From Mommy Millionaire, Kim Lavine:
Just what exactly is a patent worth? How Crocs shoes
anticipated competition and created a strategy to head it off, is the stuff
that legends are made of! I explain how in response to a question today from one of my readers
Michelle, who asks:
“Many companies like Crocs Shoes come up with an idea and
put it on the market like you did, well what about the Crocs knockoffs? My
question is how can a company that does the Crocs knockoffs get away with it?
Do they have to pay the founding company? I would be one of those people who
would be afraid of being sued. I could go on and on comparing items that we use
everyday and that can be a long list.”
I remember when I was just starting out, perhaps the scariest moments for me involved putting my ideas out there in the marketplace, worrying about somebody knocking them off. Since then I’ve learned that the idea is only 5% of a product’s success—and this may include the patent! The other 95% is sales and marketing. You can find a whole section in my book MOMMY MILLIONAIRE on patents, and I would suggest everyone read it to find out the absolute basics for going forward, including when to pay and attorney, and when not to.
When it comes to patents, some of the best advice I’ve ever been given was that “Martha Stewart doesn’t own the patent on sheets and towels,” which is evidence that trademarks and brands, in my experience, can be more valuable than patents. In theory, a patent is only as valuable as your capacity to defend it in the marketplace, which usually means a lot of money spent paying lawyers. Unfortunately, you don’t usually have the revenues to support paying an attorney to defend your patent when you’re starting out, so it’s always been my advice to take your idea to the marketplace as hard and as fast as possible, so you can generate the revenues necessary to defend your patent. The United States Patent and Trademark Office anticipated this problem, allowing inventors to sue patent infringers for triple damages, which goes a long way to keep people from wanting to steal your idea, if they have to pay three times the money they make off of it to you in damages.
Despite this, patents typically defend a narrow technical parameter, which a
lot of competitors usually manage to find a way to get around.
Crocs journey began in 2002 in a Canadian plastics
company, when a Crocs founder discovered a version of the funny-looking shoes
being used in day spas. In 2003, the founders of Crocs, after seeing initial
success selling their unique and admittedly ugly shoes at boat shows—and after
being rejected by venture capitalists in their attempts to raise start-up
capital to take their idea big time—raised $5.2 million dollars from friends to
fund their company! The first thing they did with that money was to buy up its
suppliers and manufacturers of the unique resin that Croc shoes are made of,
called Croslite. This same supplier also owned the design patent on the resin.
Crocs began selling first to small shoe stores, then went into national
distribution at Nordstrom and Dillards. To meet the need, Crocs founders
employed contract manufacturers in China, Italy and Romania. In 2006, Crocs
expanded overseas from Singapore to Austria.
The people who founded Crocs had serious business
backgrounds, including a President at a national branding company, an exec at a
national sandwich chain, a hardware sales executive and a President of an
electronics manufacturer. With a motto of “Think Huge,” and after selling only
1,000’s of pairs in 2002, they pooled extraordinary management talents to write
a business plan that raised them $5 million for launch from friends and
business associates alone. In Feb of 2006, Crocs raised an additional $239 million in the largest footwear
IPO (Initial Public Offering) ever, valuing their market share at $1.09 billion. Yes, there are competitors nipping on
their heals now, no doubt with some slightly different resin formulation for their
shoes on which their patent is based, but they are the innovators with all of
the market share and they have the resources to keep their competitors at a
There are a couple of lessons here:
Why aren’t women’s companies getting this kind of money to fund start ups?
Why do only a tiny percentage of women-owned companies generate revenues of a million dollars or more annually?
though there is $20 Billion in Angel Capital every year for start-up
businesses, does only 4% of it go to women-owned businesses, when 40% of all
businesses in the US are owned by women?
Is it just a lack of confidence that keeps us from formulating five million dollar business plans? Is it because there is still a attitude of male chauvinism in the business world that won’t see beyond our sexuality? Or is it that we haven’t given ourselves the permission to dream this big, and the tools to go after it? As a very inspiring woman I met this week told me, Molly McDonald of The Pink Fund, http://www.thepinkfund.org which provides financial aid to those suffering with breast cancer: “We don’t need brass balls, we need brass boobs.”