Inventions; their development, purchase and sale

SALE OF INVENTIONS

INVENTIONS

THEIR DEVELOPMENT, PURCHASE
AND SALE

BY

WILLIAM E. BAFF

PATENT ATTORNEY

NEW YORK

D. VAN NOSTRAND COMPANY

25 PARK PLACE

1920

COPYRIGHT, 1Q20
D. VAN NOSTKAND COMPANY

PREFACE

THIS book is essentially a manual on the market-
ing of inventions, and it is proposed to view
the subject from various angles, proceeding
from the less obvious to the known. In its broader
aspect it is a book on business policy and is sent out
on its mission of enlightening inventors and others
about plans by the aid of which inventions may be
profitably exploited.

It is intended, however, not alone for the ordinary
layman without experience and worldly wisdom but
for busy people in every line desirous of understand-
ing the nature of patent property in inventions. The
difficulty has been to confine the book within proper
bounds and still leave nothing out which is necessary
for passing judgment upon any invention, either from
the standpoint of the originator or of the capitalist,
investor, or manufacturer interested in working in-
ventions.

The problems discussed are the manufacturers'
problems as well as those of the individual inventor
seeking to enlist capital for his new undertaking or
to start a new business founded upon a new and use-
ful invention.

The most potent word in our business vocabulary
today is efficiency. Efficiency is simply a high ratio
of results to means. Increased efficiency depends
almost wholly on increased knowledge. The fallacy
is now recognized of letting each man go along in

V

435194

vi Preface

his own way and produce business by using only
his own methods. This is a book to show one how
to use the efforts of others to the best advantage in
order to become a dominating factor. It is in sum
and substance primarily written for the average man —
for plain folks, not for geniuses. Geniuses do not
need guiding. The idea of Wanamaker is, " All
may help, none shall hinder." The aim of this book
is to standardize the best way, the best thing, the best
thought and see that all inventors know, practice,
and use them.

In so far as it teaches the paramount necessity of
self-help, the suggestions made are of practical value,
and in so far as it discloses plans showing how to use
the efforts of others to the best advantage, the in-
junctions given are indispensable. The majority of
people have realized that the growth of income is not
keeping pace with the growing cost of living. The
man who never tried, never helped himself or any
one else. The man who never made a mistake, never
made anything else. The capitalist is ever sharpen-
ing his eye, spurring his ambition, and setting his
mind to the task of increasing the income side of the
ledger. He is keenly on the alert for the knock of
opportunity when it comes. And then he is fore-
armed and sensible enough to investigate, to search
into its good features and its bad: to examine, analyze,
and decide.

George Westinghouse first called on Vanderbilt
to submit his airbrake. He was turned back with
the rebuke, " I have no time to waste on new ideas."
That remark cost Vanderbilt millions. That policy
has had its day. It never pays to refuse to investigate.

Preface, vii

The knowledge herein recorded was obtained by busi-
ness men after the hardest knocks, and they were
years and years accumulating the experience that is
the reader's for a few hours' study.

Today, to be a success means constant study.
Every line of activity will furnish ideas that one can
use in one's business. The more serviceable knowl-
edge one possesses, the better equipped will one be
to win out in business. Life is a constant struggle
anyway. It is good for people to strive, even des-
perately if need be, for a certain goal. When attained,
it will be appreciated. Try to dispose of a patent in
the right way, and it will not be difficult to succeed.
It takes strength and power to get up and "keep on
plugging" with the determination to win after you
have fallen down in the race. But armed with con-
crete knowledge, there is no reason why the inventor
should not succeed. Guessing is worse than useless.
Germany has lost the war because she regularly mis-
guessed everybody.

Patents are peculiar property and inventions are
peculiar things. A patented article differs from or-
dinary commodities in that it has easily discernible
characteristics of invention. It is not like bulk goods,
which have no individuality. By its very individ-
uality and superiority it commands recognition and
demand; on account of its individual qualities it
becomes known and its value becomes established
in the mind of the interested public. If a man owns
a patent on an invention greatly needed by the public,
he is, on the average, pretty certain to begin its manu-
facture as soon as he reasonably can. He must, how-
ever, go with and not against the stream.

viii Preface

In order to avoid costly mistakes and not court
failure, it is necessary to begin right. If a large num-
ber of inventions patented in this country since the
dawn of patents have failed, the following may have
been any of the reasons:

1. The claims of the patent were weak.

2. The invention would not work.

3. The cost of manufacture was too great.

4. The idea was feebly patentable but not suffi-

ciently new.

5. There was no demand for the invention.

6. The big fellows froze it out.

It takes hard work to market inventions, yet almost
every patent contains the germ of a successful, mar-
ketable device. Men have stopped too soon, or
wasted effort and energy while staring success in the
face. Few think of the hardship which every electric
light, every piece of steel, every pane of glass, every
telephone represents. It takes knowledge to make a
business man, but it takes genius to make an inventor.
An inventor can invent and sell, while a business man
can only sell. If one works for $15 per week, one
probably would never save in one's whole life $3000.
That is why men invent; inventing is a step toward
increasing income.

Such is the power of salesmanship and advertising
today in creating the demand for patented things that
people do not call inventors fools. After all, the
flying machine is the living evidence that a " fool "
invention may possess invaluable worth; flying ma-
chines have helped to win the present war.

It is hoped that the reader will find the precautionary
pointers about preparing a patented article for the

Preface ix

market, estimating the value of patents, creating the
market, and disposing of inventions, instructive, and
those portions of this work bearing on advertising,
salesmanship, and contract law, helpful, in answering
any of the thousand questions that arise during the
interval between patenting and disposing of an in-
vention.

A word about the various methods considered
looking toward raising capital to work inventions.
How to raise capital to push an invention is the peren-
nial question. This is what every inventor is after.
Two prime considerations control, business and ad-
vertising. The one without the other is an anomaly.
If the inventor has capital of his own to dispense with
assistance from others, he is truly fortunate. In the
vast majority of cases, however, the invention requires
Jthe interesting of investors. The question is how this
may best be done. Raising capital is simply the art
of selling the investor something, the very purchase
of which carries with it an obligation to take you as
a partner. It is therefore saksmanship — no more,
no less. Genius can always raise capital. This book
is intended to help the preoccupied workaday world
to get its share of earthly goods by study, application,
and hard knocks.

Nine tenths of those inventions which are sold are
sold outright. The public must be reminded that
inventions save money for the public. The public
pays nothing for them — pays nothing for the devel-
opment. The inventor must be reminded in case of
any doubt as to the importance of the consumer in
marketing inventions that many good firms exploiting
a new and good article have been able to improve

x Preface

the quality of their goods because the public have
been with them and given them a chance, whereas if
they had not done so, these firms would have been
compelled to go out of business.

The manufacturer of patented articles naturally
serves the consumer. A manufacturer is usually
anxious to serve the consumer in his best interests.
As a rule that is the best business policy for him to
follow.

The dealer has got to make a clear profit on an
article, or he cannot be expected to push patented
goods. It actually costs the dealer today, taking
all lines and bulking them together, seventy (70) cents
out of every dollar for goods and thirty (30) cents
in addition to this seventy cents for overhead expenses,
or the cost of doing business.

In the logic of facts the capitalist or moneyed man
comes last of all, not first of all, in deciding the market
for any patented articles. The money interests are
looking for men of character and not for money to
start industries, and character in an inventor is his
best asset, for it takes years, amidst prosperity and
misfortune, to build up character. At a public
appearance of J. Pierpont Morgan, before a com-
mittee of Congress, some one asked him how he
determined to whom to make loans. He said: " The
first thing I want to know about is the man's character.
I have loaned millions to men who had little property
and I have denied millions to men who had ample
security."

However this may be, it is only after the inventor
has made a mark in the world that money will flow
to him from capitalists, and while every inventor is

Preface xi

not an Edison, a good invention may reasonably war-
rant the expectation of commercial success. A manu-
facturer of an article first puts his goods out as an
experiment. He does not know whether he is going
to make money or not. He may spend $50,000 or
he may spend $500,000 in supplying such articles and
still make no money. The article may not be good
enough for the public.

W. E. B.

WORCESTER, MASS.
Nov. i, 1919

CONTENTS

CHAPTER PAGE

I. VALUE AND PBICE OP PATENTS i

n. GAUGING THE MERITS OF AN INVENTION .... 21

m. TYPES OF INVENTIONS (THE COMMERCIAL SIDE) . . 31

IV. GLEANING THE TALKING POINTS OF INVENTIONS . . 35

V. How PATENTS EXCLUDE; PRACTICAL EXAMPLES . . 41

VI. DEVELOPING INVENTIONS 51

VIE. SUCCESS IN INVENTING .. . . . ^ . . . . 56

Vm. THE DEMAND FOR INVENTIONS 61

IX. THE MARKET FOR INVENTIONS . 77

X. PATENTS AS PROPERTY . 92

XI. INVENTIONS AND INVESTORS ........ 95

XII. INVENTOR AND CAPITALIST ........ 105

XIII. OPPORTUNITIES FOR INVESTMENT AND FACTS ABOUT

INVESTORS . . > » . 112

XIV. THE PRESENTATION OF THE INVENTOR'S PROPOSITION. 118
XV. METHODS OF MAKING SALES ....".*.. 125

XVI- CLOSING WITH INVESTORS . 140

XVII. RAISING FUNDS — THE RIGHT WAY vs. THE WRONG

WAY — WHAT PLANS TO ADOPT 148

XVIII. ADVERTISING FOR CAPITAL LEADING UP TO A PARTNER-
SHIP OR CORPORATION . \ ., . i, ... . . 167

XIX. SALESMANSHIP AND BUSINESS — GENERAL CONSIDER-
ATION . . . . ... ... . '. . . 184

XX. SIZING YOURSELF UP AS A BUSINESS MAN . . . 190

XXI. ELEMENTARY CONTRACT LAWS . ... . . ' . 196

XXII. MISTAKES OF INVENTORS . . . , . . V . 204

XXHI. THE SAFETY VALVES OF MARKETING INVENTIONS. . 207
XXTV. SUGGESTIONS FROM THE AUTHOR ON EVERY PHASE

OF SELLING INVENTIONS 212

INDEX 221

SALE OF INVENTIONS

CHAPTER I
VALUE AND PRICE OF PATENTS

"TIT TE assume one has a patent issued to one by
\/\/ the United States Patent Office on an inven-
tion which will sell. What is the patent
worth? What is its cash value, as near as it can be
estimated?

Whether one sets his own price or it is named by
his backer makes no difference, for, like water, patent
prices tend to maintain their own level. It is not
easy to fix the price of a patent even when knowing
the characteristics and model conditions which give
it value. In buying real estate, one would, before
accepting the deed, make oneself conversant with
every advantage and disadvantage which the property
possessed. But a patent is peculiar property and
should not be confused with the invention the patent
is designed to protect. The invention is one thing,
the patent another thing; the selling price of an in-
vention is not the selling price of the patent.

A patent does not give an inventor a right to make
and sell his own invention. This is a nice perception.
He always had and has this right, patent or no patent.
A patent simply gives an inventor the right to exclude
others from making, selling, and 'using his inven-
tion. It makes the inventor master of his own domain,
and if he chooses, he does not have to make his inven-
tion at all. But this right to exclude others is or may

* Sale of Inventions

be priceless.- fi one sells goods, one would naturally
want to shut out competition. Wouldn't one like to
make every one buy at one's store? That is the way
to accumulate profits quickly.

The output of all the gold, silver, and diamond mines
in the world does not equal, in value, the profits earned
from American inventions. It is not correct to say
that a patent gives value to an invention, because it
only secures exclusively to the inventor the value
which the invention already possesses. Therefore,
in addition to owning a patent one must have an in-
vention which will sell. The possession of a strong
patent lies at the root of every valuable invention.
A strong, clean-title patent is the foundation of wealth
and fortune in inventing. If one has an excellent
invention, but one's patent claims are weak, the
chances of making profits are very slight. Now in-
asmuch as no inventor can tell how valuable his in-
vention may become in future years, however spirit-
less it may seem offhand, it follows that everything
should be sacrificed to obtain a good, substantial
patent on the invention. No matter what the meri-
torious invention is, good patent claims can be ob-
tained to protect it, and when obtained, they will
determine the measure of protection accorded the
inventor. Otherwise there will be nothing to boast of.

To show the utter futility of trying to realize profit
from any invention without obtaining the right kind
of patent protection thereon, it may be added that
the nature and qualities of an invention determine
its excellence and merit: The merit of an invention
bears on the amount of public favor it generates; the
nature of public favor affects the demand for an in-

Value and Price of Patents 3

vention; the demand controls the market; the market
is affected by competition or its absence; competition
generally determines how many shall divide the profits,
and a patent spells out the possible amount of com-
petition that may be expected.

The price paid for a patent will, therefore, not be
confused with the price charged the consumer for
purchasing the article patented. The cost of manu-
facturing a patented article does not control the cost
to the manufacturer of the patent rights, but the
cost of patent rights to the manufacturer determines
the manufacturer's share of profits after deducting
the cost of manufacturing the invention.

The better the invention, the greater the demand;
and the greater the demand, the fiercer will competi-
tion be, unless a patent shuts out competition. There-
fore it is safe to say that the more merit an invention
has, the smaller will be the price paid for the patent
if it does not check competition; but if the patent
does stop competition, then the price paid for the
patent is bound to go up.

The invention and the patent must both be good.
What is and what is not good may be elusive and
defy analysis, but to illustrate, we will give a general
test by which one can " tell." The cost of introduc-
ing a patented article — however superior to other
articles — into the market must be deducted before
positive elements enter into the make-up of the price
to be paid for the patent. So an invention may be
good and yet not as good as it seems. Similarly the
cost of maintaining infringement suits will lessen the
manufacturer's profits, so that a patent may look
good and turn out to be bad. One must not look only

4 Sale of Inventions

on one side of the shield. Whether it is a poorly pay-
ing invention or a poorly protecting patent standing
in the way of profit, one can generally find out by inves-
tigating and without spending much money, assuming
again that the invention will sell at all. It is the
purpose of this book to show how to do this.

It is purely a business proposition to estimate the
price of an invention. There should be no miscalcu-
lation. When a manufacturer buys an invention,
he is seeking value received. His only consideration
is whether he can make a profit from the sale of the
invention over the price paid for the patent, plus —
what the inventor usually neglects to realize — the
investment in tools, machinery, and the cost of intro-
ducing the invention. He does not want to buy a
blunt tool.

Every buyer of a patent who intends to manufacture
under the patent, tries to discount the future. There
must be clear gain looming in the distance. His bid
is not based on the profits he expects to make the first
year but after the expiration of a certain number of
years. His effort is to wipe out the cost of a patent
through his profit as soon as possible. He naturally
supposes that the chances are more than even that
some other inventor will obtain the same results by
some other method, if not by a servile imitation. In
such event he cannot hope to prevent competition.

To cut out competition for the present or for the
future is an important consideration in any industry
working under a patent. Patents are purchased be-
cause they are directed to prevent competition, and
it. is always a question just how much competition a
patent will prevent. One patent may infringe another

Value and Price of Patents 5

patent; in most cases a later patent can or may in-
fringe an earlier patent, but in some cases an earlier
patent may infringe a later patent.

A patent defines the " boundary " between one
patent and invention and another patent and invention.
The patent attorney and the examiners in the United
States Patent Office cooperate, while an application
for patent is pending, to make a survey so as to fix
this " boundary." No inventor has the right to ask
for more protection than he is entitled to receive;
certainly not to seek to cover and protect a device
or construction already patented, or perhaps not con-
sidered as patentable at all. The Government says
to every inventor: " Present your claim or claims;
write out a description of the particular thing or parts
of a thing or article you claim to have invented; state
clearly and accurately what it is you claim is new and
what you would prevent others from making, using
and selling, after you get your patent." The patent
virtually gives one a swimming belt.

The Patent Office represents every patentee, living
or not living; the patent attorney represents the par-
ticular inventor. Views are exchanged as to how
much protection, if any, should be accorded an in-
ventor. The Patent Office will attempt to reveal to
the patent attorney every patented device of a similar
nature to the one upon which claim for protection is
asked and request him to see to it that no claim is
asked which would trespass upon some previous pat-
entee's rights.

Of course mistakes are sometimes made by the
Patent Office officials in granting patents which in-
fringe other patents, but this is rare. The Government

6 Sale of Inventions

does not guarantee any patent it issues, does not
assure the inventor that it may not infringe some
later or earlier patent. But on its face every patent
shows that some inventor has been accorded protec-
tion on an apparently new and original invention.

Suppose the patent which was issued for the first
phonograph claimed protection on means for record-
ing sounds, not specifying how the sounds were pro-
duced or in what manner recorded. The Patent
Office is then asked to grant the inventor a monopoly
on any mechanism for recording sounds. Represent-
ing all previous patentees, as the Patent Office does,
it calls attention to the previous patents on telegraphy,
where means are also provided to record sounds. The
telegraph sends and records ticks, while the phono-
graph records human, vocal, or other sounds by inden-
tations on a wax disk or cylinder. What right would
one inventor have to prevent another inventor from
making the former inventor's broad invention? He
ought to be satisfied to make his own invention and
to prevent others from making exactly the same
invention.

The Patent Office will make each inventor restrict
or limit his claims to his true invention or improve-
ment, in this case recording vocal or other sounds. But
one inventor invented the telegraph before another
inventor invented the phonograph, and if the latter
has a claim in his patent on means for recording sounds,
the Patent Office would then see if there are any pre-
vious patents showing any means for recording sounds
in any manner. If there are no previous patents, and
the thing is the first of its kind ever invented or in
existence, no one can exclude the inventor entitled

Value and Price of Patents 7

from obtaining his broad claim on any means for
recording sounds in any manner.

As already explained, a patent simply gives one a
right to exclude others. This is the only right it con-
fers. If one's patent comes ahead of or was issued
before another, one could exclude the latter patentee
from making any device covered by one's claim and
even exclude him from making a patented improve-
ment over one's own device. It all depends upon the
wording of the claim and how the claim expresses the
structure upon which one has obtained a monopoly.
When the broad patent has run its course, it is open
to all.

But if there is a patent ahead of one's own patent,
one may find oneself unable to make the patented
invention, because the prior patentee may have a
claim giving him the right to exclude others coming
later. Thus one will readily perceive that one patent
may protect an invention broadly, giving the inventor
a monopoly on every kind of machine or device oper-
ating to perform a certain function, and another pa-
tent may protect a similar invention or improvement
specifically so that, during the life of the patent having
the broad claims, the owner of the improvement patent
will not be entitled to make his own invention because
it infringes the broad claims of the previous patent.
But he can make his improvement after the patent
covering the broad claim expires, because then this
patent will become public property; that is, any one
will be free to make this invention. In other words,
a prior patent may exclude a later patentee who may
exclude a still later patentee. This makes the last
patentee live in a sort of glass house!

8 Sale of Inventions

But we are assuming that a patent contains claims
which afford adequate protection to an invention.
Easy to say, but not easy to do. It is a hard thing
to express or define in words the exact boundaries of
an invention, as one must do in a patent claim. Patent
attorneys, patent lawyers and experts, and the Patent
Office officials realize, at times, this great difficulty.
Language is a slippery thing. Then again it is the
positive duty of the applicant of a patent or of his
attorney to present such claims as the applicant desires
to protect. The Patent Office officials merely pass
upon these claims. It is a strict rule of patent prac-
tice that what an inventor, through his patent attorney,
does not claim in his patent, " he dedicates to the
public," i.e., he surrenders to the public. Therefore,
if an attorney neglects to file claims which protect an
invention broadly, where he is entitled to them, the
patent will issue without broad claims and the result
will be many infringements of the device and much
needless competition. Again, one may unnecessarily
limit one's claims by including features which have
nothing to do with the real invention, but which,
according to strict rules, being mentioned in the claims
of the patent, the law will and must assume were
considered by the inventor as material. (This will be
explained specifically elsewhere.) Therefore, such
claims will extend a direct invitation to an infringer
to omit these unnecessary features mentioned in the
claim and so escape infringement and introduce a
ruinous competition. A patent which thus fails to
protect is a bit of mere waste paper.

It is not the writer's intention to write a treatise
on patent law, but enough has been shown, it is

Value and Price of Patents g

believed, to indicate the importance of every inventor's
engaging the services of a patent expert to prepare
the right kind of claims which will protect every
feature of an invention. It is the wisest and safest
course for the inventor to pursue. Any reputable
patent attorney is ready, upon request, to investigate
the Patent Office records to see if there are any prior
patents showing features embodied in an invention
before one applies for a patent, and after he makes
his " search," he will make a report as to its patent-
ability. But one should specifically ask the patent
attorney to inform one whether, in the event of obtaining
a patent, there are any patents standing in the way of
constructing one's own invention. He can decide this
point, and if there happen to be such a patent and
one's invention is an improvement thereon, one should
none the less apply for a patent on the improvement,
because the patent would exclude the previous patentee
from making one's own improvement just the same as
his patent might prevent oneself from making it. If
this improvement makes his article better and there
is profit enough for him in manufacturing the im-
proved article, he will be glad to purchase the patent
and so become the owner of the two patents.

By all means see that good claims are allowed before
the patent issues, because it would be too late to grumble
afterward. One will never regret engaging a capable
and reliable patent attorney or lawyer.

Obtaining the right kind of patent protection —
the most important step in realizing profits from
inventing — is what the inventor must do for himself.
He cannot ordinarily rectify any failure to do so after
the patent is once issued; the proper time to act is

io Sale of Inventions

before he accepts a patent. The work of estimating
and finding a market for the patented article may
fall upon the manufacturer or upon the financial
backer, upon the master spirits of the age, but first
of all must come good patent protection. It is up
to the inventor to get it. The manufacturer expects
him to get it, and if the patent offered for sale contains
no good or strong claims, that is the end of the matter.
Therefore, be careful as to the wording of patent
claims. Formulate them so that they will actually
exclude rivals from making and selling the invention.
An inventor who aspires to be, some day, in a position
to receive royalties himself from succeeding inventors
must be exceedingly careful in the wording of the
specifications for his patent. Purchasers naturally
look to obtain broadly covered patents and take the
opinion of experts as to the scope and novelty of any
patent before they think of purchasing, or even before
setting the price, since the actual value depends, to
a large extent, on the scope of the patent claims.
Purchasers do not wish to expose themselves to
lawsuits by leaning on broken reeds.

To succeed in interesting manufacturers one must be
able to furnish information on the scope of the patent
and, most important of all, whether in mew of prior
patents the invention can be made without infringing
them.

It is hoped the reader will not fail to realize that what
an inventor has to sell is not the mechanical construction,
however good, but the patent claims which protect the
article or process of manufacture; also, that it may not
even be possible to make the device owing to prior dom-
inating patents, causing an invention to become an

Value and Price of Patents n

infringing device. The reader should know, too, that only
when the patent well and truly covers all the patentdble
novelty that there is in an invention, will the full value
of an invention be secured to the patentee and be repre-
sented by the patent. But just in proportion as the in-
vention is deficiently protected or features of novelty,
omitted or not fully developed in the statement of inven-
tion, by so much will the patent be reduced in value,
until in such lamentable cases where the patenting has
been so badly done that the patent cannot be upheld at
all, its value will be absolutely nil.

But with the limitation that it is possible for a good
invention to sell well and yet earn no profits because
of excessive competition, so that the price paid for
the patent will be small, it may be laid down as a
safe rule that, once assured of a market, the success
of the invention, under proper management, is cer-
tain. The management and the market are two
factors which must be considered, because they are
interlinked in so many ways that one without the
other can hardly be said to exist. It is necessary to
deal with people in selling inventions. // the right
kind of a man gets hold of a business, it succeeds. If
the right kind of business firm with the right men get
hold of an invention, it will also succeed.

Every patentable idea and invention must pass
through six cardinal tests:

1. As regards patentability.

2. As regards mechanical practicability.

3. As regards its possession of superior merit and

low cost of production.

4. As regards a large and constant demand for it.

5. As regards being better, cheaper, and more

12 Sale of Inventions

salable than other devices already on the
market.

