What is the purpose of an invention disclosure?

The purpose of an invention disclosure in most cases, is to capture the minimum information sufficient to evaluate investing in a technical idea.  If you have never written an invention disclosure, however, I think the starting purpose of writing an invention disclosure is much smaller.  To start with, you need to learn how to fit your invention idea (one idea, one invention disclosure, let's keep this simple) into a template.  An invention disclosure is a template that allows patent attorneys, patent agents, business managers, and technical leaders to efficiently assess an invention for technical and business merit.  So if you've never invented, job 1 is to relax and work with the form, and learn how to transpose your ideas into a pre-digestible form for the patent geeks.  

What content goes into an invention disclosure?

Invention disclosures are the smallest atomic unit of intellectual property.  Patents, trade secrets, defensive publications all grow from the property seeds that are sown by an inventor in putting an idea on paper.  At BasicIP our motto is "if it isn't written down, it is not intellectual property."  Which technically speaking, isn't exactly true.  But, as a practical business reality, if it isn't written down, you don't own anything.  

     An invention disclosure has 2 content components: First, a description of what is to be accomplished which is the inventor's wish or goal for the invention, and second, a description of how to accomplish the goal.  A "wish" and a "how" and you are done.  Invention disclosures are simple really.    

     As an inventor, the hardest part of the disclosure is the how.  Communicating how to accomplish the goal, making readers understand how the invention works is the hard part.   

      A good patent attorney can write a patent if you give them a good descriptive paragraph and a flowchart of the invention.  So it is important not to over think or overcomplicate disclosing an invention.  When disclosing push yourself to capture the minimum information that is sufficient to evaluate whether investing in your ideas would be a wise thing to do.  That is, a good solid paragraph and a flow-chart.  What is the expected amount of information is something that you will calibrate to as you fill out disclosures and turn them in, and later receive feedback on how your company liked the disclosures.  

You can disclose your ideas in a lab notebook and have your peers witness your disclosure (with signature and date).  Or, if you work for a large company, you can go to your legal department's web site and download your company formal invention disclosure form.  Most companies today have shifted to a paper or electronic invention disclosure form.  

Why are invention disclosures important? 

Invention disclosures are important because patents are important.  Disclosures are important because trade secrets and defensive publications are important.  Invention disclosures are like stem cells for intellectual property.  The real question of why invention disclosures are important is "Why is intellectual property important?"

IP may or may not be important to inventors.  If it is important to inventors, it is usually for one of five reasons:

Reason 1: Not having patents is awkward

If someone attacks you with IP (a patent for example) the most conventional way to fight them off is with ... another patent.  So, if you get attacked, all the conventional advisors (lawyers and accountants and management consultants) will want you to have patents.  This does not mean you MUST have IP to stay in business, but it does mean that if you get into a patent fight, it will be high school all over again with everyone around you putting peer pressure on you to drink.  Only instead of chanting "drink, drink, drink" they will be acting like disapproving grown ups and telling you "You need patents." over and over.  

Reason 2: Money

If you are in a large company, disclosures might be important because your company will pay you to complete and turn in disclosures.  This is not a widely admired reason disclosures are important, but big companies know that their employees are over tasked with drone work.  And to get money for doing something to help the company is a smart idea, because it provides the raw materials for the other reasons companies need IP.  

Reason 3: You may or may not need IP

No one company can practice its own technology without infringing another company's patents.  Great example of this is in Marshall Phelps's new book where Phelps explains this to IBM's CEO by taking the cover off a Thinkpad and putting in 150 red flags on pins to show the in-licensed IP necessary to make IBM's laptop computers.  The irony of this example is in the fact that IBM captures more patents per year and has the largest patent portfolio of any company.  But, IBM actively licenses in and out because it knows that to exist in an oligopoly of any significant size, it has to cooperate with the big patent holders at the same time it milks smaller patent holders.  

Does many-to-many infringement of products matter?  Maybe yes, maybe no.  From sales of zero to about $100 million, if you keep your mouth shut in the press, you likely don't need any patents.  But, once you hit $100 million and have some cash in the bank, or are publicly traded and thus are forced to keep your mouth open about how much you make and how much you bank, you are going to attract 3 kinds of patent holders.  

First, patent trolls.  Second, that pissed off, bitter, crazy, overzealous competitor your company has.  And third, about 20 large omnibus patent holders.  The trolls basically want $500 thousand to $5 million and they will go away.  Having patents does not help dealing with trolls because they have no real business that your company can counter assert its patents on for leverage.  Trolls want to be rich, and don't care if they are famous for being well, ... anything.  

