Licensing to Black & Decker

The story can now be told.

This deal took place a while ago, but the basics of deal making have not changed and the story of licensing remains totally relevant today.

Summary:

Two years after launching the SqueezeDriver® (a squeeze powered screwdriver), the WorkTools team embarked on creating a revolutionary staple gun, CounterPoint, which worked opposite to traditional designs. The forward-action mechanism allowed users to press the lever toward the staple exit point, making stapling easier and improving staple seating. Despite numerous challenges, including creating a die-cast housing via innovative lost-wax techniques (rapid prototyping was in its infancy), WorkTools developed a delicate working prototype.

Faced with high tooling costs and sales risks, the team chose to license the product rather than manufacture it themselves. Black & Decker (B&D) became the ideal licensing target due to its openness to innovation and lack of existing staple gun tooling. However, initial outreach to B&D was met with resistance until WorkTools creatively circumvented gatekeepers, gained access to a product development team working on a new staple gun and pitched the invention - timing was everything.

Negotiations with B&D were intense, marked by two walkouts and creative royalty structuring. After months of back-and-forth, WorkTools secured a licensing deal with royalties that scaled based on sales volume. Despite last-minute delays and an outreach to Stanley Tools, B&D finalized the deal with WorkTools, launching the CounterPoint as the PowerShot®, which became a commercial success. The tool garnered widespread recognition, including the prestigious IDSA/Business Week "Design of the Decade" Gold Award.

The licensing agreement also reserved WorkTools the exclusive right to use the forward-action technology in desktop staplers, leading to the highly successful PaperPro line. Over the years, WorkTools played a pivotal role in expanding the PowerShot® line, influencing the sale and management of the business, and ensuring the longevity of its innovative technology.

While the initial royalty expectations weren't fully met, the licensing deal cemented WorkTools’ legacy in the staple gun industry, a success story that continues three decades later.

The Full Story

In 1988, Mike Marks (marketing guy), Joel Marks (inventor/engineer) and Brad Golstein (lawyer) formed a company called WorkTools. With funding from family and friends they introduced their first product, a manual squeeze powered screwdriver called SqueezeDriver®. Hitting the market at the same time as the battery-powered Skil Twist® (a legendary success), the SqueezeDriver® struggled and the WorkTools’ team was essentially earning minimum wages.

Two years after launching the SqueezeDriver®, Mike, Joel and Brad decided to launch a new squeeze-powered tool, a staple gun. Internally called CounterPoint, the tool worked opposite all other staple guns. Rather than pushing a lever toward the back of the tool and shooting a staple from the front, a user pushed the lever toward the front, toward the staple exit point. The forward action offered two benefits: 1) a user could not only squeeze but also use arm force, so stapling was easier and 2) pressing down over the staple, reduced undesirable kickback so that staples seated better.

Mike continues the story…

Developing and prototyping was a two-year process with many dead ends. Joel believed that the product needed a die-cast housing to embody all of the features because die casting had the strength that a simple machined piece of zinc alloy would not. 3-D printing was just beginning and very limited. This meant Joel had to machine a plastic model, create a silicone mold to cast a wax replica and then, using a lost-wax process, cast the housing. There were many problems in getting this to work, the primary one being shrinkage after casting. So he invented a clever way of expanding the silicone used to cast the wax just enough bigger such that it would end up the right size after shrinking. It was brilliant and we ended up with a delicate working prototype that could be used to demonstrate the design… if it was used carefully (we briefly considered getting into the prototyping business and made a prototype bike helmet for Bell Helmets and a replacement sink handle for a Boeing 737 using the process).

We debated launching the CounterPoint on our own. That would mean raising more money, diluting stock, fighting well-established companies and being exposed to possible lawsuits from people who hurt themselves because the tool worked in the opposite direction of the industry standard. We were exhausted from the SqueezeDriver® effort.