6. As regards the competition it will encounter.

These factors, when carefully analyzed, dwindle
down to a consideration of the article and the market.
It is the policy of good management to see that there
is a good market for a good article. As to the article,
the consideration of price enters because of the cost
of producing this article. As to the market, the con-
sideration of price enters because of the cost of intro-
ducing this article into the market. Good management
requires that an article be manufactured in good and
acceptable form, but as this is true whether or not
the article is patented, it is necessary simply to add,
in this event, that good management sees to it that
the patent is a valuable one in its competition-shutting
feature. The most important aspect of the article,
viewed from the standpoint of cost of production, is
its merit; while the most important aspect of the
article, viewed from the standpoint of introduction,
is the demand. This brings us face to face with the
question of merit and demand. Three features will
be briefly discussed as to merits, and they are the
following:

1. The quality of the article, by which is meant the

peculiar advantages the article possesses.

2. The condition, by which is meant the appearance

of the article, the state of completion, effective-
ness, and durability, in point of construction
and use of the same.

3. The time factor of the article, by which is meant

the time which must lapse or which it will
take before an article will bring back profits,

Value and Price of Patents 13

depending on its nature and characteristics)
development, experiments, etc.

All these elements enter into the cost of production
or the cost of manufacture. When this end is well
taken care of, the question of demand steps in for
primary consideration. The controlling feature of
demand for any single article or invention is, of course,
competition; and this depends as much upon the sup-
ply of the article as upon current market conditions.
The entire question, although naturally complex,
will be simplified by an example.

If one has an article which can retail for five or
ten cents — simple in construction and inexpensive
to produce — and can get the five and ten-cent stores
to sell it, one will find this often the easiest road to
success. Take the Woolworth chain of stores for
example. The method of taking up an article of this
nature with this concern is as follows: The inventor
will take the article to the manager of any branch
store, explain its merits, and satisfy him it can be
sold for this price. (Question of cost of manufacture,
quality, condition, and time.) Never mind about
actually manufacturing it for him. The manager,
if he thinks it worth while, will send the article to
the general purchasing agent, who has his office in the
Woolworth Building in New York City, where the
main office of the concern is located. The purchasing
agent, in turn, will investigate the article and its
marketing conditions — process of manufacture, prob-
able demand, consumption, repeat orders — and reach
a decision as to whether it pays to handle it at all.
This is the crucial point; because once he decides that
it does pay to handle it and he takes it up, there is

14 Sale of Inventions

laid before the inventor as an outlet and market for
the article, one of the largest selling organizations in
the world, reaching millions of purchasers, an organiza-
tion, too, that has a small selling expense. This is
the reason why it usually pays to invent an article
like a pin and other similar money-making inventions.

Of course it does not necessarily follow that, in order
to be good and meritorious and sell fast, an article must
be simple. But its simplicity over rival articles is a
matter of so great importance that it cannot be emphasized
too strongly here. In other words, the condition of an
artick, as explained above, is most vital. To place
an article of quality in condition, takes time. All the
really important things have taken time and patience
to bring to perfection. Thus most any inventor who
finds himself making quick profits may be sure that
they will be short-lived, although this may be a good
thing while it lasts. Confidence, tenacity of purpose,
and capital are the requisites for building up big
fortunes or the foundation of a patent, but the thing
itself must have intrinsic merit. The simplest in-
ventions are the best money-making devices for no
other reason than that it takes less capital to put
them on a successful profit-producing basis.

The real value of a patent is the net value of the monop-
oly over ordinary trading profits, and when followed by
estimation on likely instances of uses during the time
of monopoly (seventeen years) and deduction of cost
of introduction and of maintenance of patents, will
give the estimated return from the patent during the
term of the grant.

The value of use is the advantage possessed by the
invention over previously existing devices, methods,

Value and Price of Patents 15

and machines in use with the same object. It is
capable of exact calculation and expression in terms
of value. Thus whether a machine or process, the
advantage may be in the decrease of initial cost of
construction or of installation, decrease of working
expenses, improved number or quality of vendible or
usable product — any or all of these. The advantage
in each case may be expressed as so much monetary
saving.

Instances of Use. — To determine the extent of
the probable employment of the invention, statistics
will be necessary from which may be learned the
volume of trade in or from similar articles or methods
which the invention is designed to supersede. If the
invention is for use in production, an estimate should
be made of the number of producers likely to be in-
fluenced to abandon the old for the new process —
perhaps more or less dependent upon the amount of
profit in favor of the new invention, and the per-
suasiveness of the introducer.

The Present Value. — The present value of seven-
teen years' equal profits, say at ten per cent, is about
twelve and one half times one year's profits. Ten
per cent must, however, be considered as a somewhat
small return for such a speculative investment; and
moreover, it is frequently found that the profits are
less in the beginning than at the end of the term of
patents. Probably four or five years' purchase would
be a fair amount in average cases; but still the amount
must vary inversely with the probability of further
improvements arising to oust the invention from
commercially profitable use.

Know the exact costs of selling the patented article.

16 Sale of Inventions

While it never is practicable to determine this until
an article is actually manufactured, every effort
should be made to secure as accurate an estimate as
possible during its preparatory consideration. The
smaller the selling price and the more liable the article
to meet competition, the greater the care necessary
in making the estimate. Tabulations of every part
and its cost should be made either by the inventor
or by a competent person selected by him.

Inventors fail to attain success by omitting to
balance the cost and profit. Some design articles of
manufacture only to find that the cost of manufactur-
ing them is greater than the cost of manufacturing
other articles of a like character. Many have con-
sidered things to be advantages which have not proved
so in practice. One should not be misled. It is far
easier to estimate the value of licenses than the out-
right value of patents. Sometimes the use of a ma-
chine of a particular size will govern the amount of
license to be charged. For example, one could sell
an invention in the manufacture of steam turbines of
less than a thousand kilowatts to one man at one price
and a license to manufacture steam turbines of over a
thousand kilowatts to another man at another price.

A good way of estimating the value of a patent,
without actually proceeding to manufacture the article,
is to get a first-class model-maker to construct it.
To get the right price of a patented article, send the
article to users with requests for their opinion after
a few weeks' use. If the reports are favorable, the
price should be figured out on a regular manufacturing
scale with all labor, material, and expenses of manage-
ment included. In this calculation it is best to make

Value and Price of Patents 17

the price on the basis of contracting the work out,
and applications for estimates for furnishing the article
should be made to firms equipped for the manufacture
of this kind under contract. If the estimate of cost
thus obtained exceeds that which it is ascertained can
be got from the wholesale jobbers, then either the in-
vention must be altered or abandoned. If altered,
it must be capable of manufacture at a lower price.
In most cases this simple matter of addition and
subtraction with a small ingredient of exertion has
not been gone through at all, and the inventor merely
proceeds upon theory rather than upon facts which
he can easily ascertain in advance. Those not familiar
with the cost of construction in manufacturing, little
realize how important it is to save cost in small details.
The reason is that the intense competition of the
open market leaves at best but a narrow margin for
profits with most articles, and large profits are made
by the use of cheap processes of production and large
quantities of articles sold.

It should be borne in mind that a first-class model-
maker will not set a fixed price on any work he may
undertake in the nature of constructing a full-sized
or working model for any inventor. He will inform
the inventor that considerable experimentation may
be necessary in preparing the article in an acceptable
condition in order that its entry into the market
may be consistent with the earning of immediate
profits. Furthermore, a high degree of merit should
be attained in this trial for the public approval. After
a model has been finished, embodying the best methods
of construction known to the model-maker, things
will be in a condition for estimating the price of the

18 Sale of Inventions

article, and a suitable basis for a royalty arrived at.
The model-maker will base the cost of making a sat-
isfactory article on the material, size, and make-up
of the invention, and on the amount of machinery
employed and skilled labor used in its elaboration.
However, the consumer practically controls the price
at which a patented article must sell and incidentally
the price of the patent itself.

If an inventor, having control of his monopoly,
overestimates the worth and importance of his in-
vention and sets his trade price too high, it means
that he restricts his volume of sales and volume of
manufacturing production. He will therefore be care-
ful to fix his price at a point where he expects the
natural law to bring him great returns on his inven-
tion, but he is also concerned with the price at which
his invention reaches the public that it may include
a sufficient profit to repay the dealer for the invest-
ment and effort he must put forth in selling.

In another chapter the factors determining the
cost and selling price of patented inventions will be
fully discussed. Thus in the present chapter it suffices
to consider the question of price only where the con-
trolling or deciding factor is competition based upon
a patentable monopoly.

Remember that cost is always a relative term,
never absolute. The cost of making the same article,
in different factories, is always different owing to the
difference in " factory-overhead " expense, cost of
labor, and selling expense.

The price to be paid for acquiring a patent thus
depends upon the distinct advantage the manufacturer
will obtain in exploiting it. Chief among the inci-

'

Value and Price of Patents 19

dental or indirect advantages is the fact that price-
fixing generally becomes important in the case, of
patented articles. It is proposed here merely to
hint at this consideration, as the topic will be dis-
cussed elsewhere. Then again the very fact that
prices are fixed is a guaranty that they are not fixed
too high in the long run. Suppose the maker of a
patented article does place an unreasonable price upon
his product, what results? Since no one is compelled
to buy except by choice, the article does not sell. If
it does, it is worth the price in the eyes of the buyers
in exchange for the improved service it renders; and
if an article does sell in satisfactory volume at any
good and fixed price, it is proof that the invention has
made a contribution to society more than equivalent
to the returns expected.

The estimated commercial value of an invention is
the value of the superior efficacy of the invention
over the best of its competitors in each instance of
its employment, multiplied by the number of instances
of its employment or likely employment and by the
time during which it is likely to have preeminence.
It is impossible to calculate beforehand the absolute
commercial value of any invention, because, although
its value over competitors may be stated with exactness,
the number of instances of its employment , rate of output
of product, and its duration of use can hardly be deter-
mined and must be conjectured more or less accurately
according to the practical experience of the calculator.

In closing this chapter, it will be necessary to dis-
cuss the depreciation of patents in point of value.
At present this subject is more or less shrouded in
mystery to many, but as a rule the depreciation of

20 Sale of Inventions

patent values occurs most rapidly the first years of
their existence, during which years the greatest profit
is derived from their application or use. This fact
should always be borne in mind.

A great number of patents are of little value after
the tenth year, and most manufacturers take this
condition into consideration.

A patent remains an asset as long as it has not
become obsolete. In fact, it is much easier to estab-
lish the real value of patents than the theoretical value
of good-will. While it is not easy to anticipate and
forejudge the productive life of a patent, the best way
is to maintain a reserve fund to take care of patent
depreciation, in the same manner as reserves are
maintained for plants, buildings, machinery, etc. In
this way, during the legal life of the patent the pur-
chase price is always borne before the observer; but the
amount added continuously to the reserve fund will or
should more than equal the purchase price of the patent.

A few years ago a manufacturer of automobile
engines purchased a patent at a cost of fifty thousand
dollars. He estimated the useful life of this patent
to cover a period of not more than four years, due
to the rapid development of this class of engine. He
finally decided to write down the value of this patent
on a royalty basis, and add it to the cost of produc-
tion at the rate of one dollar for each machine. At
the end of eighteen months the original cost of the
patent had been absorbed in the production cost
without reducing his net profit over that of former
periods. This patent had not as yet become ob-
solete, but he adopted a sound policy, to which the
condition of his business will testify.

CHAPTER H

GAUGING TEE MERITS OF AN
INVENTION

THE spirit of the times demands merit in an in-
vention, and financial remuneration for the
inventor requires it. The whole tendency of
the present industrial age, the manufacturing spirit
and competition, which is most strenuous even in
industries which rely upon and work under patents,
forces the use of the best instead of any inferior de-
vices. It is human nature to take advantage of a
trade — if the seller does not know values — and
also to break off negotiations if he is asking an ex-
orbitant price. This is true as long as the value of
the article is unascertained. If the inventor does
not know what he has to sell, he cannot expect others
to go to the trouble and expense of finding out.

It is capital the inventor wants all the time, but
merit must come first. The simplest way to test
the merits of any invention is to find out first if it
has intrinsic value and then, if so, whether it is an
overnight affair to recognize this value or a prolonged
matter based upon comparisons made with similar
articles.

Eliminate all sentimental feeling in connection with
any invention. Be its own worst critic. One should
adjust one's viewpoint toward it so that instead of
its becoming a part of oneself, as so often happens,

21

22 Sale of Inventions

one can, figuratively, criticize it through the eyes
of one's unfriendliest acquaintance. The inexperienced
inventor will at times cover up a known defect, refuse
to admit it even to himself, in the hope that no one
else will discover it. This line of reasoning must be
gotten out of one's mind instantly. Every invention
has or will develop a competitor. He will find the
defect. What is the use of deceiving oneself when to
do so results to one's own misfortune?

Some inventions drag along for years without
getting to a paying stage and then suddenly make
fortunes for their owners when the patent is almost
run out. The typewriter is a practical example.
Some of the most promising inventions are those
which cannot be realized upon immediately. They
are in advance of their age. It is well known that
there is very little money now in surface washing or
placer mining for gold and that all the big profits are
made out of long and patient development of deep
mines. The same is true of patents. The patented
devices which sell like pancakes are only surface
washings; they are not all up to the mark either.

It is capital all the time with the inventor. Merit
will win capital to be sure, but initially and primarily,
capital will breed merit in any article and will infuse
new blood intodts sale. In patented articles the labor
element is most important. To assure success, the
inventor must commence right. He must pursue
his invention like any business, but only more steadily,
because he must strike out with something new. It
has been aptly remarked " that the great secret of
success in life is for a man to be ready when his op-
portunity comes," and this applies with great force

Gauging tJie Merits of an Invention 23

to a patentee. But "a wise man will make more op-
portunities than he finds." A patentee is the sole
proprietor of valuable property. His position is
similar to a man possessing a rough diamond needing
polishing. It takes machinery to make a machine —
a shop, workmen, and materials. And these cost
money. As explained before, one cannot tell whether
an invention is really valuable until it is made in a
shop and finished. It is an almost unheard thing
for an inventor to succeed single-handed. He must
have the necessary capital.

An article must have some merit to win out, unless
it is a nine days' wonder merely. An army of experts
cannot make a success of a poor scheme. Perhaps
the work of every inventor will not turn out meri-
torious, but for the sake of finding one genius we can
well afford to tolerate a multitude of ungifted in-
ventors, as no one knows whence the gifted inventor
may come. As to degrees of merit, it is not always
mechanical superiority which counts. An inventor
often assumes as a sort of rough guess that an article
with slight superiority will secure a hundred per cent
of the total consumption, while as a matter of plain
everyday fact, a satisfactory article with good distri-
bution and management is often a far more attrac-
tive asset than a superior article without accom-
panying financial aid and knowledge of merchandizing.
Again, what counts is business that can be held at a
reasonable sales expense when once secured.

The merit of any article newly created is seldom
determined by one man. The inventor should, there-
fore, seek the opinions of those qualified to pass upon
the merits of his invention. It is necessary to know

24 Sale of Inventions

who are and who are not thus qualified. Who could
forecast the immense commercial advantages of the
telephone and other epoch-making inventions? It
frequently happens that an exceedingly important
invention and one which can be fully protected under
the patent law differs so little in its general appear-
ance from the drawings of prior patents, that an
unpracticed eye is unable to detect an important
distinction.

The best way of finding out the possible value and
merit of an invention is by consulting people right
in one's home town. If they think the article is good,
one can use them in connection with one's plans to
raise capital later on. If the device is a railroad ap-
pliance, consult the men in the repair shops in the
vicinity as to its merits, as they are good judges. Do
not sink money without an investigation. The local
hardware man is a good judge of the usefulness of any
ordinary tool. Practical people, living all around
you, can and will give excellent advice. Go to the man
at the top, the successful man. One can stand criti-
cism of one's invention, and if after hearing it, one's
confidence is unshaken, there's every chance to win.
If one's idea is any good at all, it will come through
this trial of criticism. The heads of every line of
industry know everything vital about their arts;
anything moderately good that suggests bigger profits
is what they want; and when they find what they
want, they have financial friends who have confidence
in their judgment.

By all means, let the model itself speak in favor of
merit, otherwise it may be too late to induce action
on the part of manufacturers; but consider carefully

Gauging the Merits of an Invention 25

to whom to show this model for an opinion of its
merit.

Marketing an invention depends upon the situation
of the inventor himself with respect to parties inter-
ested. It depends upon his business environment, his
business acquaintance and standing in the business
world. In many cases a mere idea in itself is not
attractive to the investing public. In most cases it
is necessary to have a model made. This model, if
made, should perform its work without a hitch. How-
ever, capitalists and investors — as distinguished from
the manufacturers — are not as a rule mechanics and
are not concerned with the inward working and com-
bination of parts of the machine. What they want is
results. Hence it is necessary to bring the invention
to a state of practical perfection before an attempt is
made to enlist capital. Of course, in showing one's
ideas to men conversant with such devices, the patent
may suffice. For example, if the invention is a tool,
send the same to some large hardware dealers with the
request for an opinion whether they could sell the article
and at what price in wholesale lots. A few samples
might also be distributed among practical machinists.

It is axiomatic that the simplest inventions are
the best money-makers.

The collar button that turns down at the back
produced a big fortune.

Harvey Kennedy introduced the shoe lace and
made $2,500,000.

The ordinary umbrella benefited six people by

$10,000,000.

The Howard patent for boiling sugar proved a
lucrative investment.

26 Sale of Inventions

Sir Josiah Mason, who invented the improved steel
pen, made a large fortune.

The inventor of the shading pen had a yearly in-
come of $200,000.

The wooden ball with an elastic attachment yielded
over $50,000 per year.

The lady who invented the baby carriage realized
over $50,000.

A young man of twenty-seven invented the veneer
put upon shoe pegs to keep them from splintering
and received $200,000. The man who discovered
that a newspaper wrapper could be gummed and
applied this knowledge in a practical way by patent-
ing the process, made a fortune large enough to enable
him to found two schools for boys. Tom O'Toole,
the miner who couldn't keep the pocket flap of his
trousers buttoned in the usual way when filled with
the tools of his trade substituted metal eyelets and
hooks for buttons, and that little invention made him
independent for life. Canneld became rich when he
devised a seamless shield for women's dresses. Den-
nison gained a big fortune for his idea of a shipping
tag with an eyelet reinforcement. The everyday
can-opener is a little invention that is profitable. The
DeLong hook and eye was a clincher from the very
start. A thumb latch brought wealth to two New
Haven men, Philos Eli and John A. Blake. The
automatic inkstand was worth $200,000 to its origi-
nator. Joseph F. Glidden, who invented the barbed
wire fence, made a million in royalties. A flying top
of tin with wings which flew up in the air earned a
good-sized fortune. " Pharoah's serpents," an odd
sort of firework, put $50,000 into the pocket of the

Gauging the Merits of an Invention 27

originator. And more recently, Dr. L. F. Adt of
Albany, N. Y., the inventor of the Shur-on eyeglass,
realized big gains therefrom. A humble workingman
who devised a stylographic pen that .would shade in
different colors got $100,000 within a year from his
invention. Yet these inventors were not professional
inventors. Some merely stumble upon their ideas,
and their devices prove " masked batteries" as it
were. The remuneration to the inventor of a simple
meritorious invention is not always by way of a direct
purchase. Thus an inventor in the employ of the
Bissell Carpet Sweeper Company of Grand Rapids,
Michigan, was paid a salary of $5000 a year and a
commission on every dozen sweepers sold for a great
many years. He was taken from incompetence,
died a wealthy man, and his family today are well
provided for.

The inventor should understand the relation be-
tween value and merit of an invention. Value, while
based upon merit, is conditioned upon personal ini-
tiative. Get the right perspective. This applies
both to the inventor and exploiter. The one is prone
to be too enthusiastic and the other too conservative;
but when both yield a little, it will mean attaining
a fair estimate of an invention. Inventors are not
all cranks, as the joke pages of the periodicals would
have one infer. True, they are enthusiastic and
properly so, for had they not been, many of the greatest
inventions of the age never would have gone beyond
the experimental stage. It is for the buyer of inven-
tions to temper this enthusiasm with that amount of
conservatism which will " bring him back to earth," but
not to the point of belittling the invention if it is a

28 Sale of Inventions

good one. No inventor with a good patent will per-
mit it. He is liable to take it elsewhere to the dis-
comfiture of those interested if this method is being
pursued to " beat him down " in price.

The difference between a staple article and the
patented improvement on that article is usually ex-
pressed in terms of merit. It will usually take less
time and effort to push the article of merit. That is
why an article with the least merit will always pay
the greatest amount of commission. The manu-
facturer who markets an article that has genuine
quality cannot afford to pay large commissions.

This superiority of a patented article over a mere
staple is a good presumption and arises from the
fact that an inventor must get a point of advantage
over the whole world, because if the patented article
has been used before and has become known to the
public by prior publication or by public use in this
country, the patent is void.

The inventor who blends in himself the dual char-
acter of an originator as well as capitalist is on the
nearest road toward success. He does not worry
about getting started right or raising capital. The
patentee addresses himself to the public from whom
he expects support. But is it always necessary?
Sometimes the failure of an inventor to realize on his
invention is due to the lack of thrift. There seems to
be implanted in the breast of all great inventors an
indomitable spirit which generally enables them to
overcome all difficulties. The inventor who does
not feel that he possesses this invincible self-will
must endeavor to acquire it. There is no particular
secret of success in inventing any more than there is

Gauging the Merits of an Invention 29

in anything else; the tradesman who spends less
than he earns, may in the course of time become a
capitalist. The foreman may, after the lapse of
years, come to be a master, etc. Almost all of the
great business enterprises owe their origin and their
continued prosperity to the fact that their founders
were patentees.

In the nature of patented things it will often be
found that things which are useless in one way
become useful in another way. A device may be
without value in one art but of immense value in a
different art; e.g., a nonrefillable bottle may not be
practical, but it may contain the germ of a good in-
vention of a check valve.

It is necessary to know how to take advantage of
the merit inhering in any article or thing. There is
only one way of going at it successfully and that is
by thoughtful work. If one is the inventor of an
article he should forge ahead and find out how to get
the right talking points, as it is a fact that patents,
copyrights, and trade marks often furnish the ground-
work for a great number of telling arguments. An
electric machine may be the basis of a hundred or
more controlling patents. The machine may be
" talked up," along the lines that these patents not
only protect but shut out any competitor from making
any machine approximately as good, etc. If one is
commercially inclined and wants to become a cap-
italist, he should begin by marketing an article of
merit. Remember that the" brightest minds in the
business world are endeavoring to solve the problem
of how best to market an article. To start with
little or no money, build up a business, equip the

30 Sale of Inventions

plant, buy raw materials, hire help, manage a factory,
establish credit, advertise, fill orders, collect accounts,
and do the thousand and one other things necessary
to make a success of a business requires a good virile
mind, plenty of hard work and close attention to
details, and should be a steady, gradual development.
Let every inventor adopt the motto, " This one thing
I do."

If one is mechanically inclined and wants to become a
capitalist, let him take hold of a meritorious article
and seek to improve it, thus becoming an inventor
himself. It is simply necessary to know what articles
on the market succeed because of merit. It is inter-
esting to know that about four hundred patents were
taken out of the patent office on safety razors since
Mr. Gillett's invention. The owners wanted a part
of his success. The Gillett Company spent four
million dollars in advertising their article and edu-
cating the public to its use.

CHAPTER HI

TYPES OF INVENTIONS (THE COM-
MERCIAL SIDE)

INVENTIONS are not all of the same character.
There are various types of them. We are con-
cerned only with those types which will spell
success from a financial standpoint. But regard-
less of the type of any particular invention, what
counts is the amount of personal initiative of the
originator. A test of a patent is its practical ap-
plication. The reputation of an inventor, unlike
that of an artist or a writer, counts for nothing. Every
new invention made by him must have commercial
value and must be successful. It may make the
financing of a second invention easy, but it will not
sell it. Each invention must stand or fall on its own
merits. People will not make a stir about inventions
which have no merit.

