The headquarters for Louis Foreman's first business was his college fraternity. Today, he holds 10 registered United States patents, many for sports protective gear such as shin guards, or baseball forearm and leg protectors. "Some of the ideas that I had, I was able to file patents around, and then use those patents as ways to license those ideas to other companies," he recalls.
These days, the serial entrepreneur focuses on the inventions of everyday inventors -- people who have a great idea but are too risk-averse to quit their day job. So far, Foreman's trinity of companies -- Edison Nation, Edison Nation Medical and Enventys -- have developed, protected and monetized more than 500 ideas. Edison Nation alone has racked up more than $200 million in retail sales for gadgets ranging from the Perfect Bacon Bowl pan that cooks it into specific shapes, to the Shoe Skirt organizer, for stashing loafers, pumps and other footwear out of sight under your bed. The most successful medical breakthrough is GoGown, a disposable gown designed to reduce hospital waste. Foreman produces a long-running PBS TV series called Everyday Edisons (the original inspiration for Edison Nation), a behind-the-scenes glimpse of the creative process. He tells use why he's a fan of patents, and why it's time to start treating inventors like rock stars.
Why and when should someone file a patent?
A patent doesn't give you a right to make a product. A patent prevents others from making, using or selling something that is your intellectual property. A patent is really the incentive for the inventor or the entrepreneur or company for that matter to invest the time or resources to create something new knowing that for a period of time -- it's 20 years from the date of filing -- no one else will be able to benefit from what you've invested your time and resources creating. The real benefit to society is that after that 20-year period, your invention has been disclosed and now society can use it for free. That disclosure allows other companies to improve upon what you've come up with.
When you really look at the patent system, it's a social contract. The government looks at it as a way to encourage innovation and benefit society. If the inventor discloses how they did it, how their invention works, they are given a short period of time when they benefit exclusively from the invention. But in exchange, they have to educate society on how they did it and, and turn it over to society at the end of that period. Versus a trade secret, for example. If people didn't file patents, if you just kept your manufacturing process secret, then society would never know how you did what you did.
Do you ever see any negative sides to the patent system, like patent trolls?
Some would suggest that a patent troll is any person or organization that owns patents and does not manufacture anything. By that definition, universities are patent trolls, research organizations are patent trolls, and our PBS TV show Everyday Edisons and Edison Nation are patent trolls. It is important to differentiate patent trolls from troll-like behavior. There are bad actors in the [intellectual property] world, and the bad behavior of a few is causing a great deal of concern. We do not support the troll-like behavior of purchasing specious patents and sending thousands of demand letters seeking to settle for less than the cost of litigation. This is a way to game the system and use litigation to extract money from others. We do, however, believe that patents are a property right and should be used to prevent others from making, using or selling a product that infringes on those patents. Litigation is a last resort.
Why should someone bring an idea to Edison Nation?
One in every 10 people is wired so that they understand risk and reward. When they have a great idea, they are willing to invest the time and resources to pursue and start a company. 89 percent of the U.S. working population is risk-averse. It doesn't mean they don't have great ideas. If you wake up this morning with a brilliant idea, are you going to quit your job? Are you going to risk your savings or your kid's college education? Do you understand the process of getting an idea to the marketplace? We really believe that everyone has a great idea but most people don't pursue that idea because the costs and the risks are too high.
Edison Nation was created as a way to provide another alternative. If there was a trusted partner, someone that you knew wasn't going to exploit you, wasn't going to try to sell you services, wasn't going to steal the idea, but they could take your idea and try to commercialize your idea, and if they were successful, share in the royalties with you, then that would be another option for someone who's got a great idea.
How does the process work?
We typically run live product searches, where we partner with leading manufacturers, leading retailers to identify what they are looking for. A company like Fisher-Price might be looking for baby products. Procter & Gamble may be looking for cleaning products. A retailer like Bed, Bath and Beyond may be looking for home storage and organization products. We list those searches on the Web site, and if you've got an idea that fits the criteria of that search, you can submit that idea. You don't have to file a patent, you don't have to build a prototype. All you have to do is be able to clearly explain to us what that invention is, through an online submission form that allows you to upload video, or pictures, or drawings or diagrams.
Then, our analysts review every single submission that comes in. We filter those ideas to find the best one, the best fit, and try to negotiate a license for those ideas to a manufacturer or a retailer. If we are successful, we share in the royalties.
What are the terms?
The majority of the deals we do are very simple: it's 50-50. If Procter & Gamble is running a search, and they say 'Find a really innovative cleaning product,' and you as the inventor submit to us and we ultimately license that product to Procter & Gamble and they pay us a dollar in royalties, you get 50 cents and we get 50 cents. You're not charged any fees, there's no threshold that has to be achieved before you start getting your royalties. You get 50 percent of any royalties we generate from the first dollar. We believe that we're going to be much more effective in licensing that to Procter & Gamble than maybe you could do on your own.
The only area where that is different is on what we call the 'as seen on TV' products. That's kind of a separate business in itself. For these products, we run searches, we actually invest significant resources, hundreds of thousands of dollars to develop the product, and build the TV spots and go to manufacturer. What we do there is pay the inventor a 7.5 percent royalty on the adjusted gross margin of the product.
You created Edison National Medical in 2012 to focus on healthcare innovation. How is that site doing?
It's doing really well. This is a partnership between Edison Nation and Carolinas HealthCare System, the second-largest public hospital system in the United States. They've got 60,000 employees, 11 million patient interactions. They were looking for ways to disrupt health care, to find new ideas at lower cost, improve outcomes. So we partnered and created a new company in May 2012, launched it and already have some licensed products. We already have inventor successes where a doctor or a nurse or even a patient has submitted ideas, and we've been able to license those to medical device manufacturers.
Is this a new source of revenue for the healthcare system?
Not only is it a new source of revenue, but more importantly it's a way to lower costs associated with providing health care -- that's a big number, you're talking almost one-quarter of our GDP is health care. Health care is absolutely ripe for disruption, and I think we have a great model with Edison National Medical.
We're fishing in a relatively small pool, doctors, nurses, patients. More importantly, we're able to validate ideas within a hospital setting. When these ideas come to us, instead of biomedical engineers just reviewing them and saying it sounds interesting, we're able to put together panels of physicians and nurses not only to validate the ideas but also to determine the efficacy. If it's an idea that really fits the criteria of lowering cost or improving outcomes, Carolinas becomes the first customer. They will buy the product and adopt it in their system, which eliminates a lot of the risk for any manufacturer to step in.
Do you have a favorite Edison patent?
Well, I can't imagine where we would be as a society without most of them. Most people would probably say lights. If it wasn't for electricity and the improved light bulb, we would literally be in the dark. It's amazing when you think about what he was able to accomplish with the resources that were available in his time, what someone like him would be able to accomplish today. What would Edison look like today, if he access to all of these resources we take for granted.
Maybe he wouldn't have been able to be as creative with all the distractions.
That may be true, he may have been more distracted. Edison was a rock star, he was covered by the media almost like a rock star. All of his movements, his new inventions -- it was almost like Steve Jobs unveiling a new product. We don't have as much of that today. I don't think kids today aspire to be creators or inventors, they are probably more interested in being an actor or actress or singer or sports celebrity. It would be interesting to see whether if invention was treated the same as it was back then, what our kids would be coming out of school aspiring to do.
Photo: Edison Nation
Sign up for our biweekly newsletter featuring in-depth business innovation stories by correspondents around the globe, top domestic reporters and thought-provoking opinion columnists.
This post was originally published on Smartplanet.com