We identified Black & Decker as a prime target for licensing the CounterPoint staple gun at the National Hardware Show in Chicago. We liked the B&D people we met, liked that the company was dedicated to innovation and noted that they didn’t manufacture their own staple guns, but bought them from other manufacturers (private label). This meant that B&D had no investment in existing tooling to consider and would be open to something totally different.

We didn’t approach B&D until a few months after the show. Regrettably, while at the B&D show booth we had failed to get the names and phone numbers of the people we’d met. Without a name and number I had to call Black & Decker cold where I immediately ran into the brick wall all companies set up to avoid being contacted by unknown inventors.

I made a call to B&D’s main switchboard and asked for the product manager for staple guns. The operator inquired, “Regarding?” and I replied that WorkTools had invented a staple gun that would revolutionize the category. Mistake. I was transferred to the person responsible for inventions and was told we would need to sign a company disclosure agreement and submit our invention by mail. “We can’t sign your agreement,” I explained, “I’m sure it doesn’t protect us and our patents haven’t issued yet. We have developed a new type of staple gun that will revolutionize the staple gun business. It will grab 50% of the market and generate at least fifty million in annual sales within three to five years and could well generate over one hundred million in annual sales. I know your marketing department needs a tool like this. Could you please transfer me to the product manager for staple guns.” “Mr. Marks,” the woman explained, “I’m sorry, I can’t do that.” “Don’t you understand what I’m saying?” I pleaded, “I’m talking seriously, without exaggeration, of generating fifty to one hundred million dollars a year in additional revenue for your company but there’s no way I can go through your standard procedure. I need to talk to someone in marketing.” It was useless. “I’m sorry, the only thing I can do is send you out our submission agreement. It’s up to you,” she said. I thanked her and hung up.

How could I reach someone in marketing? Then it came to me. If I wanted to buy staple guns my call would go through. If I wanted to buy private label staple guns (which B&D didn’t make) I wouldn’t get a low level sales assistant, I would get someone with authority. Low level people barely knew the term “private label”. “Private label” sounded important and would surely get me kicked upstairs.

Two minutes later I called the main switchboard again, “I’d like to speak with the Product Manager for staple guns please.” “Regarding?” asked the operator. “We’re interested in buying private label staple guns.” Bingo. I was transferred to the Accessory Division where another secretary answered. I repeated my request, “Hello, my name is Mike Marks. My company is WorkTools, Inc. I’d like to speak to the Product Manager for staple guns regarding private label purchases. Bingo. I was transferred to the Product Manager. Now it was time to pitch:

“Hello, my name is Mike Marks. I have a small company called Worktools, Inc. and we’re interested in possibly buying private label staple guns from you. We’ve also developed a revolutionary new staple gun that you might be interested in licensing from us. Our new staple gun will grab a 50% share of the market and put a crater in Saddlebrook, New Jersey (headquarters location of Arrow Fastener, makers of the ArrowT-50, the leading staple gun with a 75% market share). We’ve done preliminary surveys with a prototype and 99% of the people we surveyed strongly preferred our design to the Arrow T-50.”

“Interesting you called,” came the reply. “We just set up a team to create a new staple gun. The name of the team leader is Gary Noffke. You should talk to him. I’ll transfer you.” Bingo again. I was through the brick wall. The subject of private label never came up again.

Before getting things under way we needed a Non-Disclosure Agreement. Here is where SqueezeDriver® really helped us. We sent Gary a sample of the SqueezeDriver to show we weren't typical inventors and Gary's team thought that our staple gun idea was based on a SqueezeDriver-like mechanism. The two things together made it possible for us to put a fair NDA in place.

As mentioned above, prior to making its initial presentation to B&D, WorkTools seriously considered making and selling the CounterPoint staple gun on its own. We figured that within 2-3 years we would be able to earn annual profits of $1 million on sales of 200,000 staple guns plus staples. This represented 5% of our guesstimate of the annual US market. We thought that B&D, with its established name and distribution network, would be able to sell 10X as much, a total of 2 million units. Thus if we could earn an average of $0.50/unit on a royalty basis it would be able to earn the same $1 million per year with less risk and effort. We believed in the long term potential of the CounterPoint and, with one eye to making it ourselves, decided on a buyout number of $5 million. Of course there was no way B&D was going to pay $5 million up front.