There are simple types and complicated types of
successful inventions. An invention belongs to the
simple type when its construction embraces a mini-
mum of parts and when at the same time its pushing
calls for no extraordinary expedients. As an example
of a simple invention, take the bottle cap. Every
time anybody in the United States pulls off the cap of
a beer bottle or soda water bottle to quench his thirst,
he pays a fraction of a cent into the pocket of one
William H. Painter of Baltimore. This gentleman,

31

32 Sale of Inventions

however, carried his patent in the pocket for six years
before interesting capital. Finally he succeeded and
today he is a millionaire many times over.

This is an ideal example of a simple invention, be-
cause it illustrates the great truth that to go out of
the beaten track and make an invention pay, one
must have an article of merit which must run the
gauntlet of repeated rejection until the day of final
triumph. The complicated invention, however, on
the other hand, not only is more unsparing of parts,
but the effort, labor, and time expended to push it
may be tedious. Look at any complicated piece of
mechanism. Invariably you will find half a dozen
patents on the individual sections of machinery — half
a dozen ideas so interwoven that while by analysis
one can separate one from the other, one cannot, in
looking at the section, pick out one patented combi-
nation without seeing at the same time two or three
more patented combinations interwoven with it.
So much as to mechanical perfection. Still if such
mechanism have merit, it is worth while producing
as the rewards for inventing something for which
the world needs are so great that the toilers in the
ranks need never grow discouraged. A single inven-
tion may make a huge fortune for any inventor. Any
one may be the lucky one if he is strong-minded enough
to push his invention rightly. Most sweeping, revo-
lutionizing inventions belong to the complicated
types, especially as concerns the feature of success-
fully introducing it into the market. Some revolu-
tionizing inventions were not worked out in the United
States. The Diesel engine, the internal combustion
engine, blast furnace gas engines, and electrical smelt-

Types of Inventions 33

ing furnaces were all invented abroad five years before
ever used here. The pioneer of the steam turbine,
Dow, could not get capital in this country to market
it here and he had to go abroad before he could
get it.

The best type of invention, therefore, whether
simple or complicated, is that which eliminates the
most factors of uncertainty in establishing a market
for it. It is for this very reason that there are many
businesses in the United States that have been built
on the inventions of their presidents. The industry
of the inventor in producing, and patience and good
judgment in exploiting the invention have contributed
to eliminate the natural timidity due to dependence
on others for direct instead of indirect support.

Here, then, are a number of commercial points about
one's invention which will prove of advantage to every
inventor. As far as the marketability or salability of
an invention is concerned, inventions should be classi-
fied as follows:

A. Inventions which save labor.

B. Inventions which save time.

C. Inventions which save trouble.

D. Inventions which save money.

E. Inventions which save annoyance.

F. Inventions which consist in giving a salable

product or article superior merit, where the
merit may be:

1. Added service. 6. Comfort.

2. Greater utility. 7. Convertibility.

3. Inter changeability. 8. Better quality.

4. Durability. 9. Better control.

5. Convenience. 10. Noiseless.

34 Sale of Inventions

11. Time saver. 15. Duplication of parts.

12. Noninjurious. 16. No special skill.

13. Sanitary. 17. All around usefulness.

14. No defects.

Inventions may also be graded as to their com-
mercial or sales-pushing value. Make a survey of
the number of probable users of the invention. For
example, the possible sales of a $5000 automobile in
a city of thirty thousand people in which only a few
men earn $3000 per year or over — as in certain mill
towns — is not directly comparable with the possible
sales in a town of thirty thousand people of a purely
residential character, where three thousand men may
earn average salaries in excess of $3000. But sub-
stitute overalls for the $5000 automobiles, and the
market possibilities are at once reversed — for think
of the large number of factory workers. So always
consider the territories in which the invention is
offered for sale as well as the character thereof.

CHAPTER IV

GLEANING THE TALKING POINTS OF
INVENTIONS

EMPHASIZE the probable profit in explaining
inventions. The easiest way to do this is to
show that the invention excludes competition,
or that the article has a variety of different uses. It
pays to advertise, and in advertising one must dwell
on the most effective talking points. These become
apparent when the invention has been elaborated
sufficiently to show just what it will do. Talking
points which generate confidence and induce action
are to be found sometimes in the article itself and
sometimes in the processes of producing it. Some
inventions require years of development before they
are ready for marketing. Take the safety razor, for
example. One of the most widely sold of safety
razors is the outcome of seven years of hard work
spent not simply in producing the original invention
but in tempering thin steel, in producing a handle
to hold the blade, and in devising machinery which
would stamp blades out of a ribbon of steel. Few
inventions are ever developed precisely as described
in the patent.

An inventor cannot get the right perspective on
his invention unless he considers his competitor's
side of things as well as puts himself in the place of
the ultimate consumer. An inventor about to begin

35

36 Sale of Inventions

the manufacture of his own patented article must
be prepared to meet all obstructive measures and
arguments from his competitors laboring in the same
field. He should not start without first having con-
sidered every reasonable objection from every point
of view. Can they be met from the prospect's point
of view? Minor and immaterial objections should
be shown to be such and no time wasted on them.

The public does not swarm in the doors of inventors.
They must seek it. Uphill work and tremendous
effort are necessary to make an invention the talk
of the town. Within a few days after the sinking of
the Titanic, a writer commenting on the tragedy
pointed out that the American people lack apprecia-
tion for great inventions. Had it not been for the
wireless, the probability is that the fate of the Titanic
would never have been known.

The inventor should be ready to furnish a written
statement of the advantages claimed for his inven-
tion. If the party approached by the inventor is not
thoroughly conversant with the scope of the inven-
tion and its commercial aspects, these should be
explained.

In order to develop talking points, think on the
following subjects: use, price, quality, color, size,
quantity, shape, style, history of article, manufacture,
equipment, ingredients, public opinion, efficiency,
and distribution. The above features are suggested
in a splendid book on salesmanship by N. O. Shively.

If the article is expensive, it must be shown that
the article is better than the cheaper grade.

A painted article would cost more if painted by
hand than if merely dipped.

The Talking Points of Invention 37

Quantity affects price; if one manufactures in large
quantities, the price will be low.

If the article is designed for many uses, this may
justify a high price.

The ingredients of an article may be varied or few.
The quality of ingredients will determine whether the
price is high or low. Note the variety of the steel or
iron material used in building a typewriter.

An article may be difficult to ship or handle, in
which case the price will be naturally high.

Consider the various processes to which an article
is subjected in manufacture and the cost of securing
raw materials. High efficiency of an article may
either increase or lessen the price. The invention
may save time, effort, or energy. Expert mechanics
may give the article quality and hence fit it for general
use. The article which is faulty and ill conditioned
because of poor materials and poor construction can
never be in universal demand.

Public opinion may cause the price to rise. If an
article is in great demand, the price will advance
accordingly. If the demand is sluggish, the price is
low.

The nearness of the market, the cost of transporta-
tion and the difficulties thereof, ease of storage, all
tend to affect the price.

If an article has a particular size, the size may
determine its practicability and how extensively it
will be used. A large or a small article may be found
more convenient, economical, and practicable.

The shape of an article may permit many uses or
few. It may cause it to be inaccessible, impractical,
inconvenient, or the reverse. The price of an article

38 Sale of Inventions

may make it prohibitive for commercial use. It may
be a luxury and be used by a few; it may be of such
a nature that it can be used by many.

The ingredients may be of such a nature that the
article can be used in all climates and by many or
few people.

The use of an article will suggest many talking
points. People are interested only in the use they
are to make of an article which they consider pur-
chasing. If the machine will do something a com-
petitor's machine will not, feature that point. In
selling office devices, from a pencil sharpener to a
mimeograph, the salesman must show that the article
will save time and energy and that it is worth more
than its cost. Thus take the universally used foun-
tain pen as an example. The following are some of
the talking points:

The fountain pen can be used in almost any kind
of business.

There is a pen to fit everybody's hand.

The fountain pen is a time saver and also an ink
saver.

It does away with carrying a pen and a bottle of ink.

It does not take up much room in a pocket, purse,
grip, or hand bag.

The safety fountain pens do not leak.

Better work can be done with the fountain pen
and in less time.

It does not tire the hand as a straight pen will.

There is always a considerable number of such
talking points. One must know which of these talk-
ing points are most convincing. In writing out the
statement of advantages, be sure to use the trade

The Talking Points of Invention 39

nomenclature so that those who talk the language of
the trade may readily understand.

Do not overlook .the cost and expense argument.
It is the bone and marrow of the proposition. An
invention enters the world's market in close com-
petition with other devices of a similar nature. If it
costs more to make, it will be heavily handicapped
from the start. The inventor will talk against time in
trying to sell it. If it costs less to make, it will have
this additional advantage pulling in its favor from
the start. An inventor must always realize that a
manufacturer is slow to abandon an article which
is giving fairly good satisfaction, where capital is
looked up in special tools and patterns, advertising
matter, and good- will. In the nature of things a
patented article, or even a staple, proprietory article,
has a fixed price and value. An Eastman Kodak is
the same the world over; there is only one quality.
That is not true of sugar, clothing, print goods, sta-
tionery, etc.

Do not ignore the gigantic puU and power of ad-
vertising behind many unpatented things. A new
article, to succeed, must show at a glance that it is
something better. It must have a sufficiently quick
sale. If an invention is better than others, costs
less to produce, and has more talking points, the
dealers will be quick to buy it. Otherwise, possibly
not. It is well to be associated with a manufacturer
who advertises and who has a reputation that it has
cost money to build up; one whose very name is a
guaranty. But if, for some reasons, this cannot be
done, sell the patent to the retailer. Do not ap-
proach the manufacturer at all. Much depends upon

4O Sale of Inventions

what the invention is, and what merit it has. Re-
member, talk profit all the time. What would not
appeal to the manufacturer as a profit may appeal
to an enterprising retailer. Suppose the invention
is a meritorious hairpin. The retailer could buy the
patent, have the article made by contract, and elim-
inate the jobbers and a good part of the manufac-
turing profit, thus having the exclusive handling of
the hairpin in his own city and at the same time licens-
ing its use in other cities. In this way, after public
demand is created and trade in the article is brisk,
the retailer will find public patronage increasing in
other articles he sells. The retailer should be located
in a large city so that the inventor may be assured
of a royalty on the invention from the start.

CHAPTER V

HOW PATENTS EXCLUDE; PRACTICAL
EXAMPLES

A PATENT is made useful by a series of strong
claims. The claims are the most important
part of the specification of a patent and the
most difficult feature of patent work. A claim is
ordinarily that part of the patent which is least under-
stood by an inventor. The popular idea of a patent
claim is that it signifies some special or signal ad-
vantage which an inventor's device has over others.
But this is a wrong conception. A patent claim is
a unit of protection for an invention and defines in
plain terms the amount of protection accorded to a
new invention. The more claims that a patent
possesses, the stronger will be the excluding power of
this patent against infringers, as it is the office of any
single claim to bring out a series of parts related
together in point of cooperation, effect, function, and
utility, or acting in a definite manner. Since some
parts of a device may be infringed or sought to be
used, and other parts not, it is necessary to protect
each part separately.

The whole patent system hinges upon patent pro-
tection of a definite character. The protection is
accorded by the courts and is measured by the Patent
Office. A claim is that part of a specification which
defines what the inventor regards as new over the

4*

42 Sale of Inventions

" prior art." Before any claim can be written and
included in a patent, the condition of the particular
art to which the claim relates must be ascertained in
order to learn what others have done before. Once
a decision is formed as to the breadth and scope of
the invention, suitable language is employed to define
this invention and the result is a claim. A successful
claim writer must be nine tenths a mechanic and
one tenth a lawyer. A successful claim writer must
be a good scientist, mechanical expert, and a phil-
osopher at the same time. A claim is also a unit of
novelty, must contain no hidden meaning, and must
be for a structure which will operate. A sufficient
number of parts must be recited for this purpose,
otherwise the claim will not protect so as to exclude
others from supplying perhaps an obvious omission
and thus making the real invention with impunity.
Every element in a claim is material, and the courts
passing on infringing devices will consider them all
material. A claim is either broad or specific accord-
ing to the nature of the invention and the terms em-
bodied in the claim to particularize the protected
features. But no claim can be so broad in language
as to cover not only every variety of equivalent struc-
ture falling within its terms or scope, but other in-
ventions as well, not similar in principle.

Many patents are issued with bad claims so that
the protection accorded in them is devoid of signifi-
cance. The result is that these patents cannot and
will not exclude infringers and are fit for the waste-
paper basket. The inventions may be excellent, but
the patents obtained to protect them are worthless.
To enable the reader to judge what kind of claims are

How Patents Exclude 43

worthless, some examples will suffice to explain general
principles of patent protection by means of patent
claims. We will take the bicycle as an object lesson
in analyzing claims, and for the moment we will as-
sume that the bicycle is a brand-new device and
never existed before.

A bicycle is a type of road vehicle or conveyance
where power is applied by the feet of a rider to one
of two sustaining wheels. The frame or balancing
member of a bicycle consists of rods, two of which are
in the form of uprights or forks arranged at the ends
of the frame, there being a V-shaped brace connecting
these uprights. Revolvably mounted in the fork
ends of these uprights are wheels which are held in
alignment and journaled upon axles. The front up-
right has its upper portion loosely arranged so as to
turn or swivel in a suitable bearing provided by the
frame, and as the front wheel is mounted in this fork,
means is thus provided for turning or steering the
front wheel. A sprocket gear is secured to the axle
of the rear wheel, and another sprocket gear is at-
tached to a shaft journaled in the lower portion of
the V-shaped brace. A sprocket chain is trained
upon both sprocket gears. Cranks are secured upon
the last-named or front sprocket gear and are ac-
tuated by pedals. The rider is supported on the seat
so that his legs straddle the frame and his feet may
engage the pedals so as to set the chain in motion to
propel the device. By means of the rider's hands engag-
ing the handle bars to direct, guide, and steer the
bicycle and his feet which rotate the sprockets and pro-
pel the device along, the bicycle is maintained under
equilibrium and the frame suitably balanced, in motion.

44 Sale of Inventions

It is proposed to write a patent claim on the bicycle
as described above which should be as broad in scope
as is possible and yet cover an operative structure.
The first thing to consider is, What are the fewest
number of parts which will make an operative struc-
ture in a bicycle? Having discovered these essential
elements, the next thing to do is to combine them in
a way which will bring out their proper relationship.
These elements are to be combined in an orderly, sys-
tematic way in a logical sequence, regard being had
to cause and effect. The mere addition or inclusion
of a number of elements in a claim without placing
those related, cooperating, or coacting together, results
either in an impossible structure or else in an imprac-
ticable device. Note claim:

i. A device of the character described comprising
a frame, oppositely arranged wheels disposed in align-
ment in said frame, a seat on said frame, driving mecha-
nism controlled by the feet of a rider, and means con-
trolled by the hands of the rider for guiding said wheels.

This is a good claim and will protect the bicycle
invention because it excludes any one from making a
vehicle running on two wheels arranged in a straight
line connected by a frame having a seat thereon, and
equipped with foot-controlled driving mechanism and
and hand-controlled guiding or steering mechanism.
It defines a bicycle in good set terms and nothing
else, and states the fewest operative essential parts. It
does not refer to any part of the bicycle specifically,
and whenever the term " means " is used, it is broad
enough to include any arrangement of parts or device
capable of performing the function required. For
example, the means for impelling said wheels (con-

How Patents Exclitde 45

trolled by the feet of a rider) might be pedals and
a sprocket and chain drive, or may consist of inter-
meshing gears, or of depressible actuating means con-
nected by a crank and pitman to the rear wheel, or
any other device, either patented or not, which will
operate, when placed on the frame and in engage-
ment with either wheel, to rotate the latter.

2. In combination, wheels , a frame supported on
said wheels, means for setting said wheels in motion,
and means for enabling the rider to steer the wheels.

This claim is so broad that it covers and defines
not only a bicycle but any vehicle. This makes
the claim faulty, wide of the mark, and invalid as a
bicycle claim, because the wheels are not limited to
two wheels. An automobile with four wheels and a
velocipede with three wheels would both come within
the terms of this claim, because each includes means
for setting the wheels in motion and means enabling
the rider to steer the wheels. The limitation of Claim
i — that the propelling means is foot-controlled and
the steering means hand-controlled — is eliminated
in Claim 2, and while it makes the claim broader, it
either fails to describe or misdescribes a bicycle and
is therefore worthless. It would not be allowed by
the Patent Office, as it does not feature the device
known as a bicycle, and that is what the claim is sup-
posed to do in its application to the bicycle under
consideration.

3. A bicycle composed of a balancing member having
a seat, wheels for supporting said balancing member,
motion-transmitting mechanism for said wheels, and
means whereby said balancing member may be controlled
by the hands of a driver.

46 Sale of Inventions

This is a good, well-laid claim and is very broad in
scope. It protects not only a bicycle but all fair
mechanical equivalents thereof. It would cover a
motor cycle as well as a bicycle, for in both cases a
" balancing member " is included and suggests so
many wheels only as may be arranged to permit the
member to be balanced thereupon. Thus three wheels
could be arranged in alignment, and as in this way
a member or frame would still be balanced, it would
be protected and covered by Claim 3, where Claim i
or Claim 2 would fail to protect this possible structure.
A motor cycle also has motion-transmitting mecha-
nism for its wheels, and while in a bicycle the handle
bars enable the rider to steer and maintain the equi-
librium of the device or frame, in a motor cycle the
stopping mechanism for the device may also be lo-
cated upon the handle bars. So the term " controlling
means " may be broad enough to cover any such
mechanism, as it does not specify any kind of control.

4. A device of the kind described, comprising a support,
wheels mounted in said support, and means for enabling
a, driver to propel and guide the wheels.

This claim is misleading and misdescriptive, as it
does not correctly recite the proper mechanism which
is actually found in a bicycle. It tends to encumber
rather than to protect. It does not enable one to
determine just what a bicycle is as distinguished from
other conveyances. This claim is vague and in-
complete, because the last clause refers to two wholly
unrelated parts of the same device. Propelling the
bicycle calls for one instrumentality, while steering
it calls for another. Two pieces of mechanism should
never be claimed as one piece, and should never be

How Patents Exclude 47

included under the broad term of " means " if their
functions are different. The functions of two pieces
of mechanism are different when one part would per-
form its function just as well as if the other part were
absent and vice versa, i.e., where the two parts do
not cooperate to produce a single Junction. The
mechanism for driving the wheels of the bicycle must
be able to operate whether the device is complete
with a steering mechanism or not. If one mechanism
is defective, the other is not necessarily so. In other
words, in a bicycle there is no single, unitary, or in-
separable means for enabling the rider both to impel
the machine as well as to steer it. One means is
independent of the other and should be included
separately in the claim. The clause should be ren-
dered as follows: Means for enabling a driver to
propel the wheels and means for enabling him to
steer the wheels. The claim should also be amended
to bring out the fact that the support is mounted on
two wheels, as this is necessary to make it refer to a
bicycle.

5. In a device as described, the combination of two
wheels, rods connecting said wheels, pedal-operated
means arranged to rotate the wheels, and means whereby
one wheel may be swiveled.

This is a good claim and is more specific than
either Claims i or 2, inasmuch as it recites pedals
adapted to rotate the wheels, i.e., a particular kind
of propelling mechanism or actuating means therefor,
and also specifies that the guiding or steering is effected
by swiveling one of the wheels relatively to the other
wheel. Note that this claim does not state how the
pedals are arranged to operate the motion-trans-

48 Sale of Inventions

mitting mechanism, whether by means of cranks
secured to a gear or not, or whether the pedals are
mounted on any particular wheel or not. Of course
a velocipede is also operated by means of pedals
and also has one wheel which may be swiveled rel-
atively to the others, and rods making up the frame.
But this claim recites two wheels, and a velocipede
has three wheels. It is easy to balance a three-sided
vehicle, or a vehicle mounted on three wheels, two
in back and one in front, and to allow the front wheel
to swivel. But a new problem is involved in making
two wheels do what it took three wheels to do before.
Therefore this claim is definite, defines a bicycle, and
would exclude others from making an arrangement
covered by its terms.

6. The combination with wheels, of a device for ro-
tating said wheels, and means whereby one wheel may
steer the other wheel.

This claim is defective as being obscure, incom-
plete, and ambiguous. Every element in a claim should
be recited positively and not inferentially; the last
clause intimates that one wheel may steer the other
wheel, yet the first clause does not specify the number
of wheels. It would be correct to say, " the com-
bination with two wheels," etc. This claim is mis-
descriptive of a bicycle, as there is nothing in this
claim to distinguish a bicycle from, say, a toy train
running on tracks. If, however, this claim mentioned
" a frame supported on the wheels," mentioning
two wheels positively, a bicycle would then be sug-
gested even if the claim omits to mention the fact
that one wheel is steered manually or by means of
a person, for there is no reason for so limiting the claim

How Patents Exclude 49

as thus simplified. To do so would be to restrict the
range of equivalents the claim could cover. This is
what makes word play so important in claims. Sup-
pose a vehicle were propelled automatically on two
grooved wheels running on circular tracks, of course
one wheel in following the curvature of the track could
be made to steer the other wheel. By avoiding the
inclusion of unnecessary limitations in this claim it
is broadened in scope so as to include this possible
structure. By amending or revising this claim to
mention the frame supported on two wheels, it will
be seen that the device denned could not be confused
with some part of a machine fixed on a table, etc.
In other words, cured as suggested, this claim would
be broader than any of the previous claims, as it
would fence around a wide range of variations.

7. In combination, a frame including a V-shaped
brace, handle bars on the frame, two wheels mounted in
alignment within the frame, means for rotating said
wheels, a post on said frame projecting above one of
the wheels, and a seat secured to said post, said handle
bars being swivelable.

This claim differs from the preceding claims in
matter of protecting certain details of the framework
of a bicycle set forth; to wit, a frame having a seat
post projecting above one of the wheels and mounted
on the bicycle frame. This supports the rider in
proper position to enable his hands to engage the
handle bars also mounted on this frame and so steady
and properly balance the device. The claim is very
bad, as it would not exclude others from making
either the particular device covered by the terms of
this claim or the device which the inventor evidently

$0 Sale of Inventions

intends to protect thereby. It would drag in, head and
shoulders, many unnecesary parts. The V-shaped
brace is an unnecessary feature in the claim and
is therefore a needless limitation. It is like put-
ting butter upon bacon. It does no good as a pro-
tecting feature, but does a positive harm and is
oppressive. Suppose a different-shaped brace were
substituted for the V-brace by an interested party;
clearly he would not infringe this claim even if other-
wise he employed all the other really essential parts.
Again, why mention that the handle bars swivel
without showing what they swivel, so far as the pro-
tective parts of this claim are concerned? A party
may make the device without the steering handle bars
and assert that as the claim fails to specify any con-
nection between these swivelable bars and the front
wheel, the inventor did not intend to cover a swivel-
able front wheel. The party would therefore make
the front wheel turn and would not infringe this claim.
In the event he does not make either the front wheel
or the handle bars thereon turn, but uses all the re-
maining parts mentioned in Claim 7 above, he would
still not infringe. His just defense would be that
making the handle bars swivel on the frame is either
an inessential limitation so far as denning a complete
device is concerned, or it makes the entire claim cover
an impracticable if not an inoperative device, because
if the handle bars could easily swivel without the
front wheel, it would tend to render the entire frame
unsteady and in fact would prevent the frame being
balanced. In claim writing as in argument, " least
said is soonest mended."

CHAPTER VI
DEVELOPING INVENTIONS

INVENTIONS, as a general rule, have to be de-
veloped. There is a clear necessity for this in
order to demonstrate whether or not the inven-
tion will work, and, if it does, its degree of fitness for
the work intended. This development is a necessity
alike to the inventor and to the capitalist seeking to
acquire an interest in inventions under advantageous
conditions.