Second, crazy competitor wants to have his (it always seems to be a guy) patent portfolio of > 0 compared to your patent portfolio of = 0.  Then, they want you to give up the patent fight, and agree to exit your shared market, and stay only in market segments they don't serve.   The simplest way to deal with crazy competitor is to have 2x or 3x the number of patents they have.  If your company files on 10% of its invention disclosures, this means the formula for acing crazy competitor out of a patent law suit is CCP (crazy competitor's patent count) divided by your company's file rate * 3.  So if crazy competitor has 1 patent, you have a 10% file rate on invention disclosures, then 1/.1 = 10 invention disclosures per patent x 3 = you are 30 invention disclosures away from beginning to competitively protect yourself.  

At BasicIP we specialize in invention workshops that produce about 6 completed disclosures per day per inventor.  If we ran an "offensive IP" workshop to lay a "minefield" of IP around crazy competitor's best selling product, you'd only need a team of 5 people to produce the disclosures in 1 day to start putting crazy competitor on ice.    Now, wouldn't it feel great to stop worrying about crazy competitor?  If yes, then IP is important to you.  

Third, the large omnibus patent holders want your company to license their entire portfolio for 5% of your company's wholesale sales.  That is, for 5% of your company's sales.  There are about 20 of these companies (IBM, TI, ...) that will eventually find you and want 5% of your sales.  Do the math and you can forecast a 100% (20 x 5%) increase in the wholesale price of your product due to IP taxation.  This is a pretty good deal compared to the alternative of litigating a patent ($1 million per month per suit is a nice cost estimate).  

Both the taxation and litigation come out of profit, by the way, so that means no more profit sharing.  No more profit sharing may be a reason that IP is important to you. To reduce the taxation of IP, what your company needs to do is to have as many patents as the large omnibus companies, or to acquire patents at the same rate as IBM (1,500 per year).  

Each patent will cost about $40,000 over its entire life including foreign filing, maintenance fees etc.  So IBM is committing to $60 million in patent costs every year. If 5% of your company's sales is less than $60 million, then it is probably a better deal to license with IBM.  If 5% is more than $60 million, then the clock is ticking rapidly for your company to hear from IBM and you might be wise to invest in some IP.  Once you have as many or more patents as IBM, you can even argue that they should pay your company at the old rates you used to pay them.   

This is the omnibus patent holding company game.  When your electronics company is small, you get a bye, once you pass $100 million, you get to pay for a cross license with a "balancing payment" that is calculated by counting your and the omnibus company's patents.  The calculation goes like this: Whoever has fewer patents, pays more in a balancing payment.  

Once your patent portfolio is bigger than the omnibus company's, the balancing payment reverses direction.  The end result is that intellectual property costs become like an ante in poker, to stay in the game.  Only, the game you are staying in is an industry with other big players, like you, that have similar technologies.  And, there is a name for this group: oligopoly.  So in the end, if your company has the potential to be a big player in an oligopoly, paying the IP costs of membership is a "when, not if" cost.  

Summary, patents and other forms of IP don't help with trolls so we must ignore them.  Otherwise if your company is < $100 million in sales, or if it does not have a crazy competitor, or if it can easily withstand a 100% increase in costs, your company probably does not need IP.  Otherwise, it might be a good idea to start sending invention disclosures to your IP department. 

For most companies, IP is important because it is not a question of if patent infringement is going to come up, it is a question of when.  And if you like working in your current company, submitting invention disclosures is an easy way to give your company the ammunition it needs to survive in a brave new world of open innovation where everyone is taxing and paying taxes based on their patent portfolios. 

Reason 4: Inventors are cool.  

There is no question about it.  Once you start inventing, you tap in to technical coolness. In fact, invention disclosures make geek work life like high school.  Only, instead of being rich, handsome, or playing football, ideas are the new measure of cool.  You may start inventing because of the payments for disclosure, but as soon as you receive feedback from your company's patent committee, the game becomes about how valuable you are to the engineering world, how cool you are to engineers.  How many rapid-file patent applications do you have?  How many issued patents?  How many on file?  Do you want to be a geek deity?  This, may be a really fun reason to write invention disclosures.  

Reason 5: Increasing job security

If you become known as an excellent inventor in your organization, it will make you harder to lay off.  And, if you focus your invention on the future-looking technical areas, you will establish your value proposition to the future of your company's business.  It is just harder to lay off someone who has taken the initiative to commit good ideas to paper for the company.  In particular, when most employees never complete an invention disclosure form.  So, inventing is an easy way to help your own career in your company, as well as helping the company's career among its competitors.