When Gary asked how much it would cost to buy out the rights to the tool. I answered as follows, "We figure that within 5 years this product in B&D's hands should achieve 50% market share, generate upwards of $50 million in annual sales and over $10 million in profits. Further we believe that this product will add a halo of innovation to B&D as a corporation, generating tremendous publicity and effect a rise in the price of B&D stock on the NYSE of at least $0.25 per share. Since there are 80 million shares outstanding we believe that upon introduction of our invention B&D will see a gain of at least $40 million in value. With all of that in mind we would be willing to accept a buyout of $10 million…" I had a big smile on my face that signaled I knew this was ridiculous. I continued with a smile, "…but that's negotiable. In all seriousness we know that B&D isn't prepared to write us a huge check so we'll be pleased to discuss a royalty." And that's what we did.

An interesting thing happened when we met Gary and his team for the first time. While sitting in their office in Towson, MD, Gary went back to a closet and pulled out a staple gun that B&D had briefly marketed previously. It was a forward action staple gun! They had tried the idea before. We were not the first. Yikes!~!~! But then we tried it. It was unusable because the actuation force was far too high. The good news was that B&D was open to the forward-action idea.

Going into the meeting we were aware that B&D had a patent on a staple gun mechanism. But we didn't know what it applied to. We learned that even when you think someone has never considered anything like your invention, they very well might have. We also learned that might be a good thing.

For the initial meeting with B&D we had the following:

• Ugly working prototype with a highly evolved mechanical design;

• Invention prospectus including strategic analysis of the staple gun market, survey data and a sample ad;

• A secret internal understanding that we'd say "yes" to a royalty deal that we calculated would pay out at $1 million/year if B&D achieved 50% market share.

The subject of royalty and buyout was not seriously discussed until subsequent meetings. The working prototype was absolutely critical. The written information and working prototype together helped the B&D staple gun team sell the project internally.

The B&D stapler team needed management approval to proceed with WorkTools’ design and required our working prototype four times to get that approval. Even though we had a confidentiality agreement in place we decided that they could only review the prototype for one day at a time. Every time they requested the prototype I flew it out personally – night flight from Los Angeles to Baltimore – drop off to B&D headquarters at 8am –check into a hotel and sleep - pick up at B&D at 4pm – fly home. We wanted B&D to never lose sight of the fact that this was WorkTools’ invention and that B&D had no rights to it until a licensing deal was signed.

The prototype was delicate too. Joel cautioned each time I took it that it might only fire once and then die on the spot. I passed that information to Gary every time: "Make each demonstration count. This could die at any time." One time it did die, in front of the head of the division that would need to give approval. Somehow Gary kept the program moving past that.

After six months of reviewing prototypes and doing a great deal of internal development, Black & Decker decided that it wanted to license WorkTools forward action staple gun. B&D called Worktools and set up a specific time and place for negotiations. The big question was how much they’d pay for it. The place for negotiations was a conference room at an Embassy Suites hotel outside of Towson, MD. Towson was B&D’s home turf. The Worktools team would fly in from Los Angeles. One day was set aside. There were four people on the B&D team (including a lawyer) and there were three of us (including lawyer/partner Brad Golstein).

Prior to flying out for the negotiations I spoke with Gary. “Gary,” I said, “before we spend a whole lotta money flying out for this meeting I want you to understand that we’re looking for a royalty of 5%. If that’s way off base then please tell me now. We’ll walk out in a heartbeat if you can’t meet our number.” Money was seriously tight and we couldn’t afford the luxury of a practice negotiation. “Mike,” came Gary’s reply, “Everything will be fine. I’m sure you’ll be satisfied with our offer.”