Inventors and capitalists should be more ready to
cooperate. The capitalist should join with and en-
courage the inventor. Let him take an interest by
assignment and pay the expenses of manufacture.
Brains and knowledge are valuable and necessary
and are the primary causes of invention, but the
inventor cannot obtain protection and try his in-
vention practically without money. It is a heavy
pull upon the purse. The capitalist should match
the inventor's brain with cash and join hands with
him, not merely as a trial but with a determination
to succeed in reducing the device to demonstration.
If the investor waits until the inventor obtains a
patent and shows the value of his invention, he may
find that the price for an interest in the patent is more
than he cares to pay. Successful inventors have
almost universally had the assistance of capitalists,
not only after the inventor acquired fame, but at

51

52 Sale of Inventions

the time the embryo invention was in a state of un-
certainty.

A model is best calculated to win friends who ap-
prove and who will help financially. The only in-
ventions that count are those that emanate from men
who understand the business. As concerns inventions,
an inventor with a practical demonstrative model
and a manufacturer with the wisdom to back him
with money and faith both offer the best possible
teamwork for success. There are, of course, some
exceptions to making models, as some inventions
cannot easily be experimented upon. Such, for ex-
ample, would be an improvement on a suspension
bridge, a new type of locomotive boiler, or a novel
method of building construction; but as a rule, al-
ways make a model for experimental purposes.

This model should be of a working size and dressed
up neatly, should show all the features of the inven-
tion, should be strong and durable, and should operate
satisfactorily for all purposes of practical demonstra-
tion. It should not be of an expensive kind, because
it may be necessary to add more parts or to entirely
change the fundamental idea of the invention. Let
it remain on the " anvil " long enough to be put in
good trim. The model-maker should have all the
facilities at hand for constructing a neat article, and
when it is done, it should perform its allotted function.
Try it. Try it completely and under service condi-
tions. It will be time well spent. Consider carefully
how it can best be made. After an idea has been per-
fected, an expert mechanic should be consulted to
find out how the model should be constructed. Should
it be cast or forged or stamped? Can it be made in

Developing Inventions 53

a shop or does it require hand work? Is it difficult or
expensive to assemble? Can it be pieced together
when in need of repair?

A model should not depart too far from the speci-
fications of the patent. First send the model to
prospects, then the patent papers, but only after
interest in the model has been displayed. Always
examine whether the patent will protect the construc-
tion as shown by the model. An inventor should
determine whether a patent corresponds to the model
as constructed.

Inventors who have rushed their patent applica-
tions, sometimes depart from their patent in making
their final model to such an extent that their ultimate
construction is outside the claims. There is a case
in which a manufacturer bought a patent based on
the opinion of his attorney to whom he had neglected
to submit his model. This later involved him in liti-
gation owing to this condition developing. There is
no doubt that numerous patents are carefully reposing
in manufacturers' safes under similar circumstances.

Most patented inventions have to go through a
regular process of development. It is so with small
inventions; it is so with large or important inventions.
The Edison lamp patent, for example, did not show
a structure which, as described, was of commercial
value by itself, but it soon became of enormous value
to the public because other inventions were added to
it. The first Bell telephone could barely convey speech.
What difference did it make? The idea was there,
and inside of eighteen months or two years other
improvements were added and we had first-class
telephones. This is often the way in which an inven-

54 Sale of Inventions

tion becomes fixed in form and substance. There-
upon it is ready to form the basis of a manufacturing
industry and to insure the greatest measure of suc-
cess to the inventor. The patent itself does not
create the industry, but the patented thing does.
Why does an inventor expect a busy manufacturer
to be interested on the receipt of a copy of a patent
describing his invention? Can he reasonably be sup-
posed to take the time and sit up nights in order to
analyze a set of patent claims and study out the opera-
tion of the invention from a drawing without a model?
The manufacturer prefers to see the thing itself. He
wants a clear stage before he parts with ready money.
Assuming that everything is in readiness for making
a model, what kind of model should be made? One
that will stand the inventor or his backer the least
expense. Models of small or simple mechanisms, or
perhaps of parts of these mechanisms, are frequently
made at the expense of a few dollars. In many cases
the inventor himself is able to construct the working
model, thus avoiding most of the expense of experi-
mental work. Occasionally a device is so simple
and obvious as to require no work of this kind. As a
general rule experimental work and model making
should be on the smallest scale that will satisfactorily
demonstrate the mechanism. It is almost inevitable
that the new device will require many changes from
the first design and will show many possibilities of
improvement. In model work the usual charge made
is for tune and material. One should choose smaller
shops in preference to larger ones in order to make
sure that the work will receive the individual atten-
tion it deserves. After a working and commercially

Developing Inventions 55

successful model has been made, the next thing to do,
upon finding out the good talking points, is to write
a letter to the manufacturer stating the advantages
of one's invention and informing him that, if he is
interested, a working model will be submitted for
examination. Create commercial interest before at-
tempting to submit the proof of the legal strength
of the invention, if one must take up the negotiation
by correspondence. If one cannot make a model,
or have it made, it is better not to bother with inven-
tions, in connection with which making a model is
the last step which wins.

CHAPTER VII
SUCCESS IN INVENTING

"ITIT THAT are the things necessary to make an
Y/V inventor successful in pushing his invention?
What should the inventor do to overcome
certain drawbacks? Every day these questions loom
up. The answer will be found by gauging the work
of successful inventors whose number is legion. It
is estimated that patentees of the United States have
paid Uncle Sam about $7,000,000 in excess of the
expenses of the Patent Office. This is significant.
The amount earned by inventors themselves defies
belief. How much of this are you getting?

The question is, What is the earning capacity of
the reader's brain? The average man uses only
twenty-five per cent of his brain power. If one
wants to succeed and has courage and persistence,
nothing can hinder him. If a man thinks optimistic
thoughts, nothing in the world can keep him from
being an optimist. Success always means a fight.
" I can't " is not in the business vocabulary. The
only difference between a genius and a failure is that
a genius knows no such word as " quit." The genius
always takes the bit between the teeth. One must
be a bigger man and a better man today than those
who succeeded a generation ago. The greatest and
best things in life do not come by chance or in a

56

Success in Inventing 57

twinkling. These things are always the result of
some effort based on a definite plan.

In these arduous times people must be trained in
order to succeed amidst the concourse of brains.
The work of a new era is now before us. It has been
well said that the great world war was a war of the
scientist and engineer. It was a race of skill between
the inventors of waning nations. And success can
be obtained only where the intellectual faculties are
in a receptive condition.

Suggestion never can accomplish that which is not
backed up by real ability. Will power is the power
eternally to hold on to the right in the face of opposing
wrong, to court success in the face of opposing ob-
stacles. It is the power of eliminating those actions
and desires which are not compatible with future
development and nourishing those which are. That
gives real power to the will.

In anything that one does, the smile and pleasing
countenance carry great weight. Concentration is
the ability to hold the mind on one object to the ex-
clusion of all others. If one desires to influence others,
one must have confidence in one's power to do so.
The extent of one's personality will be determined by
the strength of one's will and the power of concen-
tration. As long as one will continue to drink in
knowledge there can be no blighted hope.

Let no one be discouraged with his present con-
dition. Let his thoughts be hopeful. People, business
firms, are not pitted against the inventor, so he need
not worry about this. No matter how old one is,
things are ripe today for success. In reality, age
has nothing whatever to do with effort or ability.

58 Sale of Inventions

Since, in 1918, the draft age was raised, there is a
movement afloat to boost the man advanced in years
as an instrument in business. Many writers have
taken up the cudgel in behalf of the superannuated
to show that they are, by reason of their experience,
able to accomplish good work in spite of their years,
and much better work than some young people.
Remember that man's greatest work must be done in
later life. It is then that he can profit by the ex-
periences of his youth; but if he lacks the energy,
force, and vitality that would obtain results, his
later life is sure to be a failure. There never was a
better time for men who actually know, to succeed.

Technical magazines are helping. For example, the
Lighting Journal publishes complete monthly lists of
the latest inventions relating to lighting. Interested
firms are going after inventors who have things they
need. A rich concern, interested in a patented in-
vention, is not going to hesitate when it comes to
buying inventions it needs. If it knows of a dozen
men who have been working for years on a particular
invention, — who are working at it from different
viewpoints and going to arrive at the same results
by different routes, — it will buy all the inventions
and not take a chance to find out which is the most
valuable. Such pieces of good fortune are not rare.

Good management of a patented article makes the
person a fitter instrument for success than the thing.
Mr. Edison succeeded in making his invention a suc-
cess, because at the last moment there came capital
enough to him and talent enough to put it forward.
In ninety-nine cases out of a hundred it is necessary
for an inventor to find some assistance outside of his

Success in Inventing 59

own capital. If a man is trained, he will have no
difficulty in doing things for himself, but if not, he
certainly can succeed by finding the right man. Every
man must be prepared for his work; it takes years of
training to do so, but when he is able to use the next
man's skill, he does not need all this training. Mr.
Carnegie frankly insisted that the men who worked
under him were smarter than he; but his keen selec-
tion of men to do the work he could not do as well
himself proved a casting weight and had a good deal
to do with his uplifting. It requires more grit, more
talent, more training, to sell goods today than it
did ten years ago. A good sale brings mutual profits.
A patented article appeals to the modern business
man because of its price-fixing tendency. One half
of those who sell patented goods today, are main-
taining price and find it one of the best things for
their industries that could possibly happen.

When a patented article is taken up for sale by an
enterprising business firm, the primary objective is
to get a secure foothold on the market so as to shut
out not only unpatented articles but patented articles
of rival firms as well. Take the case of the United
Shoe Machinery Company. The reason why this
big concern has developed its large business is that it
makes the best machinery and all the machinery a
manufacturer wants. He does not have to go to this
town or that town and this man or that man to get a
complete equipment. In each shoe town or shoe
center the company keeps a corps of skilled men ready
instantly to repair or adjust any machines which get
out of order so that the shoe manufacturer has to
deal with only one concern. If any machine gets

60 Sale of Inventions

out of order, the company sends a man to repair and
adjust it. It pays them to do it.

There is thus nothing magical or impossible about
inventions. Success means optimism and opportunity
and above all preparedness. Take the statement of
one of the very best authorities, Thomas Ewing, who
until recently was Commissioner of the United States
Patent Office. He says: " With the exception of but
one plant, which has been unfortunate, every man
with whom I have been associated to any considerable
extent in the last twenty years has done well with his
invention. He has improved his position; he has even
made money by the sale of his product or he has
gotten associations that have helped him, and he has
been enabled to develop his patent lines and has gotten
ahead faster and better than he would without them."
Another important authority, Justice Brandeis of the
United States Supreme Court, who was formerly coun-
sel for the United Shoe Machinery Company, stated
that three things are necessary to prosecute an inven-
tion successfully: First, you need a good invention;
secondly, you need ample capital; thirdly, you need
good management. How to obtain all this is what
it is proposed to take up in subsequent chapters.

CHAPTER VIH
TEE DEMAND FOR INVENTIONS

AS stated above, the amount of money to be
made from inventions depends upon mar-
keting conditions and especially upon the
demand for inventions. With so many examples fur-
nished by the experience of enterprising firms, there
is no room today for wrong conceptions about market-
ing problems. Marketing means a lot of money and
the influence of men well up in trade and business.
In the natural order of things inventors are usually
poor business men.

Skill in handling patents counts for more than luck.
Analyzed carefully, successful inventions have simply
been marketed right. The little rubber stopper with
the wire attached to it, which is now used on every
beer bottle, is a good example of fine business man-
agement in the handling of an apparently trifling in-
vention. Public demand for any one's invention
practically regulates its success from a commercial
standpoint. If there is no public demand for it, there
can be no substantial profit or income from it, how-
ever hard people may crack their brains.

The first questions to be considered in demand-
creating are:

1. Is there a demand for an invention or its output?

2. Will the invention do the work?

61

62 Sale of Inventions

3. Will it do it better or cheaper than other existing

devices?

4. Can it be efficiently protected?

Some inventions that do not perform the work
required of them when a patent is strictly followed, can
be made to work.

Then there are questions as to how to market in-
ventions. These are:

1. Shall we sell direct to the consumer by our sales-

men?

2. Shall we sell direct to the retailer?

3. Shall we sell through selling agencies?

4. Shall we sell by mail direct to the consumer?

It is again necessary to urge that the process of
putting an article on the market is not as simple as
may be imagined. It is necessary to create a public
demand before the invention can be sold on any large
scale, and it is necessary to follow up the demand by
supplying the article, otherwise the fruit of the effort
to get it will be lost. The manner of procedure will
depend upon the nature of the invention. After
figuring out carefully the net cost of manufacture
and fixing a reasonable wholesale price which leaves
a margin of profit, the manufacturer must secure
trial orders from various concerns. The inventor
must create the market for his product. He must
not wait for the market to be created for him; other-
wise he will get nowhere.

A very large proportion of the really useful patents
is born of the necessity of manufacturers. They do
not sit down and say, " Now let us invent something";
but forced by the exigencies of business competition,
which bring matters to a crisis, they find themselves,

The Demand for Inventions 63

in order to secure an advantage in their struggle for
the public's orders, compelled to devise means to
make their machines or products better than those
of their rivals. The bigger the enterprise, the more
foresight must be displayed in forestalling the market.
The biggest corporations today have their study
departments, their closed laboratories, where a mul-
titude of inventors are studying fresh problems to
supply the future needs of men. They say this to
their own corps of inventors: " Don't wait for the
future to make itself; mold it ahead of time. Don't
wait for the demand; have the product that will be
wanted, ready in advance." Incidentally, it explains
the attitude of mind of these big men, who are the
fountain heads of business enterprise.

The following is a good formula for determining the
market for the product of a manufacturer: The num-
ber of possible customers times the average sales to
average dealers, divided by the number of manufac-
turers of equal rank, equals the total normal quota
of sales of a particular city for the normal amount and
intelligence of sales effort.

There are two aspects of the question: (i) knowl-
edge of the formula and (2) estimate of the factors
which will supply the data and solve the formula.
To take a concrete problem. Suppose it is desired to
find the number of probable sales of gloves that manu-
facturers may expect to make in a given city. The
inventor will first have to find out the number of
people in the city who are likely to be purchasers of
gloves. This depends (i) on the nature of the article
and (2) on various conditions obtaining in the par-
ticular city.

64 Sale of Inventions

1. Nature of the Article.

A. Whether used by all classes of people.

B. Whether used by a certain class.

C. How often used.

D. How frequently purchased — repeat orders.

E. Whether it is a necessity or a luxury.

F. Whether there is a special season of use.
Gloves as a rule are not used by all classes of people

(A), but by well-dressed people (B) who use them more
or less daily during business hours or when making
social calls, in the company of women, in the evenings,
on Sundays, and on special occasions (C). The aver-
age user will make one pair of gloves last a season,
although others will have several pairs of gloves for
various or interchangeable use (D). Gloves will be
used as an accompaniment of other clothing and so
as to harmonize therewith, sometimes as a matter of
convenience, sometimes as a matter of actual ne-
cessity (E). They are used mostly in the cool season,
infrequently in summer (F).

2. Conditions Affecting the Particular City.

A. Population.

B. Industrial or factory center.

C. Social center.

D. Condition of the working classes.

E. Waterways, seaport, etc.

F. Cost and standards of living.

G. Number of visitors, transients, etc.
H. Intellectual center.

I. Number of office workers.
/. Number of professional people.
K. Tone of residential districts.
L. Transportation facilities.

The Demand for Inventions 65

M . Store service.

N. Prosperity of merchants.

0. Fixed salary class.

If the city is an industrial center and factories are
plentiful, making diversified articles (B), it will reflect
the prosperity of the different classes. Wages will
be fairly high and the condition of the working class
satisfactory or at least normal (D). The workers will
have money to spend, and merchants should benefit
thereby (JV), as should the professional men (/).
Necessities would be purchased first, — for the house,
etc., — then things for personal convenience. This
item would cover clothing, gloves included. In-
dustrial prosperity for the city is one of the factors
which will influence social activities. Thus if the city
is a social center (C), it would react upon the standard
of living of a large class of people residing in the resi-
dential districts (K) whose needs would necessarily
increase and call for many ramifications in store serv-
ice (M). The industrial prosperity would determine
the fortunes of a large class of desk men or office workers
who also have modest social activities, especially the
younger element (7), and it would make in favor of
the security of fixed salaries (0).

If the city has good waterways and is a seaport,
with or without good harbors and shipping facilities,
this prosperity will be reflected by the city. The
number of visitors arriving and leaving the city will
be influenced (G). If the city is an intellectual center
(H)> this will also influence the number of visitors
(G), who are usually well-dressed. This condition
will also react on the merchants and call for better
store service and facilities, better hotel service, etc.

66 Sale of Inventions

It will also affect the cost of living, may increase the
number of office workers, professional people, etc.,
and add to the city's wealth. Transportation facil-
ities in general will influence the price of commodities,
the number and patronage of the stores, the influence
of the moneyed classes, the tone of the residential
district, the number and efficiency of mechanics,
middlemen, working men, etc. By analyzing possible
market factors in this way, the complicated fabric of
a city's industrial, social, and intellectual organization
is unraveled.

Coming back to gloves and considering possibili-
ties and gauging susceptibilities as outlined above, it
will be concluded that well-dressed people may be
found among office workers, business men and mer-
chants, and most frequently among professional men,
among people of both sexes, prominent socially, etc.
Professional people, business men, ladies, etc., will
purchase more gloves than will office workers or
workingmen, as they have more opportunities to
use them. After sizing up correctly as nearly as
possible the advantages any particular city of a deter-
mined population possesses in point of trade, in-
dustrial, and intellectual prestige, the next thing to
do is estimating the possible total number of pur-
chasers out of the total population. For this purpose
use may be made of statistics of the volume of trade,
freight, transportation conditions, ship movements,
government reports, trade reports, trade papers, and
house organs, reports of commercial agencies, travel-
ing salesmen's reports, market fluctuations, news-
paper advertisements, etc. Let us say that a city
of 300,000 inhabitants, having more than a fair pro-

The Demand for Inventions 67

portion of workingmen and a large number of factories,
will furnish a reputed 16,000 (more or less) customers
for gloves in a determined period of time, varying
from six months to a year.

It is now necessary to know how many manufac-
turers are to supply the needs of these customers in
the particular city under consideration. It must be
considered that 16,000 represents only the number
of persons who will purchase gloves and not the total
number of individual sales which will be made by all
the retail stores selling gloves in that particular city.
First, it must be remembered that the approximate
total number of manufacturers making gloves alone
or as a side line is to be found out, and that only a
certain percentage of these will be doing business in
the particular city. In the absence of definite informa-
tion, these active ones will be grouped into members
having equal rank. The following items will tend
to indicate what factors will determine the rank of
any particular manufacturer:

What Determines Rank.

A. The number of traveling salesmen employed.

B. Amount of capital invested in the enterprise.

C. The activity of the sales department.

D. The activity of coordinate advertising depart-

ment.

E. Appropriation to push sales.

F. Efficiency of packing department.

G. Nearness to centers of trade and transportation

facilities.

H. Regulation of the supply of the product.
/. Cheapening factors of production.
/. Maintaining standard of excellence of the article.

68 Sale of Inventions

K. Labor market conditions.

L. Conservative policy of management.

M. Efficiency of office administration.

N. Absence of national or local regulations which
hamper effort.

0. Receptiveness of new ideas, plans, and policies.

P. Corporate connections.

Q. Interests in subsidiary companies and firms,
making items essential to product.

R. Selling vs. production expenses.

S. Constancy of expected profits.

As a rule the number of manufacturers of equal
rank with national sales organizations doing business
in any particular city is more or less known, but the
number of others (less than the total) may be uncertain.
On the other hand, the average sales of gloves to
average dealers, for the period under consideration,
may be determined with comparative certainty, with-
out knowing the total number of stores to be supplied,
so that the latter will be an unknown quantity. An
investigation of the average sales to average dealers
will reveal, let us say, that 150 pairs of gloves are sold
to the average dealer over and above existing stocks,
for the period considered. There may be anywhere
from 200 to 300 stores selling wearing apparel and
articles, but how many actually handle gloves steadily
is not known. We now have 16,000 possible cus-
tomers and, let us say, 40 manufacturers making
gloves. By the formula we will express the equation
thus: 40 : 16,000 = 150: ? In other words, the num-
ber of possible customers, times the average sales to
average dealers, divided by the number of probable
manufacturers, gives the total normal quota of sales

The Demand for Inventions 69

for the city. This is assuming, however, that 40
manufacturers are actually selling gloves in this city.
Then 150 gloves, times 16,000 (by the formula),
divided by 40, makes 60,000 pairs of gloves, which
represents the total amount sold in this city for the
particular period. This may not be exact, but it is
a safe estimate. If 300 dealers sold equal numbers
of gloves, of course each dealer would sell 200 pairs
(60,000 — 300). Now let us suppose that two large
advertising and enterprising glove manufacturers prac-
tically hold the field to themselves and are of equal
rank, say the firms of Meyer and Adler. This is
definite. On investigation it appears that they con-
trol 75 per cent of the total amount of sales, the balance
going to other competitors of varying ranks. Seventy-
five per cent of 60,000 would give 45,000 pairs of gloves
or 22,500 pairs of gloves to each of these competitors
of equal rank. By checking up on incomplete data
it is possible to obtain a satisfactory basis of computa-
tion of volume of sales of a manufacturer's product
in accordance with the laws of probabilities stated
by the formula. The following factors, in one way
or another, have to determine the total normal quota
of sales in any city.
Total Normal Quota of Sales.

A. Number of stores selling the article at retail.

B. Number of sizes, styles, and shapes of article.

C. Number of special brands, which sell well.

D. Amount of stock on hand.

E. Number of repeat orders.

F. Quantity of gloves produced at one time.

G. Number of exchanges.
H. Jobbers' supplies.

70 Sale of Inventions

I. Special cut-price sales.

J. Movement of trade in vicinity.

K. Location of stores.

L. Amount of space for goods.

M . Character of window display.

2V. Special occasion sales.

0. Amount of advertising.

P. Special discount if purchasing.

Q. Number and influence of salesmen.

R. Movement of other stocks.

S. Delivery facilities.

T. Credit department and family accounts.

U. Amount of credit in banks.

V. Volume of general business.

W. New or side line.

X. Profit or loss on periodic sales.

F. Promptness in replenishing depleted stocks.

In its most specific aspect the question of demand
for any given invention concerns the interest of the
consumer, dealer, manufacturer, and inventor in the
order named. The inventor comes last. It matters
not a straw what the popular belief may be. If the
consumer will not buy, the dealer, whether retailer or
wholesaler, will not buy, and if they do not buy,
the manufacturer will not make the patented article,
and the inventor will derive no advantage therefrom.

A brainy producer of a good article believes rightly
that the ultimate result of his efforts is the opinion
the consumer, not the dealer, places on his goods.
The consumer demands that certain attributes,
which are deemed essential by him, be included in
all products, and the manufacturer who refuses to
fulfill the demand under these conditions, even though

The Demand for Inventions 71

he furnishes what he deems to be an improvement,
without first determining how his product will be
received, is taking a chance with fate. The public
are not fools, notwithstanding Barnum's well-known
remark; they are pretty smart. If a man wants to
sell goods to the public, he will find out they know
a great deal about them. The hardware people, the
drug concerns, and other business firms, all have
their meetings. The price-cutting dealer begins his
work the moment the consumers have " cut the ice "
and boosted the patented article so that the dealer
derives a constant patronage and reputation for the
article. The price-cutter always selects the article
which has a reputation at a certain price. If the
article had not been universally sold at the certain
price and were not reputed to be worth the price,
it would not be worth his while to cut it. The article
could never become a drug on the market.

