I received a comment on my IPR post below, but it has such good questions I will move my answer here to the main page... my responses are in quotes...
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I have a fledgling import business that has not quite gotten off the ground although prospects are looking food. Recently I discovered that magical combination of the 4Ps of which you speak. Sales were astounding -- and effortless.
So you have customers, everything will flow from this...
Unfortunately I have discovered that the design for this product has been patented by an American inventor in my country, and a potential client who would like a very large quantity is afraid of the legal implications of ordering them.
Don't you love imperialism?
Now my problem is to decide whether to continue marketing this product despite the patent. My customers love it and I am able to offer them a very good price. I do not believe in the IPR and object to a foreign inventor claiming monopoly on a design in my country -- which they do not even serve directly but only indirectly through agents.
Of course the other option is to do what you always advocate, which is to compete on design. I am not sure that I can produce a better design, but I think I can create a different design that might do the trick if marketed properly. In any event, competing on design is definitely the more creative way to engage with the market, so this is the avenue which I will likely go down.
This attitude gives you something to negotiate with against the patent holder.
But I still feel that I am playing into the IPR game by backing away from this product, despite the fact my customers want it eagerly.
You do not have to back away, see below.
For example, I could continue to market the patent-infringing product AND market my new design, sell them alongside one another and let my customers tell me which one they prefer.
This would be an interesting experiment in market research. What if you were to refine this test a little more, and NOT offer the patented product at a lower price, but at the same price at which the patentholders agents in your country offer it? I'll explain below.
That would be a nice experiment, except again I have the worry about litigation. Sure, I am a very small fish and can probably get away with doing this without attracting the attention of the patent holder. But it limits my ability to supply these larger clients, who cannot hide in obscurity like me because they operate high-profile boutiques across the country.
All very true.
So, should I: a) continue selling the patent-infringing product; b) compete on design and sell a different product; c) attempt both options a & B and see what my customers think? Any thoughts on this question?
The first reaction to injustice is always to comply and complain. Don't break the law, so comply with the Intellectual Property Laws of your country. And complain whenever you can. But in your case, you can do more. You have customers for the patentholders product. You have alternatives to the patentholders product. This is enough to make a reasonable offer to the patentholder.
Your objective is to launch a business. Your strategy is to compete on design. Your tactic in this case is to get a license to sell the patented item to your customers. You say the patentholder already has agents offering his design in your country. And you found customers that these agents failed to find? You say you have alternatives you can market alongside your designs? Then do so, but offer the patentholders design at the going price (because you will have to charge more to cover a royalty if in fact you get a license.)
Keep in mind the USA patentholder apparently is a good enough designer to create products that would sell well in your country (almost no patented product ever gets to market, because they have no use in real life). With or without IPR you'd be delighted to pay him a royalty on his designs.
You have the ultimate card: customers. Once you have tested the designs in the market, take your facts back to the patentholder. Explain to him that he will grant you a license to sell his product in your country, or you will offer the alternative to his in your market. he should do this because his present agents are underperformers, inasmuch as you find customers that the agent cannot. Make the patentholder a reasonable offer. In business the one with the customers always wins.
Of course, either way, as you build your business, you are in the driver seat as to whether you continue to work with the patentholder, find other designers, or whatever. "Competing on design" presumes designers, and they too should be paid. I have no objection to that, it is only monopoly on ideas and designs that is unjust.
Let me know what you think.
1 comments:
Dear John,
Thank you for your kind and detailed response. I spent the day mulling over your comments.
I would be more than happy to pay royalties to the inventor for use of the idea, except that I doubt the inventor would accept my proposal. This inventor has used the patent to build a kind of personal cult following / commercial empire. All the marketing material points to the inventor's obsession with the patent. Everywhere you look, the inventor has made sure to reference it, and has in fact submitted the patent in multiple versions in order to perfect it. I must admit it is quite the piece of work.
Then there is also a history of the inventor aggressively enforcing the patent in the US. The patent holder has used litigation or the threat of litigation to stop competitors from marketing rival products. The intention here is clearly to dominate / monopolize the market and so far the strategy has worked. The inventor's product is nearly synonymous with the product category.
I find some consolation in the fact (expressed in several places online) that the inventor agonizes over the stress involved in enforcing the patent. There are references to how onerous it is to be constantly policing the market for infringements. In my opinion, this is the price one must pay for attempting to exercise a monopoly. One must constantly devote energy and vigilance to enforcement, which must be taxing in the way that US military occupations always drain the health and wealth of the American people.
I think there is another price to going down the road of securing a patent which one must then enforce. That price is in the forced switch from a creative to a competitive mentality. The original creative impulse than led to the idea (which then became a patent) fades, and one is left only with the fear of competition. Again I take solace in the observation that this patent holder has since attempted to duplicate the initial success by introducing new products, all of which have failed commercially.
On my side of things, it will not destroy my long-term prospects as an importer but the realization that I can no longer market this product is a serious obstacle in the short to medium term. I really need a product that will allow the sufficient velocity of transactions and cash flow that I need to get off the ground, and now I feel like I'm back at the beginning. I can innovate by creating my own design but this will take time to do and in the meantime I will suffer financially.
Then there's the question of what to say to my customers. They are practically pounding down the door to get more. (Or I should say they would pound down the door if I could afford a door. Right now it's the kitchen table for me.) I'm afraid that my unwillingness to supply more will be construed as an inability to deliver and that will cause my customers to question my competence.
Just when I was feeling that rush of take off... looks like I'm grounded for the meantime.
Pax
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