed. A list of companies that did not include individual names - addressed to “Product Development Department” for example - made up of companies with SIC (Standard Industrial Classification) similar to my invention would be worth maybe $0.05 to $1 per name - the higher value being appropriate if, in fact, the product development department is at the address the letter is being sent to. If the list is made up of the addresses of corporate headquarters of Fortune 500 companies then it is worthless. The fact that seven of the letters were returned indicates that the list was not carefully made.

Writing a good introductory letter is worth something too. You don't mention what was included with the letter. Creating good presentation materials - drawings, invention description, video, surveys, market research - takes time and talent. It can cost a lot of money if you pay someone else to do it for you.

It's far better to make contact with a specific person, ideally the person who is responsible for marketing new products. Unsolicited letters have little chance of achieving anything - most are thrown away unread. In the absence of a non-disclosure agreement, most companies will not even look at presentation materials.

All of that said, even a great invention sent to the right person at a perfectly targeted company with great presentation materials and a non-disclosure agreement in place, is far more likely to be turned down than turned into a deal. Success is never a guarantee no matter how good the invention or the presentation of it.

2. The company did "production drawings."

I don't know exactly what this means. Do you mean engineering drawings that a manufacturer will use to make the product? Detailed drawings with specifications can be very expensive. $13,000 could be cheap or expensive for such drawings.

3. The company wants more money to release the drawings to you.

I don't like the fact that you seem to have learned about this extra charge after the drawings were completed rather than in advance. But again, it's unclear what the drawings are and how complicated they are. Did the company make suggestions on how the invention should be designed? If so, it's possible they should be named as a co-inventor on a patent. What happens in this case should be addressed in your contract. It’s likely that the extra charge for getting the production drawings is covered in the contract too.

4. The prototype will cost $100,000.

Depending on the complexity and desired functionality a cost of $100,000 might actually be reasonable. If you want a prototype that can be tested in real world applications it's much more expensive than one that is made only to look at and touch. Does the cost include product design? Does the design work give you the chance to consider several alternate designs? Costs add up quickly.

5. You feel that the company stole your invention.

It’s unlikely that company will do anything with your invention. They made their money by providing you with what seem to be low value or no-value services. But you should make sure to keep all of your invention records and drawings including what was said during telephone and face to face conversations (and when). In the unlikely event they do commercialize your invention and make a lot of money with it your records could help you claim a share of profits in a lawsuit. But keep in mind that there may be ways the company could claim to be a co-inventor or claim that your invention was publicly known. If a lot of money is at stake things are guaranteed to become very messy.

6. You have a contract with the invention company.

The contract probably specified what the company would do for you and it’s likely they fulfilled the terms of the contract - even though nothing came from their efforts. It sounds like you’ve accepted this and don’t plan on suing them for poor performance. That’s probably a good decision. The big question is whether or not the contract limits your ability to move forward. I can’t answer without reading the contract. If you want to be safe you should have a lawyer read it and inform you of your risks and options.

7. What should you do now?

I suggest you go back to step one in the inventing process and confirm for yourself that your invention is something that the market really, really wants. Build a crude prototype for yourself and survey friends and family. Follow the steps laid out in Inventing 101. The odds are good that invention will be changed and improved as you develop it further. The improvements and changes you make should get you clear of any claims the invention company may have on you (just be careful to not use any of their ideas). If you have something really great go on to Inventing 102. You can do a lot on your own. You will need some professional help along the way, with a stage two prototype, with patents, with contracts. There’s no easy path to success. But if you have a great invention are persistent and have a little luck you will find a way to succeed. Spend as little money as possible and confirm, confirm, confirm that the market is really and truly there.

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For more than two decades Mike Marks has been active in creating and marketing new products and forming new businesses. As founder of Invention City and co-founder/partner of WorkTools, Inc., Endeavor Products Company, and Accentra Inc., he has managed the design, manufacturing, marketing, patenting and licensing of products such as the Gator-Grip® Universal Socket the Black & Decker PowerShot® staple gun, the Staples One Touch stapler. Over the past ten years products developed by WorkTools have generated over $350 million in retail sales and over $8 million in royalties. Mike has negotiated a wide range of contracts, established manufacturing operations in Taiwan and China, managed national and international sales, run public relations/advertising campaigns and written and produced television commercials and video news releases. Prior to founding WorkTools in 1986, Mike worked as a commercial photographer and photojournalist in New York for clients such as American Express, Nikon and Newsweek Magazine. Mike graduated from UCLA in 1978 with a degree in Economics.