The dealers will insist upon a steady source of supply
of a patented article upon which the consumer has
bestowed his patronage. They will not take it up to
sell unless they are assured of a reasonable certainty of
supply, for to do so would not only occasion expense in
suddenly changing over from their former system of
business, but would also subject them to disastrous
losses in case they create a new demand with their
customers which they subsequently find it impossible
to fill. To create a necessity for an article is a big task.
With some inventions, like typewriters and auto-
mobiles, it takes years, large sums of money and con-
siderable pushing, before they can be considered
staple articles on the market. Then again, a large
number of unforeseen experiments must be made

72 Sale of Inventions

after a device is once launched — changes and modi-
fications are necessary — and these cost money. One
must take this in consideration and provide for it.
The consequences of ignorance in omitting any detail
may mean a failure of the entire undertaking. An
invention does not always succeed in proportion to
its merit; it may fail because of poor management.

The dealers realize that they are the channels of
distribution and expect a reasonable profit from manu-
facturers. This is the ground for attempts at price
fixing on the part of the manufacturer. The United
States Supreme Court, the highest tribunal in the
land, has condemned almost all instances of price
maintenance, whether accomplished by contract or
licenses under patents or copyrights. The courts at
present regard unrestrained competition as a business
necessity. Only comparatively recently have people
thought otherwise. The courts have repeatedly de-
clared it unlawful for trade associates to publish lists
containing the names of aggressive price-cutters.
The direct contract plan has also been discountenanced.
By virtue of this the jobber agreed, in consideration
of being supplied with the producer's goods, to sell
only at certain prices and only to such retail dealers
as were designated by the producer, who required
the retailers who made these contracts to maintain
a standard retail price. So there is nothing to hope
for in the way of protection by direct sale contract.

If legal enforcement of price-maintained contracts
is desired instead of the more effective way, which
consists in educating the consumer to demand articles
of known quantity and fixed price, it should be by
way of straight agency or consignment of goods for

The Demand for Inventions 73

sale where the title to the goods still remains with
the seller or consignor. A direct sale is tabooed.
It is encouraging to note that in New Jersey a statute
has been passed which is broad enough to forbid
price cutting. It is doing a great deal of good. Let
us hope that other jurisdictions will follow suit.

The demand being good and the dealer realizing
the demand, the manufacturer is kept busy producing
the article in quantities large enough to meet the
demand. The manufacturer's problem is to gauge
the public demand in the first place so as to make
the article right. Competition will hit the manu-
facturer of a patented article harder than it will the
dealer who, finding no demand, ceases to order, while
the manufacturer may be well stocked with patented
goods he cannot sell. Competition is always present
and is a good thing in trade. It helps to produce
a good article. True competition exists where one
manufacturer is striving against another manufacturer
to put the best article out for the least money; for if
one dealer has a good article, he compells all other
dealers to put out a first-class article of the same
kind in order to meet competition. If they don't,
they cannot sell the goods he does.

The manufacturer properly considers that inventor
ignorant who knows nothing about market conditions.
When an invention is offered by an inventor belong-
ing to this category, the manufacturer will display
no interest. Among manufacturers who seem likely
prospects for an inventor, are some who try to take
up much of his time without meaning to do busi-
ness. With them he can accomplish nothing. He
must find a way to avoid these and devote more

74 Sale of Inventions

time to better prospects. But the experience a manu-
facturer has had, makes him a good judge of the sal-
ability of an invention. The maker of articles also
knows what position he stands in when it comes to
creating a source of profit for dealers and distributors,
and he is on the lookout for patented articles that will
sell well. Industrial competition is a form of war.

The inventor will now understand that he is in a
position to demand adequate compensation for any
patented article which the manufacturer will begin
to make because of the demand existing therefor on
the part of the consumer and of the distributor. He
should recognize that he, the inventor, is the cause
of it all. If there is likely to be a large and steady
demand, once the manufacturer and inventor have
ascertained this fact and the inventor has several
propositions up his sleeve for disposing of his inven-
tion, a small, steady royalty would be the best mode
of compensation.

If the inventor has more than one opportunity of
placing an invention, he should give special con-
sideration to the subject before deciding which prop-
osition he will accept. He should bear in mind that
sometimes the largest royalty offered may not be to
his ultimate good. Consideration of the question from
an investment standpoint will bring out the principle.

If the inventor considered investing his savings,
he would place them where he would be sure of a
continued payment of interest, even though the
dividend were small, rather than in some investment
which offered larger returns with a doubt attached
as to their continuing at the same rate. A small
royalty offered by a large and strong concern is safer

The Demand for Inventions 75

than a larger one based on hopes and promises of a
party or firm that is not on a sound business basis.
Competition and the possible volume of business have
an important bearing on royalty. Close competition
reduces the possibility of granting large royalties.
A large volume of business works in the same direction.
On the other hand, restricted sales at large profits
should operate to the advantage of the inventor.
The amount of capital necessary to produce and market
an invention also has its influence. The greater the
investment, the greater the risk of the manufacturer.
The inventor is expected to bear a portion of this
risk and burden expressed in reduced royalties.

The inventor must see to it that the patented article
is always kept up to its standard of excellence, con-
sidered from the standpoint of the buyer's expecta-
tions. The manufacturer must produce the article
patented in a condition acceptable to the ultimate
consumer. More than one article has met the test
of acceptability only to fail as a money-maker when
subjected to the test of creating net profits. In
such event the public will not have the opportunity
of purchasing a product, however well it may meet
the demand, unless there is a sufficient margin of
profit between the true cost and the selling price. That
is the only way to prevent the patented article already
on the market from being crowded out by better
articles. Sometimes it is a good policy for an in-
ventor to make improvements in his invention after
he is working his first patent. This will be necessary
in order to keep out others from making these same
improvements and so supplant the inventor in the
good graces of the buying public.

76 Sale of Inventions

There are some places where inventors are so num-
erous that manufacturing industries prevail locally.
The little state of Connecticut, for instance, takes
out more patents than all the southern states together.
Therefore always consider tHe trade zone. Many
businesses find it impractical to attempt to win trade
outside of certain zones and districts. For example,
a manufacturer of stoves has little if any market for
his product in California. Consider also trade days.
There is not a town of one thousand inhabitants in
the country where they do not have specific trade
days, and on those days the dealers will sell many
articles for cost in order to stimulate sales on other
articles. These and other conditions make in favor
of sales and demand-boosting for an article of merit.

CHAPTER IX
THE MARKET FOR INVENTIONS

CREATING a demand has to do particularly
with the selling end of the patented article.
Creating a market, again, has to do with the
feature of mechanical developing as well as selling
this article. This is a practical difference. It will
be found that the term " market " presupposes the
existence of many mixed factors. These must all
be considered separately. The particular and funda-
mental concern in demand creation is consumption,
while the leading feature in market controlling is «
cost. When a manufacturer of an article first puts
his goods out as an experiment, he does not know
whether or not he is going to make money. He may
spend fifty thousand dollars or he may spend five
hundred thousand dollars in supplying these articles
and still make no money. This may be due to the
fact that the article is not good enough for the public.
In other words, the producer may go up like a rocket
and come down like a stick.

Different factories have a different cost for one
and the same article, and the market they secure is
consequently affected. The important item of over-
head factory expense shuts out all other factors in
the estimation of cost and the fixing of price. As
was aptly remarked by Thompson in his able work
on patents, and in an eminent article on factory

77

78 Sale of Inventions

conditions affecting patent conditions, " a study of the
mechanical methods utilized by a competitor in his
manufacturing, as indicated by his product, is more
important than studying his selling methods. ..."
It is also necessary to make a list of the comparative
times necessary to assemble the parts of the new article.
Owing to the constantly increasing cost of manu-
facture, this item is very important. " Remember
that a deviation in order to meet a changed selling
policy of a competitor is a mere detail, whereas a change
in construction to come within a lower cost, discovered
inherent in the competitive goods, after a product
is placed on the market, is often prohibitive, owing
to the expense involved in making changes."

One manufacturer found no profits in running his
business where his cost of selling goods, which were
new to the public and had to be extensively pushed,
was fifteen per cent. While the creation of a really
meritorious invention involves much ingenuity on
the part of the inventor, the successful vending of
that invention often involves ingenuity of even a higher
degree. The personnel necessary to make any in-
vention successful includes not only the inventor
but the jobber and dealer in the world's market as
well. Between them it is a triangular deal. The
jobbers and dealers are the salesmen of the inventor;
they are part of the mechanism the inventor must
use to introduce the goods, educate the public, and
create a demand. These jobbers and dealers trade
in goods the great majority of which are not patented.
They are free goods, and the public has been edu-
cated as to their value. The demand for them is
large and the profits are not great, but as a rule sufn-

The Market for Inventions 79

cient. Competition has been fought to a finish; all
know what it means to cut prices. The maker knows
that if he sells to several dealers in one place and
one cuts the price almost to cost, the other dealers
will " block the line." Profit now is so small as to
become a mathematical point. Then the public
always expects to buy at this ridiculously low price.
As a result the manufacturer will no longer sell to this
cut-rate making dealer, and the other dealers won't
buy. As the manufacturer cannot afford to sell at
the cut-rate price, he gets no more sales. Hence
the better policy is to put a moderate profit on
each article, and by large sales develop returns. In
this way a producer can effectively husband his
resources.

Whenever we think of the market, we think in
terms of competition. It must always be considered.
It is what stimulates invention. As a result of this
competition a superior article is evolved and placed
on the market. A manufacturer must make the
most up-to-date article that he can for fear that his
competitor will discover something that is equally
good or better that does not come under his
patent. Competition is the coping stone of business
prosperity.

The proper time for the inventor to think of the
market is not after he has obtained the patent but
right from the very beginning when he applies for a
patent. The matter must be resolved beforehand.
Before filing an application, it is well to have a com-
mercial investigation made to discover all products
of similar nature which have been made in the past,
and are being made at the time of the invention.

8o Sale of Inventions

This may enable one to test one's construction after
making the comparison. In finding the market,
there is an element of psychology present as to how
the patentee is going to reach the kind of people that
will buy his article, how he can approach them, how
he can get them to pay a proper price. If he does
not succeed, the invention will be stillborn, and he
will have nothing to fall back on.

Above everything else comes the cost of introducing
an article into the market. Things are easy after a
market has been obtained. The question is, How
much effort, time, and money will it cost to secure
this market?

This is a matter which cannot be determined be-
forehand. The cost of starting works, if they are
necessary, or of fitting up machinery for manufactur-
ing, or of altering such already fitted and similar
charges incidental to production must be estimated.
Next the cost of diffusion of knowledge of the inven-
tion or production to the ultimate buyers or con-
sumers, officers, travelers' expenses, advertising, and
salaries of officials enter into consideration, these
being all the necessary expenses of manufacture which
must be borne by the selling price of the product.
They represent money going out, whether the inventor
engages in the business personally or seeks others
to do so under license from him. On the question of
price it is necessary to figure first the cost of the com-
modity. After taking that into consideration, one
must figure the reasonable profit that the retailer
should make and then figure one's prices from that
end and figure them as low as one possibly can so as
to keep one's head above water.

The Market for Inventions 81

The fluctuation of wholesale and retail prices in the
market is a matter which cannot be foreseen. It will
serve as a guide to mention that

5f£ articles, retail, cost 35 to 4Off per dozen wholesale.
10^ articles, retail, cost 60 to 90^ per dozen wholesale,
articles, retail, cost $1.75 to $2.25 per dozen

wholesale,
articles, retail, cost $3.50 to $4.50 per dozen

wholesale.
$1.00 articles, retail, cost $7.50 to $9.00 per dozen

wholesale.

The gross prices are approximately as follows:
On a 5f5 article, $4.40 to $4.80 per gross.
On a iof$ article, 7.20 to 9.80 per gross.
On a 25^ article, 21.00 to 27.00 per gross.
On a 50^ article, 42.00 to 54.00 per gross.
On a $1.00 article, 90.00 to 108.00 per gross.

It is usually customary to give a discount of from
five to ten per cent if ordered in gross lots. Terms of
settlement show considerable variation in different
lines and range anywhere from one to eight per cent
for cash in ten days with extension of credit from thirty
days net to ninety days " extra dating."

The mere invention of merchandise is ordinarily
almost a minor consideration when put up against
the selling and marketing of merchandise. There
are thousands of inventions in this country which
are very valuable indeed, but which are never com-
mercial possibilities because of the selling problems
involved. We have seen that it depends virtually
upon the consumer to create a demand for a patented
article; in fixing the price at which the article must
sell, regard must be had to the price it is fair for the

82 Sale of Inventions

consumer to pay. It is easier to induce the con-
sumer to pay a higher price than the dealer, and once
the consumer desires an article, the dealer will be
compelled to stock it.

If an invention actually possesses superior merit,
there is no necessity for figuring excess profits. A
good run of purchases is assured, and things take a
favorable turn. Some manufacturers of meritorious
articles " cash in " on the market by taking advantage
of the steady sale of their article. Daniel Kops,
maker of the celebrated " Nemo " corsets and the
inventor of many patented improvements in the
corsets for which his concern is famous, stated that
he did not charge the public an extra cent for his
inventions. His cost calculations consider only ma-
terials, labor, and overhead charges. The advantage
of holding the market by a superior grade of corset
accounts for this.

There are not over twelve thousand retail stores
of any importance in this country. Many things
invented are of a nature demanding an outlet through
the stores of the country in order to be commercially
successful and in order that they may be placed con-
veniently before the public so that people may have
the largest opportunity to avail themselves of the
improved device, whatever it may be. A merchant
can determine his percentage of profits only when he
counts up sales, and it is through a host of dealers
that he can do so.

There are certain factors which enable a manu-
facturer to hold the market once it is obtained. Ex-
tensive advertising counts. It helps to fix the price
of a good commodity. Every woman who goes into

The Market for Inventions 83

a store is thoroughly enlightened upon the cost value
of, say, the Bissell carpet sweeper. This is where
she, the consumer, is protected by the fixed price.
The good-will created for a business also counts. It is
the experience of a large number of firms, manu-
facturing patented articles, that an established trade
in a patented article will continue to be profitable
for some time after the patent expires. With many
enterprises it is necessary not to stop with the ac-
quisition of a single patent or invention. It is nec-
essary to acquire quite a few patents. It means
protection against competition and keeping up the
standard of excellence of patented goods. When
thinking of causes for deduction in estimating the
value of inventions, one must not forget that the
employment of the invention may entail infringement
of previously existing patent rights the acquisition
of which will be necessary for industrial protection.
Any royalty paid must, of course, be deducted in
estimating the cost and value of a new patent. It is
necessary to mark out a course and to go right after
trade all the time. This can be done through sales-
men or through sales letters. The latter are to be
preferred. The average man has no faith in testi-
monials unless it gives proof of the statements made.
A well-written sales letter is the equal of the salesman
at any time, and it has the added advantage of getting
in when and where the average salesman cannot.
The salesman has only one opportunity to give
his talk, while the letter has many; the salesman
finds the prospect gone under press of business, while
the letter can afford to wait until he returns; the
salesman makes but one single impression which

84 Sale of Inventions

grows weaker as time passes, but the letter continues
to influence, gaining momentum as the days go by.
Over $106,000,000 is spent every year in direct mail
advertising, and this includes letters. Advertising
has overcome insuperable obstacles. The retail dealers
of this country in all lines spend through the pages
of their local papers millions of dollars in advertis-
ing, much more money than is spent by national
advertisers.

After much thought, labor, and experiment the
manufacturer will arrive at a satisfactory price for
the new patented article. After more labor and
large funds expended for correct methods of merchan-
dising, dealer service will have been established. The
dealers are now supplied and are doing a good service.
Now comes the iniquitous price-cutter, the bane of
legitimate profits. Price-cutting should be curtailed
until it is harmless. The price-cutter, as we have
seen, reasons that if he advertises a well-known
patented article that sells regularly at $3.00, for
$2.00 or $2.25, the public is likely to give him credit
for selling all other commodities at equally reduced
prices; here is where he counts upon benefits. It is
known that price-cutting has driven from the market
many an article of the highest merit. It is evident
that if the manufacturer of a patented article does
not fix the price on his commodity and if dealers are
permitted to cut it, the final outcome will be the
selling of goods at such low prices as to destroy all
profits for the legitimate dealer. He will never be
able to weather the storm. Price-cutting especially
concerns itself with new, superior articles, because
their merit means a steady demand and the price-

The Market for Inventions 85

cutter destroys the profit end of the new article for
the maker.

It is more important to hold business after it is
once obtained than to merely get new business. Price
maintenance is one way. Sales may also be stimu-
lated in new articles by issuing trade coupons. Some
firms have obtained conspicuous success in intro-
ducing new products by the distribution of coupons,
sometimes in connection with a sampling campaign.
Great care should be taken to see that these coupons
get into the hands of the actual prospects.

A chain is no stronger than its weakest link; there-
fore a business firm manufacturing patented goods,
that has no market for surplus goods, cannot survive
in times of emergency. A patented article is good
the world over, and if there is a local or national market
for it, there must surely be a foreign market for it.
Even if the home market be disturbed, there is no
reason why the foreign trade in the article may not
be brisk. What an increased foreign trade means
to the manufacturer, to the farmer, to the railroad,
to the merchant, and to shipping is often underesti-
mated or entirely unappreciated. Thus, upon the
outbreak of the European war the price of cotton
declined enormously, to a point almost below the
bare cost of production, and thousands of planters in
one entire section of our country found themselves
not only deprived of their profits but actually facing
financial ruin. Merchants and banks that had ex-
tended credits to the cotton growers were confronted
by an equally serious condition. The whole situation
had been brought about merely because a part of the
European market for cotton had suddenly been cut

86 Sale of Inventions

off. Finally men got together and adopted measures
for bettering the foreign markets for offensive and
defensive purposes.

That is one example. During the same period the
wheat-producing belt of the country found itself in
the midst of unprecedented prosperity. In spite of
the fact that a bumper crop — the largest in the
history of the United States — had been harvested,
prices went to levels hitherto unknown. This was
because some of the great wheat-producing sections
of the world had suddenly been cut off from their
usual markets in western Europe and the demand
for American products had increased.

The western farmer, the grower of wheat, the mer-
chant, and the banker in that part of the country,
found out as never before how important foreign trade
was to them.

To the manufacturer, however, foreign trade means
something more than an increased demand for his
products. There are few factories in the United
States that are producing anything like full capacity.
The average factory is probably producing, in normal
times, at not more than seventy-five per cent capacity.
If the manufacturer could find a steady and reliable
outlet for this additional twenty-five per cent capacity,
he would be able not only to increase his profits
greatly, but to reduce his overhead considerably.
It would enable him to sell his products at a lower price
in foreign markets or perhaps both at home and abroad.
It would give him a good foothold on the market.

By enlarging the market the manufacturer is enabled
to maintain a steady demand. It should be recognized
that a widely distributed foreign trade means greater

The Market for Inventions 87

average stability. In most countries of the world pros-
perity or depression depends to a considerable extent
upon agriculture and the state of the market for
agricultural products. But it is also true of every
line of manufacturing. Suppose that a manufacturer
of agricultural machinery marketed his goods only in
the United States. If there were a single bad year,
when crops were not good and market conditions were
not favorable, he would probably find his outlet for
agricultural machinery considerably curtailed. Again,
suppose that manufacturer sold his machinery not
only in the United States but in Canada, South America,
South Africa, Australia, India, Russia, etc. It would
be quite unlikely that there would be bad harvests,
bad crops, or bad market conditions in every country
in the world, and perhaps, while the United States was
experiencing a depression, Argentina or Russia would
be enjoying prosperity. It is a case of not putting
all one's eggs in one basket.

Patented articles will reach a high level of sale and
distribution after the present war, both at home and
abroad. But this country will rise to the occasion
amidst the fiercest competition for international
trade. After the war Europe will have to retrench.
She will be loaded with tremendous war debts, and
this will mean increased taxes, which will bear heavily
on business and industry. Practically all of the ele-
ments entering into the cost of production will be
raised. Good-will, which means only the advantage
of a going concern, is already practically lost to many
of the European belligerent nations; the labor and
supervising force in Europe will be considerably
reduced and its efficiency materially impaired. The

88 Sale of Inventions

men who fought in the armies of Europe are not the
unemployed or the unemployable, but are the very
flower of the industrial and commercial enterprises.
Many of these men will not return to their places in
the factories or at the bench. Many of those who
do return will be maimed and diseased, while others
will have lost the " work spirit " that is such a large
asset of the European worker. In the meantime
capital has been withdrawn from productive uses, and
all capital expenditures and capital investments have
been reduced in efficiency. Capital will need renewals
and repairs, which have not been made; therefore the
demand for capital will be large at the end of the war,
while the amount of it on hand will be small and ex-
pensive. Interest rates will be necessarily high.
The elements entering into the cost of production
will therefore be raised, and it is pointed out that
prices cannot, even for a short period, be substan-
tially lower than the cost of production. As a con-
sequence of this, prices will be high, higher than ever
before in Europe, and they will approximate the
level of prices in the United States more nearly
than ever before. The European nations will not
be able to export to foreign markets and supply their
own markets at prices as much lower than ours as they
were able to do before the war, and the American
firms should be able, therefore, to retain a very large
proportion of our trade, holding a great part of the
new trade that we obtained during the progress of the
war. This is what appears to be the outlook in Europe
when peace again prevails.

European nations will not be able to do more after
the war than they did before. Domestic wants will

The Market for Inventions 89

have to be filled before the European nations can
seriously undertake foreign trade. No matter how
much they may want it, no matter how much they
may need it, they will first have to set then* own
houses in order. The war will be followed by a period
of intense competition. As a result the most efficient
producers and distributers will win.

After the war everything will be under tension.
Scientific research and invention will be carried on
in a manner never before contemplated. Already Eng-
land, Canada, and our own country are planning to
get a good part of the resultant trade. The nations
will vie with each other to see which will obtain trade
supremacy. During the war this country made a
great increase in its exportations of manufactured
goods, and there was a noted decrease in importations.

In view of what seems likely to come, manufacturers
of new and patented articles should protect then-
salable articles in foreign countries at the earliest
moment. If they fail to do so, they will be under
a marked handicap against powerful organizations
existing to push the sale of domestic articles made by
the firms doing business in the foreign countries them-
selves. A leading banker has recently stated that
when peace comes a new shuffle of international rela-
tions will result because of the new tariffs and trade
treaties and in view of the existence of the strong
working organizations among the industries in foreign
countries. But no matter how formidable these
organizations may be, patented articles may, if of
superior merit, oust their products from a profitable
market. A distinct advantage may be gained by
obtaining patent protection abroad. Further, by

QO Sale of Inventions

seeking patent protection on a wide scale rather than
in the limited manufacturing field, the inventor would
have a certain definite control of foreign markets;
also by negotiating for the working or sale of his rights
with manufacturing countries, he could protect him-
self advantageously as to the export of the patented
devices from those countries or perhaps retain certain
fields for himself. Thus he could keep his home
factory fully occupied all the year around in the
case of those devices which have a season trade in the
United States, but which other parts of the world
would require at a different period of the year.

In order to avoid making a fatal mistake in taking out
foreign patents many American manufacturers test
out an invention before even applying for a patent
in the United States. To do this, however, the article
often has to be sold, or published in trade journals,
and this publication, at a date prior to the filing of
a foreign, say a French application, would result in
the placing in the hands of a competitor a certain
means of defeating and defying the French patent
which might be granted on such an application. An
instance of this, well known to the rubber tire trade,
came before the courts of European countries some
years ago. In this case a full description of the in-
vention had been given in American trade journals
which reached foreign countries before the filing of
the application, and when suit was brought under
patents granted there, the defendant produced the
American journals and was able to defeat the patent
and continue manufacturing the device which he had
put on the market.

In considering the profits to be made in the sale

The Market for Inventions 91

of patented articles in the open, competitive market
it is necessary to add that it is easier to make profit
by offering several articles to the dealer than to ap-
proach him with but one line of goods. He may
not be interested in purchasing some articles, but
he may be interested in buying others. In the end
this will represent profit. Generally to establish a
reputation on a single article of merit and then to
follow this up with other products is, everything con-
sidered, the easier course.

