Licensing Inventions to DRTV Companies

GW asks:

I have an invention which I believe best suited for the DRTV infomercial marketplace. The prototype works and market research says go. I'd like to license it to _______. However they say they do not sign NDA agreements! In fact all of the verbiage on their inventor submission page seems to basically say they can do whatever they want with your invention. That seems very suspicious to me, like they are trying to take advantage of inventors who are eager to get their ideas heard.

When the president of the company is asked what's to keep him from stealing inventions, he responds "it's just not the right thing to do." As noble as that sounds, it offers little consolation for a cautious would-be submitter. Is there any way to get my product pitched to ______ or a similar DRTV company while minimizing the risk that they are going to steal it? And can you offer any advice on how to get my product licensed for an infomercial marketplace?

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If you have an invention that meets the criteria (see below), infomercial companies are probably the easiest of all companies to make a deal with. Why is that? Because they focus short term (regardless of what they tell you or the rare exception). A typical DRTV product has a life cycle of about two years. Being NEW and first to market with a big WOW matters far more than patent protection or quality. This means DRTV companies are always looking to license new products. The upside is that they do not suffer from the NIH syndrome (not-invented-here) typical of many large corporations. The downside is that building a product line around your invention, getting it out of the hands of TV Product channels and into regular distribution channels, is not in their DNA.

HOWEVER... a hot TV product can make more in two years than many products make in twenty.

The DRTV business itself is a little sleazy. Most of the products are of inferior quality. The commercials basically lie. Many of the people in the business are a little sleazy too. They know their products are bogus and don't care. They think of the consumer as a sucker to be fleeced.
All of that said, they are some of the most rational business people you'll ever do business with. And there are a few who are honorable people (not the one you asked about however). It's all about numbers. If your invention sells well in a test they will roll it out and sell it nationally and even internationally - and they'll keep on selling it so long as it turns a profit.

The best way of thinking about DRTV companies like the one you asked about is that you'll be making a deal with the devil. There's nothing wrong with that. You can make good money and even keep your integrity. But you need to know the following things:

1. If you sell them on the idea you should plan on doing the deal with them. If you do not want to do a deal with them, then do not sell them on the idea. Do not get cute and shop your invention around. Once they're sold they will go forward with or without you. Most patents can be worked around and they'll be happy to do that (remember quality doesn't matter!) If you back out they'll simply knock you off. Lawsuits are a cost of doing business for them and will not scare them at all. A 5% royalty is pretty typical.

2. Expect to get ripped off to some degree and not be paid all of the royalty you'll be owed. There's not a lot you can do to prevent this but there are ways you can it acceptable - good quarterly minimums for example - just understand that you need to accept this as a cost of doing business. Make sure your contract is very strong in the enforcement and termination clauses.
True story - My company, WorkTools, licensed our first product to a big name DRTV company (no longer in business). We had quarterly minimums set at $25,000 = $100,000/year. The company regularly reported sales far below the minimum royalty number - but they kept on paying the minimum for about two years. Years later I became good friends with one of the company's former salesmen. He loved (and continues to love) telling me how they ripped me off. And I respond, "you know what, I was very happy to get $100,000/year because that product was otherwise dead to me. I'll bet they didn't even make enough ripping me off to cover the minimum!"

3. Regarding the NDA issue. This is NOT a case of the company being sleazy. A company that reviews hundreds to thousands of inventions a year cannot sign NDAs because -
a. Most inventions are already known in the prior art/public domain and the company doesn't want to be exposed to lots of bogus lawsuits (while they're not scared of a lawsuit regarding a product that makes them money, they don't want to waste legal fees on worthless products).
b. A proper NDA requires negotiation. And again, because of the quantity of inferior inventions they see, they can't afford the expense of negotiating an NDA with each inventor.
c. if you have something truly hot AND you have credentials (such as a previously successful product) AND you can give them enough sizzle without giving away the product idea - you actually can get a NDA signed. But you'll need to find a way to pitch someone fairly senior at the company - maybe at a tradeshow or somehow worming your way past the receptionist.

4. They are not in the business of explicitly ripping off inventors. They need inventors because they need new products. In fact, if you do a deal with a DRTV company you can have a nice outlet for new inventions with the same company for years and years.

5. if you have an issued patent they will be less likely to rip you off. But the patent claims need to cover the big features that will be screamed about in the infomercial. Keep in mind that if you walk in the door with a provisional patent and you don't have a NDA, they have the legal right to make, sell and profit from your invention and pay you nothing... until the patent issues.

6. A great TV product has the following elements:

a. It solves a problem everyone can relate to.Not a specialty product.

b. It has a big WOW factor that can be demonstrated visually.

c. It can sell for $19.95 with a cost of less than $4.

d. it is a stand alone product and not an add-on to an existing product

e. There are add-ons "upsell" items that can be sold with it.

What should you do? Be smart. Feel the fear. Do it anyway.

Good luck!

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