So out we flew. On the first morning of negotiations the B&D team told us how wonderful our invention was and all of the great things they were going to do with it. It would be an “icon product”. It would be featured in TV commercials. Then they made their first offer. It was something on the order of a buyout for $250,000 or a royalty of 1.5% of net sales. I turned to Gary and said, “I told you what we were looking for. This is insulting.” Then Brad, Joel and I walked out of the conference room, across the lobby, into an elevator, down a hallway and into our suite. “Well,” I said to Brad and Joel, “I guess that’s it.” A couple of minutes later Gary called, “let’s get together again in an hour.”

An hour later we went back to the conference room and talked some more. The offer was improved, but not nearly enough. Deciding it was hopeless, we thanked everyone for their time and walked out again. It was the end of the day and we were getting ready for dinner and a morning flight home when Gary called again. “Let’s try one more time tomorrow. I don’t know if we have any more to give but let’s discuss some possibilities.” Gary later told me that, "driving home that night I was so upset I tried to blow up my car." We were actually pretty chill. We had our number.

Brad, Joel and I had arrived at the B&D meeting with a number in mind. That number was $1 million a year in Royalties if/when B&D achieved 50% market share – we assumed that to be roughly 2 million units a year. Whether B&D paid X dollars a unit or a percentage of net sales or whether the Royalty started high and went low or vice were all “points of indifference.” Our secret number was $1 million a year at 50% market share. The formula for achieving that number was completely flexible. And that flexibility was why there remained hope in continuing negotiations.

We began the next morning by making a proposal to B&D. We said we could accept a Royalty that began at 5% for the first 500,000 units sold each year and dropped to 2.5% for all units sold for the rest of that year; each year would have the same sliding scale (we estimated this would pay out at roughly $1.5 million if 50% market share were achieved). We didn’t get a flat “no” so we talked around the point some more. When things were ready to fall apart again we dropped our proposal to 4% and 2.5%. After more discussion on how this might work and why it was fair we came to a standstill. This time B&D was ready to walk. It was very disappointing because we had come a long way and we were awfully close to an agreement.

I was fixated on the Royalty starting high and going low because I assumed B&D would prefer that structure. It was a structure that bet on success beyond 1 million units a year… something that WT certainly believed would happen. I was so fixated on this structure that I couldn’t imagine inverting it. Joel thought of that.

Joel suggested, “how about each year starting at 2.5% for the first 500,000 pieces and then going to 4% after that?” Everyone stopped talking and the kind of silence that speaks “maybe” filled the room. The B&D team asked us to leave so they could discuss the concept in private. When we returned more discussion ensued. B&D agreed that this would work. We were on our way to closing a deal.

Eventually a final deal emerged. Each year B&D would pay WorkTools a royalty of 2.5% of net sales for the first 500,000 units sold for that year and then 4% of net sales for units sold beyond 500,000 for that year. WT would also receive an advance of $140,000 of which 50% ($70,000) would be refunded via royalty deductions. B&D would advance the cost of patent filings too; that cost would also be refunded via royalty deductions. The maximum royalty deduction would be 50% for any given payment period. We shook hands, went out for a celebratory dinner and had a group photo taken.

But we didn’t have a deal yet. The President of the B&D Accessory division needed to sign off on the deal to make it official. We gave him 30 days to do that. It seemed like a formality at the time. 25 days later the deal was still unsigned. I called Gary to remind him of the deadline. He said he didn’t think the deal would be signed in time. “Why?” I wanted to know. Gary hemmed and hawed with embarrassment and said, “He won’t sign off on the deal until we have a final ornamental design.” In other words until the B&D team finalized what the new staple gun would look like, the President wouldn’t sign off and there would be no deal. Exasperated I said, “But you have total control over what the thing looks like.” “I know,” sighed Gary. “So what are you going to do?” he asked. “Well,” I answered, “if our deal isn’t signed by Friday (this was on a Wednesday), I’ll be talking to Stanley on Monday.” Gary said, “We’re going to continue working on this and hope we can still put something together later on.”