It seems that the majority of concerns which are
now selling groups of more or less related products
began with a single product or a single assortment
and added others later. The Stewart- Warner Speed-
ometer Company, as its name indicates, began its
career in the national market, with a magnetic speed-
ometer. It now handles warning signals, tire pumps,
vaccuum-feed systems for gasoline, and other auto-
mobile accessories. Perhaps the most common method
of introducing a new product in a group is through
the specialty salesman calling upon the trade and
taking actual orders which are filled through the
jobber. As a rule the specialty salesman devotes
his attention to the new product and does not inter-
fere with the work of the regular sales force that
handles the established brand. By adopting a conserv-
ative policy any manufacturing firm will be able to
buy up good patents on simple contrivances that it
would pay to make as a regular or as a side line. When-
ever this can be done to advantage it should be done.

CHAPTER X
PATENTS AS PROPERTY

f | ^HE possession of a patent does not assure, of
itself, financial independence to the inventor,
but, other things being equal, it will make
money quicker when pnce on the road to success
than any other species of property. Freedom from
competition or an exclusive control or monopoly is
the desideratum of the business world everywhere.
The proper protection of a new business is of vital,
everyday importance, and the best protection is
universally recognized to be that secured by means
of patents. Patents enable poor men to succeed where
everything else fails. Mines and oil wells are be-
coming scarcer every year; there are few which remain
undiscovered. Real estate takes an inside knowledge
of conditions which none but men who give the subject
deep study can hope to acquire. Taking all things
into consideration, patents are today the greatest
source of wealth.

However this may be, the invention or product of
the inventor's brain must be adequately protected
by letters patent in order to give rise to interest among
capitalists and financial backers. Probably only those
who have seen the great disadvantage of assigning a
patent or an interest therein or in literary property
on a contract for future payment can fully realize the
consequences thereof. The title to a patent is not

92

Patents as Property 93

to be compared with the title to real estate, because
a patent is intangible property and therefore something
which creditors cannot seize. Houses or farms may
be taken and sold on mortgage, but this would not
be possible with the species of property characterized
by a patent. One could take a mortgage on a patent,
but it is not practicable. The need of the right kind
of protection is paramount in order to shut out com-
petition. Unless an inventor has an exceedingly in-
teresting invention, something above the average,
he may not awaken the interest of an investor. In
the use of an invention of ordinary merit the in-
vestor may reason: " What's the use of setting my
patent attorney to work looking up the state of the
art on this invention when he is very likely to rind
similar patents and possibly one that may dominate
it? I won't go to the trouble and expense." Not
every good patent is as " good as gold."

The importance of stimulating protection for new
and meritorious inventions is gaining ground every
day. It is significant to note how some of the founders
of our country viewed patent protection. In 1742,
when Benjamin Franklin invented the Franklin stove
or, as it was sometimes called, " the Pennsylvania
fireplace," he refused to accept a patent on it saying:
" We enjoy great advantages from the inventions of
others, so we should be glad of an opportunity to serve
others by an invention of ours." That may be true,
but it did not prevent an unscrupulous London manu-
facturer from making some slight changes on the
Franklin stove, getting a patent on it, and making
a large fortune from its sales. This is as true as the
dial of the sun. Still Franklin was too shrewd a

94 Sale of Inventions

business man not to know that if a manager is to
give his time to the operation of a business, a demand
for reasonable salary and compensation is fair. His
deficiency was in not recognizing the services of in-
ventors as entitling them to compensation. Experi-
ence has shown that the best compensation is by
means of patents. This is the only view which squares
with the facts. Nowadays people are more enlightened
in matters of patent protection. A large number of
investors, acquainted with patent rights, expect broad
patents on the articles they are asked to manufacture.
While no person can safely guarantee a patent, as the
United States Patent Office does not do that, still
the inventor, by taking all the necessary safeguards,
can fortify himself in the possession of a good patent
by taking the precautions outlined in previous chapters.

CHAPTER XI
INVENTIONS AND INVESTORS

HAVING considered the factors outside the
merits of an invention which determine the
success thereof, it will now be convenient
to consider the details which guide the inventor in
finding, and in closing with, investors interested in
or likely to become interested in his invention.

It is first of all necessary to know what the attitude
of the prospective investor is likely to be, so as to
come armed with the desired information. Salesmen
always say that guessing the attitude of those they
visit is the hardest part of the game of " landing the
prospect "; accordingly, a few pointers on this matter
will be welcomed. The investor expects information
from the inventor who wishes to dispose of his inven-
tion either outright or conditionally, because the
probability is that most of this information will be
needed and, when needed, " like the Texan's pistol,
it is needed badly; in fact it must be had."

The majority of investors have neither the time
nor the ability to make an extended investigation of
the inventor's proposition; they wish to get all the
particulars at once. If one can present these force-
fully, one is safe in assuming that the investors will
at least consider any reasonable plan. Every enter-
prise should be investigated. The title to a patent
is a very important thing. Every real estate title

95

96 Sale of Inventions

is carefully searched before any deed is passed. It
practically is the same with an invention; the title is
the first thing that has to be searched. Do not
hurry the investor. Do not burst like a thunderbolt
upon him. Many inventors allow no time for manufac-
turers to consider their invention and the methods
by which a novelty is to be made to pay.

In order to be at ease with the investor, whom one
addresses orally or in writing, one must understand
certain features of the investigation the investor will
want to make. One should come primed with vital
facts. Ordinarily, the investigation runs along general
lines, whether the plan will be to sell an invention
outright or get capital to start an industry to work
the invention in which one is to obtain an important
interest. The incentive for purchase on the part of
the investor is profit, and in any event he has to con-
front the market conditions already explained. So
some questions one will be expected to answer are:

1. Is there a sufficient and profitable demand for

the output?

2. Will the output be sufficient to supply the

demand?

3. Is the output of the proper quality to meet the

demand?

4. Can the product be turned out at a figure that

will make operations profitable?

5. Is competition to be encountered?

Some few enterprises are fortunate enough to have
no competition. Usually, however, the competition
is more or less severe. How much investigation is
necessary depends upon the number of conditions
which are known. The question of obtaining a patent

Inventions and Investors 97

should hardly enter into consideration at all, for it
is assumed that a patent has already issued.

But should one want to start out in the manufacture
of an invention and aim to obtain capital, then one
must be prepared to deal on equal terms with the
investor; one's knowledge should be coextensive.
One must be able to talk or find some one who is able
to talk effectively, as most likely the investor will
want to talk to the inventor personally or to his rep-
resentative. The investor will be throwing out hints
on a variety of subjects like location, rents, fixtures,
amount of equipment, advertising, buying, selling, col-
lections, bookkeeping, business forms, credits, etc., and
will be asking repeated questions to learn about one's
ability and business experience. The inventor should
show that he realizes the importance of good adver-
tising and of buying the equipment and stock
cheaply.

If one has a meritorious article, he must not be timid.
An investor may not be talkative and may think
deeply. Sometimes it will be a good plan, in ap-
proaching manufacturers, to submit all references
cited against a patent application by the Patent Office
, examiners. Too much attention cannot be paid to
this important feature. The manufacturer will be in
a position to arrive at a clear understanding of the
mechanical advantages of an invention and will be
better able to gauge market conditions.

Mr. Francis Cooper, in his invaluable book, which
every inventor should read, entitled " Financing an
Enterprise/' goes exhaustively into the inquiries
which an inventor or investor may have to answer
concerning the joint enterprise. No matter how

98 Sale of Inventions

small one's efforts toward getting the invention
" placed " may be, or how ramified one's scheme or
plan is, — no matter how far one may have advanced
with any undertaking, he must be prepared to answer
any or all of the following questions: It will be well
to make a memorandum of them.

A. Nature of the Enterprise.

1. Is the basis of the enterprise sound?

2. Is the business of the enterprise profitable

elsewhere?

3. What competition or opposition will be

met?

4. What peculiar advantages does the device

enjoy over others?

5. Can it be conducted profitably under exist-

ing conditions?

B. Plan of Organization of a Corporation.

1. In what state organized?

2. What is the capitalization?

3. Is the capitalization reasonable?

4. Has the stock been issued in whole or in

part, and if so for what, — for con-
sideration, money, or services?

5. Is the stock offered for sale paid in full

and nonassessable?

6. Has any of the stock preference?

7. Is any stock unissued or held in the

treasury?

8. Who has stock control?

9. Are the rights of small stockholders pro-

tected?

10. Are there any unusual features in charter
or by-laws?

Inventions and Investors 99

C. Present Condition of Enterprise as to Property.

1. What property or rights are controlled?

2. What is their value and how estimated?

3. Are these properties or rights owned or

held under lease, license, grant, option,
or otherwise?

4. If owned, are the titles perfect?

5. Are there any encumbrances on the prop-

erties or rights?

6. If not owned, are the holding papers in

due form?

7. If not owned, are the terms of holding

reasonable, satisfactory, and safe?

8. In event of liquidation, what would the

property be worth?

D. Present Condition of Enterprise as to Operation.

1. What operations have been or are now

being carried on?

2. What have been the results?

3. What difficulties, if any, have been en-

countered?

4. What is the demand for the product or

operation of the enterprise?

5. What is the present status of the enter-

prise?

6. Are proper books kept?

E. Present Condition of Enterprise as to Finance.

1. What are the present assets and their

actual value?

2. What debts, claims, fees, rents, royalties,

or other payments, or obligations are
now due or are to be met and
carried?

too Sale of Inventions

3. From what resources are these to be met?

4. Who handles the money and under what

safeguards?

5. What are or will be the running expenses,

salaries, etc.?

F. Management: Directors.

1. How many members are on the board?

2. Who are these members?

3. What are their past record and present

business status?

4. Who are the active members of the

board?

5. Who are the inactive?

6. Are meetings regularly held and attended?

7. Who compose the executive committee,

and what are its powers?

8. Are the directors stockholders and, if so,

to a material amount?

G. Management: Officers.

1. Who are the officers?

2. What are their previous records?

3. What are their present special qualifica-

tions?

4. What compensation do they receive or

are they to receive?

5. Are they able to work together without

friction?

6. Are they interested in the enterprise be-

yond their salaries?
H. Management: Plan of Operation.

1. What is the general plan of operation?

2. What special reason, if any, led to its

adoption?

Inventions and Fnvestiots

7. Disposition of Money Asked for.

1. Does the money from the sale of stock go

into the treasury of the company?

2. If any does not go into the treasury of the

company, to whom does it go and for
what purpose?

3. Of money going into the treasury, what

proportion goes into active development
and operation?

4. What part goes to pay off existing debts,

obligations, and claims?

5. What part, if any, goes to pay for pro-

motion expense, commissions, etc.?

6. How is the development and operating

money to be applied?

7. Is the amount asked for sufficient to ac-

complish the desired results?

8. Will it place the company on a self -sup-

porting or profitable basis?
J. The Proposition.

1. Is the general proposition a fair one?

2. Is the price of stock or bonds reasonable?

3. How do these prices compare with any

former prices?

4. If common stock is offered, do preferred

stock, bonds, or other profit-sharing
obligations take precedence and to what
amount?

5. What reserve of profits will be retained

before dividends are to be declared?

6. If preferred stock is offered, is it cumu-

lative, does it vote? When is it redeem-
able and at what price? What sinking

Sale of Inventions

fund provision is made for redemption,
and are peculiar provisions attached?
Do any bonds or other obligations take
precedence of the preferred stock?
7. If bonds are offered, what interest is paid,
and when and where? Upon what prop-
erty are they secured and when and
how are they paid? Is the trustee or
trust company of repute? Under what
conditions are the bonds foreclosable?
When or how are they or may they be
redeemed? Are there any other se-
curities taking precedence, and is there
any peculiar provision in the deed of
trust?
K. General.

1. What is the previous history of the enter-

prise, or the property or undertaking
on which it is based?

2. If inventions enter prominently, what is

the previous record of the inventor?

3. By whom are the statements made, and

is the person making them reliable?

4. Are there any contracts or obligations not

now effective by which the enterprise
will subsequently be affected?
In the last analysis, securing money to finance a
business depends upon the confidence one may inspire.
The investor reasons: " Can you, as the chief personal
element in your proposition, be relied upon absolutely,
and does your business judgment warrant trust? "
The factors controlling one's chances of getting cap-
ital are: (i) Personality; (2) Assets; (3) Proposition.

Inventions and Investors 103

Personality means the power to inspire confidence.
By that is meant not only appearance and presence l
but character and ability. Commercial bankers con-
sider personality as the greatest of credit factors.
Banks consider ability as relatively essential; in-
tegrity as absolutely essential; property not necessarily
so.

The assets an inventor has show his ability to pay
back should he contemplate a loan.

Is the enterprise based on a new invention or an
untried scheme, and does it involve no new principle?
Is the risk great? Do the chances for profit warrant
the risk? Competition exists wherever the new enter-
prise is not based on an untried scheme. Invention
may dispel competition; therein lies its true value.
The propositions which have the best chance to secure
backing are those that supply a want widely and
generally felt.

When negotiations are reached bearing upon the
compensation of the inventor, the manufacturer's
chances of gain come first. The first thought the
manufacturer will try to impress on the inventor
during negotiations for a royalty agreement is that
whatever amount is decided on, it adds just that
much to the cost of the product. That is a fact and
must be admitted by the inventor. During negotia-
tions he must prepare for the rocks ahead. However,
if a device costs less than a competing article or can
be sold for more, it is admissible for the inventor to
claim his share of such saving or extra profit. One
must be on the lookout for capitalists who are likely to
give help. Money is plenty, but brains are scarce.
Deal only with earnest men, do not fool away precious

104 Sale of Inventions

time with men who do not mean business. Again,
it is necessary to remind the inventor that the moment
he gets his prospective investor to make an initial
outlay to start a business manufacturing his invention,
he is fairly on the road to success.

Get the investor to buy, contract for, or pay for
something which the business must have, which he
can see is necessary and the road will be much easier
than if followed in any other way. A small corpora-
tion is apt to prove very unruly. The profit is not
large enough to divide among several, and the result
is, there is a continuous scramble for the ascendency
in management and salary. In starting a factory
and forming an estimate of the needed working funds,
the amount should be made as low as possible, taking
into necessary consideration the fact that a manu-
facturer is entitled to credit at the bank. The in-
vestor's first question is almost sure to be about the
stock and material and the "next about the fixtures
necessary. Any of these expenses, rent, material,
fixtures, machinery, and tools, are absolutely neces- ,
sary to the starting and proper conduct of a manu-
facturing establishment.

CHAPTER XII
INVENTOR AND CAPITALIST

fTT\0 a large number of inventors, raising capital
and meeting capitalists is more or less of a
bugaboo, an affair fraught with difficulties,
a drawn game. Of course, it is no simple task to
obtain financial assistance; yet raising capital is only
a question of a little study, application, and patience.
It is not new. To many people it is a thing shrouded
in mystery; but when considered properly, it is found
to be much simpler than learning a trade and far
easier than saving money out of ordinary incomes.

There is plenty of capital waiting for profitable
employment. If the demands of labor are profit-
destroying, the manufacturers will take more and
more to machines. They will shrug their shoulders
at the personal equation. There are capitalists an-
xious to get in touch with good ideas. It is neces-
sary to proceed in a businesslike way to succeed.
That many things lie unheard of for years is due simply
to the lack of means of bringing inventor and capi-
talist together. The man who spends his life devising
and inventing may yet hope to obtain assistance from
expert manufacturers and salesmen. The nearer one
is to his home city in marketing an invention, the
greater the chances of avoiding fraud, the better
facilities he will have for succeeding and for investi-
gating conditions. If the reader knows how, he can

105

106 Sale of Inventions

utilize the intelligence and labor of others. After
all, the ability to do that is what distinguishes the
work of the boss from the work of his employees.
One must cultivate a successful attitude long before
success will become his share. John W. Gates, who
piled up millions of dollars in various enterprises, said
that " many a man has lost a fortune by passing up
an opportunity of getting into a great enterprise
during its infancy."

Mutual benefit is the keynote which rings the
loudest in the endeavor to bring the inventor and
capitalist together. The manufacturer must have
the inventor to make money and vice versa. Neither
the capitalist nor the inventor is satisfied with his
income. The majority of people have realized that
the growth of income is not keeping pace with the
growing cost of living. The man who never tried,
never helped himself or any one else. The individual
inventor with ideas can readily find a hearing if he
has anything worth while. The inventor of a good
thing has an easier and better opportunity to market
his patent than ever before in the history of the world.
Yet, strange to say, capital is getting more conserva-
tive. Investors are waiting for the right kind of
invention. They will be glad to take it up and market
it honestly and enthusiastically.

It must be conceded that the way the capitalist
sizes up the opportunity of investing in patents is not
the way the inventor sizes it up. The manufacturer
views the situation from the standpoint that he is
risking real money, should a later noninfringing inven-
tion be brought out by a competitor and supplant
the invention he is considering, against what he usually

Inventor and Capitalist 107

considers only time and material expended by the in-
ventor; or putting it in another way, the manu-
facturer believes he is risking money made in the
past from prior business enterprises — a definite thing
of known value — against the inventor's submitting
an invention the value of which is undetermined and
therefore an indefinite thing. He figures that an in-
ventor may be a genius, but he is running up bills.

Show the capitalist where his benefit lies, that the
risks he encounters are only those incidental to any
commercial undertaking, but that the benefit may
be greater in the long run. The capitalist knows
what it costs the dealer to do business. He knows
that it costs the dealer from twenty to forty per cent
and on an average above thirty per cent for overhead
expenses before a profit steps in over and above the
cost of goods. The profits made on some staple
articles follow: Hats 54%, shirts 333%, raincoats 37%,
wrenches 42%, Welsbach mantels 33%, Yale locks 50%,
glue 25%, pencils 45%, ink 22%, filing cabinets 50%,
tennis balls 100%, films 33%, stoves 50%, shaving
sticks 27%.

It is gratifying to know that men with capital have
more confidence at present in proposed inventions
than in the time of Murdock, the inventor of artificial
lighting by gas. Sir Humphry Davy, an inventor of
no little nerve himself, the one who devised the miner's
lamp, asked Murdock if he expected to use the dome
of St. Paul's for a gas holder. Sir Walter Scott made
many clever jokes about it. Wollaston declared that
they might as well try to light London by a slice
from the moon as to send the light through the streets
in pipes. The modern business man is compelled

io8 Sale of Inventions

to adopt new ideas all the time. He does not affect
to see fancied spots in the sun. Changes sure to
occur in the business world make it necessary that
men should at all tunes have in reserve some dennite
plans of action in the event of disaster. An invention
in the possession of anybody is this stepping-stone,
an unworked mine. Many are they who have capital
to invest but know of no paying investment.

The claim of inventors for special consideration is
well recognized to-day, and it is known that they are
among the greatest contributors to the world's progress.
Thomas Edison said some years ago that he thought
it was time that, in this country, the same brains
and genius should be applied to selling and distri-
bution that have been applied to invention. He
made the remark: " Why don't you fellows who
are selling goods invent something."

How far a capitalist will go in helping an inventor
depends upon the measure of confidence inspired by
the inventor. The old complaints, " It takes money
to get money " and " I never had a chance," are an
old song; money is waiting for investment. It can
be raised by any business capable of creating profits.
There is no use fencing with the question. The
burden of proof is in the inventor; if he has a propo-
sition of merit, he must show that it has merit. The
inventor must plan, study his business, and take an
active personal part in securing the confidence that
will alone insure success. It is necessary to cater to
the desires of the capitalist and to view matters from
his angle. Let the inventor place himself mentally
at least in the position of the investor and view his
expectations through his eyes, taking due considera-

Inventor and Capitalist 109

tion of his standpoint and telling him he is expected
to reciprocate.

Gain the good-will of the capitalist. If one has
reached the point where one assigns an interest in a
patent, or whenever one has a consultation with a
manufacturer about an assignment, one should during
the conference explain the legal provisions. This will
result in the agreement or compensation. As long
as he understands these provisions, he will defend the
agreement when he talks the settlement over with
his friends. He will live up to his end of the agree-
ment, for then there can be no misunderstanding.
There will be no jarring of interests. One must not
overlook his own interest. Once a business is
started, to work a good invention the investor should
take such steps for the safety of the business as may
be necessary, such as obtaining a lease of the build-
ing, having the validity investigation of the patent
conducted, etc.; but he should not bother with this
personally; he will be interested in developing the
invention, in seeing it made. The inventor's position
should be that of superintendent with a salary at the
start. This is even more important than being the
president or business manager.

The manufacturer is expected to take the risk.
According to the nature and importance of any pat-
ented article that seems to be good, a greater or less
sum is spent. The secret of winning capitalists on the
part of the inventor is taking a risk. A capitalist is
expected to do so, so to be consistent, one must do so
himself. All that is expected is to place an effective
advertisement for capital. Perhaps ten million people
in the last ten years have considered advertising as a

no Sale of Inventions

means of securing capital. How could they avoid
it, since the evidence of what others do is constantly
before them? But to " consider " was as far as they
ever went. Why? Because of fear, ignorance, stingi-
ness, — mostly these. It is strange, yet surprisingly
true, that a man in the full possession of his senses
can let a ten-dollar note stand between him and suc-
cess. He believes, no doubt, in advertising and that
it pays others, but he cannot see how it can ever
pay him.

Why not? A newspaper page is no respecter of
persons, so why should not one's own " ad " be as
profitable as that of other people? A man will try
to get out of his rut; he believes that advertising can
help him; he actually sits down and figures out the
cost, but being controlled by just one figure, he cuts
down the length of the " ad " until it fails to be ef-
fective. He keeps chopping out more and more
words until finally he inserts three or four lines and
expects to pull $5000. All this is nonsense.

However, if the great truth were known, it would
be found that nine million out of ten million people
never get so far as to write the " ad "; so tight is the
human purse string. This very tendency keeps mil-
lions out of the running. But let it be remembered
that if it is so hard for one to part with a little money
for advertising, how much harder must it be for an
investor to give up a great deal of money for a similar
reason. It is diamond cut diamond. Therefore it
will be necessary to put out a decent sized " ad " if
one puts out one at all. Do not be afraid of a ten
or twenty-dollar bill when it comes to advertising for
capital. If one keeps at it he will win out, — will

Inventor and Capitalist in

give commands to others rather than meekly take
them. The whole question of self-confidence lies
in getting the first few replies. Practice on these.
There are enough probable promoters. No class is
so anxious for new and attractive propositions as
that composed of wealthy men. They live by the
labors of others and wish to continue doing so. This
applies all the way up from the man who has a thou-
sand spare cash to the one who has the coveted million.
Above everything else, let the inventor be true in
his statements concerning the construction and opera-
tion of his invention. The prospective investor will
hold him to his statements. A written statement
will often be required of an inventor over his own
signature. This report will many times be found of
material assistance. A decided difference will some-
times be noticed between the verbal statement and
the one to which he is willing to subscribe his name.
Excessive claims, verbally stated, are usually tempered
when written.

CHAPTER XIII

OPPORTUNITIES FOR INVESTMENT AND
FACTS ABOUT INVESTORS

'"TTMHS chapter is especially concerned with invent-
ors who are abreast with the best information
on business and who have allowed no oppor-
tunities to slip through their ringers. Other chapters
will be devoted to the treatment of subjects intended
to make the mechanic-inventor conversant with the
business end of selling inventions. However, every
patentee should carefully consider the facts contained
in this chapter. Getting capital is not the easiest
thing; one must employ shrewdness and discretion.
The investor must be made to have confidence in the
inventor.

As to the nature and characteristics of patent oppor-
tunities, it may be said that if one advertises for capital
properly, he will obtain prospects. By advertising,
people know what is what. The better portion of the
middle class includes those who usually answer ads
for capital; they are the most desirable. They may
just have reached the point where they see the need
of more money, where they could better their standard
of living with a bigger income. So they are precisely
in one's own position from the money point of view.
The inventor wants money to use; they have money,
but want to make more. Every man of means is a
fit object of approach on the part of the inventor.

112

Opportunities for Investment 113

The average man does not object to making more
money, but he must be shown how. He must be
given reins for his imagination.

Find out why the prospects ought to buy. Never
approach a prospect without considering these ques-
tions: " Why should this prospect buy my goods?
Of what value will they be to him? Will he be bene-
fited by making this purchase? Will it be to his
best interest to buy? " It is a great truth to realize
that the average financial men of good standing are
ready to help the inventor and give him capital, but
they are not enthusiastic. They are waiting to receive
with open arms the inventor with something of money-
making value, but they want to be shown. They
want to be somewhat sure so as not to squander a
fortune. They have plenty of wherewithal, but they
will consider no project which is on a sandy basis.

Of course there are men who are blind to real op-
portunity. Many investors fail to recognize a good
opportunity. They are water-logged. We know of
a man who, in the early days of the telephone, was
offered a quarter interest in the patent for $1500. It
is reported that the rights for the whole state of New
Jersey were offered to another man for a mere nominal
sum. But investors are becoming more diplomatic
in distinguishing between good and fatal proposi-
tions. They know which are likely to have a run of
fortune. Many a good patent has gone a-begging or
has been lost to persons first approached for the sole
reason that they had but an insufficient acquaintance
with the subject of patents and were generally unable
to take the proper initiatory steps of investigation or
were unwilling to incur the expense to do so. The

H4 Sale of Inventions

present book has been prepared for just such persons.
It is necessary to open their eyes.

Big men do interest themselves in inventions. One
of the largest capitalists of Wall Street, a banker of
nation-wide fame, has interested himself in a score
or more new inventions. One of them was a Thermos
bottle, and seven or eight were electrical inventions
of extraordinary character. A certain railroad presi-
dent of New York interested himself in making steel
rust-proof. A new organization for producing com-
pressed gas names as two of its directors the heads of
two of the greatest industrial trusts in the country.
So it will be seen that if men of large means are at all
interested in an undertaking, they usually take it up
hi its entirety and finance it either alone or with their
associates. They are willing to come in for a share of
the inventor's " luck."

The smaller the manufacturer, the better must be
the merit of his goods and the keener his interest in
patented inventions in order to gain a real advantage
over his larger rivals. But degrees of merit will count
with the big investor, if there is enough in it for him.
Most men of means expect to get a controlling interest
in a new undertaking. This does not mean that the
inventor is to be frozen out, but simply that the in-
ventor must give capital a good return, as it may
mean the turning point in his career. A manufacturer
may not care to bother about giving an article a better
form 01 appearance, but he will be instantly inter-
ested in adopting labor-saving machinery in his plant
to counteract rising cost. The article turned out
may be the same or better, but there is a change on
the method of production which appeals directly to

Opportunities for Investment 115

the pocketbook of the manufacturer. Such inven-
tions always pay in the end. Labor-saving processes
of demonstrated value and efficiency are what all men
are lying in wait for, especially if the cost of replace-
ment is slight compared with the value of machinery
to be discarded in favor of improved machinery. No
manufacturer will put an extinguisher upon projects
to reduce the cost of producing an article.

Give facts to the investor. One must talk profits,
but one's estimate of profits must be conservative, in
keeping with the ordinary everyday experience of man-
kind. If one's figures are conservative, the investor
will respect one all the more, and one will be in a fair
way to succeed. Nothing goes without capital in
the industrial world. Capitalists, recognizing this,
are able to command the situation over the inventor.
This is true as long as an enterprise is unsettled or
unproved, while capital is of an established and known
value. Be sure that if the investor does invest, he
will part with the least amount of money to do busi-
ness. Capitalists are usually able men of affairs.
If one writes to manufacturers for financial assist-
ance, one must remember that they are usually experts
in their line. If the invention has merit, it ought to
succeed. Although business men are often obtuse in
seeing a good thing, and lukewarm in acknowledging
it, as a rule they will seize upon anything of true value
to them, by which they can derive some advantage over
their competitors. It is not usually advisable to
mention price in the first letter.

If one receives answers and arranges for an inter-
view, it is necessary to bring the letter along for iden-
tification and as evidence of power to act in the matter.

n6 Sale of Inventions

In the case of many firms, callers may mean intrusion
on the busy hours of a busy man. The inventor
should himself suggest that the manufacturer or cap-
italist investigate his proposition. The intelligent
investor will want to submit the prospectus offered
him to the examination of men qualified by experi-
ence and study to talk intelligently about it as a
commercial proposition. Investors who have lost
money on inventions before, have a rule and here it
is: " Never pay any attention to what the inventor
himself has to say." Do not expect the investor to
know much about a new proposition. Leave the
door open for investigation. As a rule the inventor
has spent months if not years working out the fortune-
producing details of his plan or scheme to get the
most out of his invention. It has become his pet
scheme. But remember that as yet the investor is
not imbued with this enthusiasm. It is absolutely
necessary to interest him further.

Before placing an " ad " in the paper for financial
assistance or writing letters to those who may be in-
terested, it may be well to eliminate the money man
indirectly if one can; if not, let him go ahead. The
nature, character, and salability of the patented article
one wishes to manufacture will determine this, and
also whether one will want many or a few to help in
pushing it.

A loom that costs $20,000 to manufacture cannot
be sold as if it were a breakfast food. There may be
only fifty possible buyers in the country. Leasing
is best adapted as a business method of placing a
complicated machine on the market. Still there are
some who will not consider the lease of an invention.

Opportunities for Investment 117

As a rule the United States Government, the biggest
of contractors, will not pay royalties on inventions.
It insists on owning its own machinery. Few in-;
ventors grow rich on mere royalties alone. The
inventor can agree to sell his invention below cost,
provided the buyer purchases another unpatented
article from him on which he does make profits. To
get the most out of any invention, one must become a
manufacturer. That is the secret of the success of
Edison. His method is that adopted by most knowing
patentees. The presses used in the Government
mint for coining metal are produced and sold by their
inventor, Oberlin Smith. In Pawtucket, R.I., is
a prosperous plant built by two inventors of success-
ful metal-shaping machinery. The instruments used
in the telephone central stations to record the dura-
tion of a conversation were invented by a man who
is president of the company by which they are made.

CHAPTER XIV

THE PRESENTATION OF THE
INVENTOR'S PROPOSITION

NO one can overestimate the importance of
this subject. There are quite a few ques-
tions which the inventor must decide for
himself before preparing a prospectus that will explain
all the details of exploiting an invention. The in-
ventor should make up his mind whether or not he
possesses the requirements of a salesman who could
sell the invention when it is manufactured. If he
can sell it himself, he need not be bothered with the
trouble of properly presenting any proposition in the
formal manner to be discussed hereafter.

It is best to be able personally to look after the
details of making and selling a patented article. As
an inventor, a man has certain strong advantages over
all others. In fact, a man will not ordinarily get
success out of doing a thing as other people do it.
Inventors know this, and that is why they have done
otherwise; that is the reason they took to inventing.
After letting it be known that he is an inventor and
has a meritorious article, a man should have no more
difficulty in getting an interview as a salesman than
as a promoter of his own invention. But he must
come up to expectations. He should bear in mind
that he does not usually have to combat the untract-
able and stubborn opposition which an ordinary sales-

118

Presentation of the Inventor1 s Proposition 119

man has to overcome in order to get an interview with
a business man to sell him something. He does not
have to hammer out his way.

The preceding chapters have shown that it is the
consumer who will make or mar one's chances of
creating a market for a patented article and, what is
equally true, that one has got to see to it that one's
invention is used. An unused patent will bring in
nothing unless by luck some person notices it. What
is worth doing is worth doing well. It is necessary
either to start a business oneself for making and selling
a patented article or else to get others to do so. But
one must know what he is doing before he starts.
If he bases his experience upon ignorance, he gets no
results; if he bases his experience on some knowledge,
he gets some results. But if one bases his experience
upon applied knowledge, there is no limit to his suc-
cess. There is then no chance to run up against failure.

Some lines of business call for a wide range of knowl-
edge and ability which no single person can combine.
For example, the owner of a manufacturing plant,
may have expert knowledge of factory management,
but he may be weak on sales organization. The in-
ventor should take no chances. If his business ex-
perience is not sufficient, those who know should
help him.

The inventor who has secured his patent has less
difficulty in disposing of his invention than the in-
ventor who has not reached this stage. His plans
are not mere tea table talk. However, as soon as
a successful model has been made, his chances have
increased. Money will then be easy to secure, be-
cause if the invention has merit, only the business

I2O Sale of Inventions

risk has to be considered by the investor. Thus
armed, the inventor is able to meet the investor with
composure; he can put a good face upon the situation.
To be sure, his patents are running out against him,
but a moderate delay is not serious. At this stage the
inventor may commit a grave mistake. If he begins
the construction of tools and machinery, he is leaving
the field of invention and invading the domain of
business. He must then be very sure that he has the
ability and means to carry the enterprise through the
financial success. If he has not the money, he com-
mits his worst mistake. The business cannot stand
still; it must either go forward or backward. Rent
is running, bills for labor and material must be paid,
general expenses are mounting. Under these condi-
tions business men will look upon the enterprise as
a failure.

Having decided to enlist capital and the cooperation
of the proper men to push the invention of merit,
and having advanced far enough with it in the esti-
mation of himself or others, whether of the Patent
Office or among the consumers, manufacturers, or
sellers, the inventor needs a prospectus, either elabo-
rate or simple. This prospectus represents his battery
of talking points arranged strategically so as to " pull "
with his prospects.

Theoretically, a plain, honest statement of the facts
and conditions, free from honeyed words, color, or
prejudice of any kind and coupled with a reasonable
offer, ought to get the money needed for a good enter-
prise. Occasionally it will, but in ninety-nine cases
out of a hundred it will not. Such a presentation
lacks attractiveness; it is a mere random shot. Capital

Presentation of the Inventor9 s Proposition 121

is timid and must be reassured. If this is not done,
capital usually betakes itself off to some other enter-
prise, perhaps not so good but more attractively pre-
sented. The statements, however, while enthusiastic,
should not misrepresent. An inventor is justified in
emphasizing the good points of his invention and of
setting them forth to the best advantage. He is
also justified in showing why weak points are not
fatally injurious. However, he should not state
hopes as accomplished facts so as to lead investors to
make false conclusions. He may state possibilities
and beliefs as strongly as he wishes, but must not
shoot with a long bow.

The majority of inventions to be financed are very
inadequately prepared for presentation, due to ignor-
ance or unwiUingness to bear the expense or trouble
involved. In framing the proposition, good common
sense, judgment, and business ability can be em-
ployed to advantage. To properly set forth an in-
vention to a manufacturer or purchaser it is essential
to show:

1. Its advantages over well-known devices in the

art to which it appertains.

2. Its cost, based if possible upon experience or

taken from quotations given by reasonable
parties for its production by the dozen, hun-
dred, gross, or thousand, as the case may be.

3. The profits to manufacturers, wholesalers, and

retailers.

4. The market to be supplied. This is determined

in accordance with the nature of the inven-
tion, — whether it is an invention useful to
both sexes, to children alone, or only to men.

122 Sale of Inventions

The prospectus should be put into the right hands
for perusal. One may be fortunate, indeed, if one
secures a good manager, for a most important essen-
tial successfully to finance an enterprise and keep up
the spirit of the personnel is efficient management.
The undertaking may be meritorious, the money
supply may be more than adequate, but without good
management failure is almost assured. A good man-
ager is not usually curtailed by a lack of funds. He
can take his stand upon effort. If the enterprise is
yet to be financed, the employment of a manager
known to be competent and successful is of material
assistance in securing funds. But even if one cannot
enlist his service, his testimonial as to the merits of
an article will carry much weight. If the manager is
to give his time to the operation of the business, make
his compensation liberal.

There can be no question but that a prospectus is
needed. A picture never sold a piece of property
except at a ridiculously low price. Accompanying
the copy of patent there should be sent out to manu-
facturers a statement such as has been outlined above.
If one can arrange for the prospects to come to see
him, his prospectus will serve him in good turn.

Each prospectus should contain an estimate as to
the probable demand for the articles or goods, the
cost of the furniture and fixtures, and the probable
expenses, sales, and profits for one or two years. One
should put down every item one can think of.

The presentation of any enterprise which is well
founded is either public or private. A poor pros-
pectus is certainly worse than none. It should be
well gotten up and artistically printed. Then it

Presentation of the Inventor's Proposition 123

will " take." In some of jthe largest cities there are
bankers and others who make a specialty of pre-
paring prospectuses. A good short prospectus of three
or four pages costs at least twenty-five dollars and
may run as high as fifty or a hundred dollars. It is
usually possible to tell about how long a prospectus
should be. The prospectus writers will not only get
up the prospectus, but will also very often suggest
other material and papers necessary for an effective
presentation, and give other useful advice. If the
prospectus is to be printed, the professional writer will
take care of these details. In a private presentation
this is unnecessary. Red-ink, capitalizing, and scor-
ing prospectuses are helpful if not carried to excess.
Legal cap paper is to be preferred when the pros-
pectus is to be typewritten. The paper should be of
good quality. Do not give carbon copies of pros-
pectuses to important men. A prospectus should be
tasteful and striking in appearance.

Do not begin a prospectus with the organization
data of the enterprise or corporation but with some
attractive matter of real interest. Sometimes the
names of the financial backers are the most import-
ant items to state in the prospectus. Make the sub-
ject of the prospectus interesting and readable. State
all the important facts of the undertaking, unless some
are omitted purposely to be presented in other ways.
(See investors' questions beginning page 98.) The
presentation, however, should not be too full. Simply
state enough facts to show the real value of the enter-
prise. The strongest appeal and most convincing
arguments should be marshaled at the close of the
prospectus.

124 Sale of Inventions

To arouse interest is not hard. With a good propo-
sition there is no such difficulty. We shall speak
briefly of a public presentation of a prospectus, because
that is something the inventor cannot safely attend
to himself; it needs the services of a skilled promoter
or one versed in such matters. It is necessary to send
out a good deal of printed literature. The financial
statement may appear in a separate paper which
covers also the financial details of the company. The
original patent papers, with verified copies of possible
assignments, contracts, etc., accompany the pros-
pectus; also a validity report. The opinion of the
patent attorneys through whom the patent was ob-
tained, would also be of some importance. If the
invention is being exploited by a going concern, this
fact should be adequately stated. If the enterprise
has proceeded beyond the experimental stage, this
should appear. If the enterprise has been profitable
for a number of years, a statement showing the receipts,
expenditures, and net profits should be prepared, and
the prospectus should bring it out clearly; moreover,
it should be verified by the certificate of an auditor.
The nature of the trade in patented things should be
explained and the reason for believing that the revenue
therefrom can be increased.

CHAPTER XV
METHODS OF MAKING SALES

A CONSIDERATION of plans and methods
for perfecting a sale of a patented invention
or otherwise disposing of it is now in order.
It is evident that any method of disposing of one's
invention presupposes the existence of agencies and
parties interested in the pushing of inventions. The
easiest way in which to cooperate with these agencies
will engage our attention first. If the inventor is of
a scientific turn of mind and young, training in the
higher branches of mechanical application and re-
search, which at the same time assures reward for
invention, is the sine qua non. Unfortunately there
are few agencies where men may be trained to invent
and where their inventions are taken up and pushed.
One must attain success by regular stages. But
during the war a good beginning was made. Canada
stands first to-day among countries whose citizens
are red-blooded enough to try new inventions. It
is not surprising, therefore, that the Canadian Parlia-
ment recently appropriated many thousands of dol-
lars to establish the Bureau of Industrial and Scientific
Research. The plan includes the selection of uni-
versity students who show an aptitude for investigation
along certain lines, allowing them $600 the first year
and $750 the second year. Subsequently they may
either continue their investigations at college or be

125

126 Sale of Inventions

transferred to industrial plants to make practical
application of their ideas.

One's article must be of great merit in order that
one may be in a position to choose any of several
plans, some better than the others. It is compara-
tively easy to get mechanisms to produce an effect,
but it is difficult to devise the best mechanism for the
purpose, the simplest mechanism, the most direct-
acting, the mechanically proper mechanism. A nearly
perfect invention will bring other inventions to a
full stop.

Recognizing the fact that the hardest part of the
task of introducing the invention into favorable public
notice is to get the thing used and tried, personal
demonstration is suggested. Many articles, such as
toilet preparations, smokers' articles, etc., may be
demonstrated in store show windows, either in depart-
ment stores or elsewhere. In this way an invention
may be put in large letters before the public.

Demonstration is also a good policy whenever it is
proposed to show the merits of any small article, —
what it does and how it does it. In all such cases,
what counts is the exhibition of the article to crowds
of people who watch the exhibitor's movements in
the window and concentrate upon the particular article
he demonstrates to the exclusion of other articles or
things. In a department store there is usually a large
number of things which attract the observer's atten-
tion at the same time. But out in the street the ob-
server has his eyes receptively open to what the dem-
onstrator is exhibiting. An appreciation of differences
will be keener.

The reader may know quite a few articles which

Methods of Making Sales 127

have been started fairly on the market in this way.
An inventor of a novel shaving brush, having a soap
fountain as a portion, demonstrated it by renting
the windows of the best located druggists in several
cities in succession and exhibiting the article in the
show windows before large crowds of people. The
arrangement he made with the owner of the drug
store was mutually satisfactory. The article was
one of merit, and the druggist recognized this merit.
The thing was sold over the counters in the drug store
and from the very start was a great success. Many,
spurred on by the demonstration, purchased the
article. Selling such articles almost at cost is often
a good way in which to boost the sale in the beginning.
One then depends upon the continued use of the article
by the purchaser and its recommendation by him for
ultimate profit. The recommendation of a satisfied
user is a big boost for any article. This opportunity
of exploitation should not be allowed to lapse.

If any one has started a business of his own for
making and selling his invention, and wishes to gain
notoriety by leaps and bounds, let him exhibit his
invention at an Industrial Exposition. Hire a booth
and place suitable display cards for public inspection.
There are certain trade exhibitions or expositions, as
they are called, held periodically in different cities where
various devices are advantageously displayed. It
is very effective as a direct means of bringing the
merits of patented articles before the attention of a
large number of likely users and is an easy way to get
a footing.

In other words, the inventor must use his best
business judgment, the same as he would if he were

128 Sale of Inventions

engaged in any mercantile activity. If things look
a little promising, newspaper advertising should be
used. As the sales increase, this may also be in-
creased. Great care should be used in selecting the
newspapers. Consult an advertising man about this.
Thus by proceeding cautiously, one step at a time
on the right path, the inventor can eventually build
up a lucrative business, a business that will be prac-
tically a monopoly. Sometimes we have seen, as in
the case of a new food cereal, that the way to start
a market for an article is to give away some free samples
of it. The newspapers can be used for free reading
notices. In the smaller towns of the country the local
newspaper publishers are eager to print all the news.
Consequently, when one of the residents of the town
gets a patent, the publisher will usually be only too
glad to print news articles about the invention. All
this goes to advertise it. In fact, it is the very best
kind of advertising. It should be obtained even if the
publisher should require pay for it, for the chances
are that other newspapers will copy the article and thus
spread the news of the invention broadcast. News
will spread about the merits of the device, if it is
what it is claimed, and reprints may be as quick as a
lamplighter in bringing prospects.

When the inventor finds himself in a position to
dispose of his invention outright or on a royalty basis
and when he can show that the success of his invention
is assured and not merely something problematic, then
"feeling out the pulse" of the buying public is the next
best plan. It requires no trick of fortune to do this.

If the device is very simple in its construction, a
number of articles should be made and, if possible,

Methods of Making Sales 129

sold to the most prominent people at hand who would
have use for them. After they have used them, the
writer should visit them in person and endeavor to
get written testimonials endorsing the article and
setting forth its advantages. By using a little di-
plomacy he can get the desired testimonials. These
should be printed in a neat small circular. In this
circular, give a clear, concise description of the article
together with good cuts showing it. State the price.
Too much care cannot be taken with the printed matter.
In most cases it is best to engage a competent person
to prepare the copy. Neat letter heads should be
printed, also envelopes and labels. By sending out
circulars in this way, following them up with a personal
canvass of prospects, the inventor can gain some idea
as to the reception his invention is to have at the hands
of the public. If the results flowing from such steps
should prove encouraging, the inventor should not
permit the hope of great and immediate gain to over-
come his good judgment. Otherwise he may fish
in troubled waters. He should exercise his enthusiasm
in his invention, but in the expenditure of money he
should be extremely cautious and ever bear in mind
that, for the present at least, he is simply feeling the
pulse of the public and that it would be well for him
to wait and consider before becoming heavily involved.

One should pay much attention to the letter heads
and to the form and appearance of the sales letter he
sends out to influence people. One should use only
the best paper and get the printing done well. Use
plain English words. Every letter should be clear,
courteous, to the point, and should meet one's wishes
as to fullness. When one writes the sales letter, he

130 Sale of Inventions

should not give the idea from the tone of it that he
has something to sell; he should not let his prospect
know that he is simply after his money. Make him
forget there is a cost attached. Use a little persua-
sion and tell him that he needs the new article and
show him why. Always talk for his interests, never for
anybody else's.

Again it is emphasized that, if practicable, it is
always better to exploit an invention through a new
concern than through an established manufacturer.
As experience has shown, one can obtain much better
terms in this way, because, with a manufacturer's
firm, the invention is only one of its interests and is
apt to be neglected, or otherwise pass out of one's
hands.

An inventor may dispose of his invention by straight
assignment, by royalty or license, by geographical or
territorial rights, or by shop rights.

The straight assignment of the whole right in a
patent for a cash consideration is a simple matter;
but the assignment of undivided interests and the
granting of territorial rights have sometimes caused
the parties concerned endless trouble, especially when
they have stood behind a screen. An assignment of
a patent becomes necessary when one sells an inven-
tion outright. This is an excellent plan if the inven-
tion is good and admits of being sold outright. By
this plan one cannot realize as much as one can by
remaining interested in the invention and making
part of the compensation contingent upon success,
because the large risks taken by the manufacturer
necessarily require a large return. The article the
manufacturer buys to-day for $1000 might be sold

Methods of Making Sales 131

by him the next year to another manufacturer for
$10,000 and by the latter in the following year to a
third manufacturer for $100,000. It shows the great
and rapid increment of value attained by patents as
the sales under them increase.

The assignor of the assignment is the party making
it, and the assignee is the party to whom the assign-
ment is made. To give the purchaser of a patent
legal title, the patentee is required to sign a deed of
assignment. This is usually prepared at the expense
of the purchaser and has to be registered in the United
States Patent Office. The patentee should be cautious
in signing the deed put before him, as the wording
may commit him to guaranties which he did not
intend. The assignment should state whether it
covers all the patent rights of the invention in the
home countries only, or those in all foreign countries
as well; also, whether the rights conveyed pertain
to all patents for it or merely to the particular patent
recited; also whether the assignment covers all im-
provements on the invention and how far these im-
provements are to be included.

Suppose the subject related to a paper box making
machine. It should be clearly understood and stated
whether the assignment covers merely the patent for
the machine then pending or for other substitutes and
divisional patents as well, and if it covers improve-
ments; also whether by this term is meant merely
improvements coming under and dominated by the
claims of the patent, or all improvements in that type
of paper box machine only, or improvements in any
type of paper box machine, or improvements in all
box machines, whether for paper boxes or metal boxes.

132 Sale of Inventions

Failure to mention these features may lead to
quarrels and to expensive litigation. To protect the
assignee, the assignment should state that the assignor
is ready to execute such new instruments as may be
found necessary to carry out the expressed intent of
the original assignment.

By means of an assignment one may dispose of the
entire interest or title in a patent, either for the entire
country or any part thereof; but when one leases
the use of an invention, he is not granting away the
title at all. We are now merely discussing the formal
aspects of transfers of interest in patents. Soon we
shall approach the question of what actually goes to
the party to whom a particular transfer of a patent
will have been made.

Few inventors realize the advantage which leasing
an invention possesses over a direct transfer of title
by means of an assignment. By this plan the in-
ventor agrees with the manufacturer to take a per-
centage of his profits in consideration for transferring
his patent rights. A cash sum may be paid in addi-
tion. The royalty may be reckoned in many ways;
it may be a flat sum per article — so much per piece,
per gross, or per thousand — or it may be a percent-
age of the regular selling price of the article, or a per-
centage of the net profit on it or on the difference
between the selling price and the cost of manufacture.
It may vary upward or downward as manufacturing
increases or decreases from year to year and in a single
or complex ratio. It may be reckoned on the articles
manufactured during each royalty period, or on those
sold, or on those not merely sold but actually delivered
and paid for.