As soon as I was off the phone I called an acquaintance named John at Stanley Tools. John was responsible for Stanley’s staple gun program. I told John that we had a new staple gun and that I’d like to see him that coming Monday. John lived in New England. We set up a meeting in Boston. If B&D came to its senses I could always cancel the meeting.

On Friday I called Gary and asked if we would be getting a signature. He answered no and asked what we were going to do. “We’ll see” I replied. On Monday I met with John in Boston. John liked our staple gun a lot. We gave him a prototype to show to the folks at Stanley.

At the start of the National Hardware Show in Chicago that August things stood as follows: Stanley was evaluating the CounterPoint prototype and preparing to give us an answer; B&D was trying to finalize a housing design and sign the agreement we’d negotiated two months before. We didn’t want B&D to know we were talking to Stanley or vice versa. This was difficult since all of the players in this story were staying at the same hotel, the Palmer House Hilton, and there was only one prototype available for both Stanley and B&D to review.

In the event, B&D came to its senses and said it was ready to do a deal. At the same time Stanley decided against the radical new design. WorkTools was left with only B&D.

Back to the negotiating table we went. “Have you disclosed the invention to anyone else?” B&D asked. “Yes,” we answered honestly. “Who?” they wanted to know. “We can’t tell you because of confidentiality,” we lied. B&D postured, “Since you’ve disclosed the invention to someone else it’s now worth less to us and we need to change the terms of the deal we negotiated.” “You’ve got it all wrong,” we replied, “now there’s another interested party (there wasn’t since Stanley had said “no”), and it’s worth even more. You’ll need to give us something extra to sign the deal.” They reluctantly agreed to increase the annual minimum to maintain exclusivity from $125,000/year to $145,000/year. This gave us a moral victory and didn’t hurt B&D’s ability to proceed with the deal.

The following year B&D launched PowerShot®. The demand was so high that they put on 3 shifts working 24 hours a day to make 750,000 units in time for Christmas.

The PowerShot® staple gun, was featured in B&D’s annual report and won numerous awards including IDSA/Business Week’s “Design of the Decade” Gold Award alongside the Apple I-Mac, VW Beetle and BMW 325-i.

During the course of our relationship with B&D we managed the expansion of the PowerShot™ line by designing additional forward action tools ourselves and recruiting manufacturers and designers to work on spec. When B&D decided to sell its business in fastening tools we steered the sale to a young entrepreneur named Sean Quinn (our deal terms gave us that power). Sean did a fantastic job of building the business. But in our new licensing deal with Sean's company we lost the ability to have a say in how the business could be sold. So, when the business was sold yet again, this time to Arrow (whose President at the time wanted to kill it) we couldn't stop the sale. After the sale we lobbied at the CEO level for a management change that helped save the business.

Beyond the royalty terms, one of the most important aspects of the B&D licensing agreement was that we reserved the exclusive right to use the forward action technology for desktop staplers. That led to another licensing deal (with equity) and a huge success with a line of spring powered desktop staplers called PaperPro. I should also add that we had fantastic advisers helping us. One was Ralph Kamon, the former head lawyer at Paramount, the other was my godfather Jess Rifkind who was a head of Xerox PARC when Steve Jobs stole the ideas that became the Macintosh.

Post Script

Shortly after PowerShot® was successfully introduced, I spoke with every other staple gun manufacturer in the world. All of them said that we were lucky because they would never have licensed it. We never made $1 million a year in royalties from the B&D deal but we got pretty close for a while. Today, 30 years later, we’re still active in the staple gun business and Joel is the #1 staple gun designer in the world.

And... there is no crater in Saddle Brook. Quite the opposite. We now have a good relationship with Arrow. Under new management and ownership the company has done brilliantly.