Methods of Making Sales 133

The inventor should not forget this, otherwise a
shrewd party will take unreasonable advantage of
him. It may be added that attorneys who are not
experienced in this line of work are as apt to miss the
point as the inventor is. In fact, even an experienced
attorney has difficulty in anticipating every possible
contingency, however vigilant he may be.

A contract of this sort or any sort which does not
call for immediate execution in full by both parties,
but is expected to be in force over a period of years,
must of necessity be a long one in order to secure
what it ought to secure to the benefit of the patentee
by providing against these unforeseen contingencies.
In royalty contracts some manufacturers base the
amount of royalty on the estimated profits which will
accrue eight years after the patent is granted, that is,
when the patent protection is about half expired.

If a royalty contract does not provide for a con-
siderable amount of cash down, it should provide for
a minimum annual payment, e.g. $500 on account of
royalty, which not only secures the inventor a sub-
stantial income but is also a pledge of good faith on
the part of the manufacturer.

The great advantage of royalty contracts is that
the inventor does not sign away his rights irrevocably,
but that, on the contrary, they automatically revert
to him. Consequently he does not have to sue at
law for damages or to have the rights restored to him.
Including the delays with appeals, legal actions are
not only costly but altogether destructive of reward
for meritorious invention. Again, such contracts do
not depend on the solvency of any of the parties.
The really serious and able manufacturer has no hesi-

134 Sale of Inventions

tancy to enter into such a contract, as it involves no
disadvantage to him as long as he fulfills his engage-
ment. Should the invention prove unsuccessful, he
has the right to allow the contract to lapse and will
not be responsible for further royalties.

One may assign outright in any territory, or one
may grant an exclusive license effective in any given
territory. A country can be divided up into a num-
ber of sections and the rights of each section sold or
leased to a different firm. This is a good mode only
in cases where there are many factories and where
the trade of each is circumscribed. But the advan-
tages of so dealing are very great because one can
often get as much from one section as one could by
licensing the whole country and still have the profits
of the other sections. Again, if the inventor be suc-
cessful in one section, he should have little difficulty
in selling rights in the remaining section.

Shop rights do not as a rule call for much discussion.
Quite a few may be sold either by active work of the
inventor or of his agents. When an invention is sold
in this way, it becomes unsalable as a whole because
there exists no monopoly in it. Still it is the only
way in which some inventions can be handled, es-
pecially shop processes; e.g., a process for gold ex-
traction that could not be monopolized advantageously
by any firm. Beware of making any assignment of a
patent unless it leads to the introduction of the in-
vention into the market as opposed to obtaining, money
with which to patent the invention. If the inventor
has a little money, it is best to employ it in patenting
rather than to spend it in promoting, especially where
it is necessary to part with an interest in a patent in

Methods of Making Sales 135

order to get the money to file the application. But
if he is to give an interest in the patent to secure this
money, let it cover a sufficient amount not only to
take out the patent but to build models, make experi-
ments, and test out the invention on a commercial
scale. He should figure on at least $250 to $500 in
most cases. If he does not do this, he may have to
part with another interest in the patent after the
patent is issued in order to secure funds to make a
working model; thus he will have nothing left for
himself.

The reader having now been informed of the various
ways in which he may dispose of a patent, the interest
conveyed will now be considered. When one finds
an investor interested in an invention, one must know
the exchange value of an assignment, in return for the
patent rights conveyed. One knows how much money
to give when a certain price is asked for a certain
article he buys, and now he must know what interest
in his patent he should give in exchange for a certain
sum of money or other benefits.

One may grant a divided or undivided interest in a
patent. The nature of a patent property has already
been explained. An undivided interest without re-
striction is an assignment which is unfavorable to the
inventor and should be avoided, for unless the assign-
ment provides for the contrary, the owners become
tenants in common and are therefore at each other's
mercy. Each may use, or license others to use, the
patent without the consent of his associates and
without any responsibility to the other joint owners
for the profits arising from such license.

Any joint owner could license a foreign manufacturer

136 Sale of Inventions

to sell the product in this country. Each can manu-
facture without restriction. If an inventor sells even
a small interest in an invention, the owner of this
small amount has all rights of the one or several owners
of the balance.

Would the reader like to overcome the objectionable
features of a joint ownership? This can be done by
forming a corporation, the patentee assigning his
patent for a certain portion or percentage of stock, or
under an agreement in which the holders of a joint
interest cannot sell without consent; also by putting
the title in the hands of a trustee. The owner of a
part interest cannot be compelled to join with the
other owners in order to enable the sale of the whole
interest to be made. This would enable one joint
owner to prevent the sale of the whole interest and
to hold up the other owners for an exorbitant price
for his share.

The assignment records of the Patent Office show
many instances where a percentage division retaining
over fifty per cent indicated that the buyers or sellers
expected to retain control. Cases are common where
the inventor will hold more than half and sell the
balance to others, presuming thereby he has retained
control. In this view he is mistaken.

It is submitted that in putting the patent to work,
the first consideration will be to select the class of
persons to whom the public use of the invention would
bring the most pecuniary profits. Such a class will
usually be made up of the manufacturers of similar
goods, because they are already equipped with suit-
able means to handle the invention.

Before one is in a position to judge what form of

Methods of Making Sales 137

transfer he should make, he must know who the most
likely prospects are and how to prepare lists of them
so that he may select the best names. It is also essen-
tial to understand the contractual relationships and
mutual rights between the inventor and investor.
This subject will be treated elsewhere.

We cannot close this chapter on methods of making
sales of patents without a word about preparing mail-
ing lists, a factor of prime importance in advertising.
We read every day of big mail order successes. Mail-
ing lists have produced fortunes for many business
men. A publisher sold over a million dollars' worth
of books through a medium of carefully selected
names. A wholesaler placed a new brand of goods
in record time and at unbelievably low cost by the
use of mailing lists.

No salesman would submit his proposition hap-
hazard to every one in his territory irrespective of
his line of business and purchasing power. He applies
the principle of selection. When compiling a list of
names of prospects, one must do the same thing. In
each case one must ask oneself, " Is this man a live
prospect? "

The Addressograph Company, in a book published
by them entitled, " The Preparation and Care of
Mailing Lists," has charted in an admirable way
the sources of names of prospects. Consider the
names of some directories, such as the telephone
directories of various cities, Brown's Directory of
American Gas Companies, McGraw's Directory of
Gas and Electric Light and Electric Railway Com-
panies, and Thomas' Directory of American Manu-
facturers.

138 Sale of Inventions

SOURCES OF NAMES OF PROSPECTS

Directories.

Local: City, telephone, blue book.
National: Rating books, trade directories.
Government Records.

Municipal: City tax lists, permit records, license

records, marriage records, building permits.
County and State: Registration lists, county tax

lists, secretary of state records, labor reports.
National: Income tax lists, labor records.
Organizations.
Business: Commercial clubs, advertising clubs, civic

organizations.

General: Fraternal, labor, and social.
Advertising.

Magazines, newspapers, and trade journals.
Press Clippings.

Names of advertisers, society notes, fires, removals,
real estate, business changes, new incorporations.
Miscellaneous.

Employees of local concerns, exchanging lists with
other concerns, addressing companies, salesman's
reports, investigators, R.F.D. carriers, customers,
delivery men, bank cashiers, justices of the peace,
country editors, and dealers.

Governmental records are a fruitful source of val-
uable names. The city clerk of any city will tell
one what records to consult. It is not part of the city's
business to supply these lists of names, but the city
officials are at all times ready to give any responsible
individual access to their classified records. Ap-
proach city as well as R.F.D. mail carriers when

Methods of Making Sales 139

they are off duty. One can get farmers' names,
information about whether a fanner is a renter or
an owner, how many acres he farms or owns, etc.
Postmasters are allowed by law to verify lists of names
and to cross out " dead " names. If one takes ad-
vantage of this, he must enclose return postage for the
list. Postmasters will not, however, add any more
names to the list. A good list to obtain from an
addressing company is a list of stockholders in com-
panies already organized, men who have already
been successfully approached. One can get samples
of such circulars by reading the printed matter usually
obtained by answering the " ad " in any financial
or investment paper.

CHAPTER XVI
CLOSING WITH INVESTORS

IN the next few chapters dealing with confidential
matters it will be presumed that the reader is
closeted with the author considering personal
advice. In exploiting inventions, as in everything
else, it is the last step that wins. The last step and
the most important is to " close " successfully with
the prospective investor. It is first necessary to get
in touch with him. By advertising you can get the
quickest results. To get started on the road to suc-
cess, you need a factory. And to get it, you will
place an " ad " in the papers for capital, get the replies,
locate the investors by telephone numbers or street
address, and determine by reading the letters which
ones would be most suitable for your purpose. Have
in view some location for your factory or salesrooms.
The next thing to do is to see your landlord, the one
of whom you expect to rent the place. Explain to
him that you are to bring to him the man who is
to pay the rent. Make an appointment with him to
see him at the place at the right time, the same or
the next day (depending upon how far away your
investor lives and the number of favorable replies
received) . Then call on your prospect and tell him you
want him to go and look at the proposed location.
Do not spend much time with him and do not argue
about the merits of your enterprise.

140

Closing with Investors 141

Meet him and take him to see the landlord. Intro-
duce him to the landlord and trust the landlord to
get a deposit on the rent or at least to get the lease
signed. Do not be too anxious to hear all they say.
Before long you will see them bargaining with each
other. They will both lose sight of you temporarily.
The investor will sooner put out some money for rent
than put some money away in the bank for you.

You have now reached the point where it is neces-
sary so to influence the investor that he will settle
preliminaries. It is necessary to know what counts
in influencing capital irrespective of those who are
to direct this influence. When you approach the
investor to increase his income with a sound proposi-
tion, you are doing him one of the greatest favors
one man can do for another. Strive to get him inter-
ested in making some initial advance for the good
of your mutual undertaking so as to see him act in
good faith. Having placed the investor under an
obligation, you are then ready to get the lease signed.
Then you can talk about some form of contract and
call in a lawyer.

People are usually influenced through one of the
three following factors: (i) by the use of the eyes,
(2) by the use of the hands, (3) by the voice. You
may use all of these organs whether consciously or
not. You have a definite purpose in mind in bring-
ing your prospect together with the landlord. More
dollars change hands every day as a result of per-
sonalities, friendships, feelings, and emotions than
for any other reason. You must aim to place your
investor in such a position that he cannot easily retire
without damage to his feelings. Discipline him to

142 Sale of Inventions

the merits of your invention. That is the reason you
want to link up the investor with some supply or
fixture man. Remember " you can drive a mule to
water, but you cannot make him drink." It is just
that way with investors. You must make the in-
vestor feel that by putting down the money to start
the invention, he is doing himself the best turn in
the world. Be open-hearted about it. He must do
it of his own free will and accord, and such a frame
of mind can be brought about only by the use of
proper suggestions.

Size up your prospect whether he is a conservative
or a radical. From your angle it is a question of
money and how freely the investor spends it. One
novel way in which to size up your prospect is to ask
him a few side questions. If your prospect is a little
conservative, if it took him, like yourself, a long
tune to accumulate a little money, do not pile up the
profits too fast. He judges life by his own experi-
ence. Let him talk, and see if he tells you his ideas
of money-making. He may be full of incident. In
this way you can tell whether he is an enthusiast.
You will see at a glance whether he will put the profit
in the savings bank or will buy an automobile, that
is the main difference between a conservative and a
radical. You are now ready to bring the landlord
and your prospect together for the purpose of getting
the payment of actual money. All this is practical
psychology, as clever use is made of suggestion.

Understand the psychology of inspiring confidence.
First of all, talk about rents, machinery, and so forth.
The amount of machinery you need and the cost there-
of you can get from dealers in machinery. When

Closing with Investors 143

you show these figures to the investor, it looks like
business.

Talk economy all the time, especially when talking
of fixtures. The probable receipts and expenses for
the first year of the undertaking are to be considered
together. Every great idea goes through three stages.
First, people say it conflicts with the Bible; next,
they say it was discovered before; lastly, they say
they always believed it.

You may not have to use speech to influence your
prospect. Perhaps your model will win him over.
Your model should be neat, well made, and as busi-
nesslike as possible. Do not underestimate this.
A rickety model tied with strings and loose at the
joints may demonstrate the principle beyond question.
But suppose that in doing so the model breaks down
once or twice or a joint becomes uncoupled or a string
untied. The exhibition then will have to wait until
due repairs are made and your nervousness is over-
come. In the meantime the man with the money
concludes that the thing will not work. In the minds
of those looking at an invention, the character of the
model has much weight. Better make the model
neat, then you will have no trouble with it.

You must not only influence your prospect to think
with you, but to take some definite action as a result
of your representation. By getting him to pay the
rent, or pay for a supply of fixtures, etc., you prac-
tically tie him up so that he must act. The majority
of people interviewing a prospect make it too easy
for him to slip away.

Sometimes you must offer special inducements. By
all means, do not forget what has already been said

144 Sale of Inventions

about the essentials of a good enterprise. They may
be thus summed up: (i) A sound undertaking, (2)
sufficient capital, (3) efficient management. In other
words, you must know how " to cut through the ice."
The easiest way is to get in touch with a prospect
who is a good salesman and merchandising man. This
will not keep a prospect from setting up a factory
with his money or by the help of the money of others.
It must be reiterated that when you are selling shoes,
there is a ready and acceptive market for shoes before
you manufacture them, but when you take a patented
article of which the public knows nothing and you
start to sell that patented article, you are confronted
with a different problem. You have got to persuade
the other man to whom you hope to sell that this
something he has never used before is a good thing.
It may cause a revolution of his habits or it may
cause a revolution of something else; you have got
to overcome that resistance. The man who handles
a patented piece of merchandise is entitled to name
the price, because if that valuable invention is to be
distributed throughout the country, so that con-
sumers will get the benefit, you have got to do those
things which will enable the manufacturer to build a
sufficient distributive organization. How can a very
good thing that you invent get to a man in Florida,
California, or elsewhere unless there are at hand those
necessary means by which the manufacturer can
handle the selling organization?

Let us be men and women of action; let us say,
" I can, I must, I will." The further the inventor
pursues his enterprise, the better for the inventor,
provided he does not stop at any position from which

Closing with Investors 145

he can neither advance or retreat. You will under-
stand why it is best to leave out the question of your
salary from the initial discussion of plans. It is a
bitter pill for the investor to swallow. Leave this
proposition for a later time when you have the propo-
sition well under way.

When the investor pays the rent or gives security
for such payment, his attitude toward you will change.
He will realize at once that he and you are partners.
He will make appointments with you to get the stock,
begin manufacturing, etc. Then you will find op-
portunity to discuss how profits are to be 'divided.
If your proposition calls for less than $10,000, you
may be entitled to half and you might be foolish to
accept less. Do not let any one get a dominating
share of the business. The idea is, if you work regu-
larly, you get paid. If he helps, he gets paid. This
plan is excellent. If an investor will not even pay
the rent, how can you expect him to lay aside a certain
sum of money in the bank? Business is business;
rent is not only necessary but reasonable and right.

The idea should be to see that the first dollars ac-
tually laid out are spent for something of value in
your prospective business. Do not lose sight of this
fact for one moment. Instead of, or in addition to,
the landlord, you may enlist a drummer or traveling
salesman to see your prospective investor and talk
about a certain stock of machinery or goods you may
want to use. The drummer will assume the entire
brunt of the sales talk. He is trying to sell your
prospect something he can see with his own eyes and
feel with his own hands, something tangible, real,
and material. He argues in a thoroughly businesslike

146 Sale of Inventions

way. He is like the landlord who does not know how
long it will be before he can find a tenant, and so he
tries with all his might to get a new tenant. They
know their business, the landlord and the drummer,
while capital-raising is new to you.

As soon as you are ready, fix the interest which you
desire in the new undertaking. Capital-raising is only
a high form of salesmanship. Advertising is to-day
the one supreme means of communication between
strangers. The average man thinks more of his
newspaper than he does of any one of his friends.
The investor has the same regard for the newspaper
which he reads. Do not ask an investor who is a
mere stranger to you, to put money in the bank for
you to use. Simply get him to assume an obligation.
This is the new idea which should dominate your
work. Obligation is so strongly recognized as a prime
factor of business to-day that it has become quite a
struggle on the part of the business man to place his
new and old customers under obligations to trade.

If the invention seems to be good and is considered
worth an investigation, a purchaser will ordinarily
require an option for, say, sixty or ninety days. This
usually will give sufficient time to make at least a
validity and infringement search. The underlying
reason for avoiding royalty contracts is that there is
always sure to be a controversy as to the construction
of the patent and therefore the scope of the agreement
to pay the royalty.

Do not be anxious to rush into corporations without
a sound understanding of what it involves. Business
men may not care to buy stock in a corporation where
they are offered common stock only. It does not

Closing with Investors 147

appeal to them. They prefer six per cent cumulative
stock payable in case of liquidation of the company
out of its assets before anything is received by the
common stock. If the owners of the enterprise feel
sure of the merits and the success of their invention,
they can hardly object to this. The next point is
whether the preferred stock should participate in divi-
dends beyond s'x per cent and whether it should have
the right to vote. The investors would probably
insist upon both of these points. Whether or not they
should be allowed these rights is purely a matter of
business policy.

CHAPTER XVII

RAISING FUNDS — THE RIGHT WAY

VS. THE WRONG WAY — WHAT

PLANS TO ADOPT

WE have been informed upon the factors which
govern the creation of a successful inven-
tion. The creation of a market for this
patented invention, the attitude toward the prospective
investor, what to do to win his cooperation, what
plans to adopt to start a business manufacturing the
invention, and what interests may be given to the
investors in the patent itself have all been discussed
generally. So far the primary object has been to give
the reader the proper perspective concerning investors
and their expectations, so as to set his mind at ease.

It is now proposed to treat of details concerning
capital-raising, the methods of enlisting capital, the
conditions to be surveyed, and the schemes and plans
adapted for the purpose of holding capitalists and
financial backers in the foreground of a meritorious
invention. It is suggested that the reader give the
present chapter his most earnest perusal.

Every inventor wants to raise capital to push his
invention. There is plenty of money to be had if
he goes about the task in the right way. There is
no reason why he should not have a finger in the pie.
The things you believe helpful may not really be so,
therefore certain channels of capital-raising will be

148

Raising Funds — What Plans to Adopt 149

suggested which you never realized before. The fol-
lowing matter comes from a prospectus: " In the
state of New York alone the savings banks have on
deposit over one billion dollars. This vast amount
of money is earning only from three to four per cent.
Within a radius of one hundred miles of that city there
are thousands of clerks, mechanics, and professional
men and women earning large salaries and having
no business of their own in which to invest their sur-
plus funds. All these must seek channels for invest-
ment. Every state of the union is prosperous. There
is plenty of idle money waiting for all classes of invest-
ments."

Usually the inexperienced inventor, unaware of the
best plans to raise' capital suitable to his own tastes
and abilities and mistrusting his own powers, lies in
wait for some benign promoter to come to his assist-
ance and lighten financial difficulties. You can posi-
tively do as much of the work of raising capital as any
promoter can, and in nine cases out of ten you can
do it better. It will be shown how you can take a
man along with you to do the talking for you, should
you yourself not be a good talker. This man may
aid you considerably, but trust yourself chiefly. Pre-
pare yourself thoroughly; look well to your own
personal appearance; be as natural and as business-
like as possible, and all will be well with you. You
need not tempt Providence.

It is said that there are about seven million stock-
holders in mining, oil, and the smaller industrial com-
panies located throughout the eastern states. A
cheap way of reaching them is to get circularizing
lists known to be composed of the names of such

150 Sale of Inventions

investors. " From the producer to the consumer "
is always a drawing card. Spend your own money;
you do not always need to employ that of other people.
Do your own mailing, and you will see that the stamps
and literature you pay for are used. Surely you can
interest as much capital as the so-called brokers, and
can bring as much grist to the mill.

More important than how to raise money is who
is to raise and get the funds needed. Whoever it is,
whether another person or yourself, that raises money
to start the working of your invention, he is a pro-
moter. What are the essentials of a good promoter?
It depends upon whether or not a professional pro-
moter is meant. To be successful as a professional
promoter, a man must have property, good business
standing, and reputation. A commercial agency is
the best means of finding out whether a promoter
possesses all of these requisites. If their advice is
not conclusive, find out from friends. He need not
be a Napoleon of finance.

If you find a responsible promoter, you will have
to make him an interesting proposition. He will
want an interest in the enterprise, taking his allotment
out of stock. The contract with the promoter should
be clear on all mportant points and be formally
drawn. He cannot guarantee to get the funds, but
he will try to get them. The agreement with him
should specify that his payment is to be earned and
to become a claim upon the enterprise only if he is
successful. If exclusive control of the undertaking
is given to the promoter at the start the contract should
specify when this control terminates. If the right kind
of contract is executed with the promoter, the duties

Raising Funds — What Plans to Adopt 151

of the inventor will be light, and the whole task of
raising money will be on the promoter's shoulders.
The inventor places everything, documents, state-
ments, reports, samples, etc., in the hands of the
promoter. He does the rest and lays out his own
campaign. If necessary he will beat up for recruits.

A successful patent promoter must have technical as
well as legal knowledge. He should be familiar with
every phase of patent law in order to get the best
results. The idea is to save the inventor considerable
embarrassment. Avoid misrepresentations of pro-
moters. You must have a rather big enterprise to
warrant employing a professional promoter. As a
rule, such a man is needed for the publicity end of a
good-sized undertaking only. The inventor himself,
his friends, or business acquaintances are best adapted
for handling the project privately, that is, among
acquaintances or within a small group. It is neces-
sary to think twice about this. Again, starting a
partnership usually calls for private promoting, while
starting a corporation usually calls for public pro-
moting. It is necessary to know when a partnership
is better than a corporation and vice versa.

It is necessary to dispel the idea of employing the
mail order promoter, who, whether he is wanted or
not, generally manages to get the ear of the inventor
first. There are some men who make good incidental
promoters. The financial columns of a newspaper
will attract men when " Business Opportunities "
will not. Some brokers will finance unusually good
enterprises, bankers seldom. Doctors sometimes
make good promoters, particularly for enterprises
which come within their province. Many lawyers are

7

152 Sale of Inventions

instructed by their clients to watch for suitable enter-
prises. This is especially true of patent lawyers.
Most good inventions pass, in some way or other,
through the hands of patent attorneys. Do not deal
with firms offering to sell inventions who require
fees. In any event, don't let them tie up your patent.
You should have a heart of oak in turning these
" sharks " down.

It is well to tell the inventor about the various pet
schemes of these " sharks " by which they swindle the
unwary inventor or patentee. The advertisement of
concerns of the public promoter type usually read
about the same: " Capital secured for meritorious
enterprises," " Companies incorporated, stocks and
bonds sold, and enterprises financed," " Inventors
and others desiring additional capital should see us,"
" We represent several private bankers, trust com-
panies, and individual capitalists," etc. They all
harp on the same string.

Concerns of this type will advise you to incorpor-
ate even if your invention has not been fully worked
out and whether or not they know anything about
it. Several such firms in New York City have received
advertising not desired by their publicity depart-
ments, through police raids and proceedings in a
criminal court. These have had a salutary effect.
Most of these capital-raising companies get enough
money from their clients to keep them going. They
may make an attempt at advertising and soliciting
money personally, but they are usually unskilled in
handling inventions, even though they do understand
various lines of business. Avoid these companies
as you would avoid a hot iron. In New York City

Raising Funds — What Plans to Adopt 153

and other large cities the following is a safe rule to
follow: No matter what the pretext or how alluring
the literature received, refuse flatly any advance pay-
ment demanded by a promoting concern. Reputable
houses do not make demands of this kind. The
Patent Office issues weekly the Official Gazette con-
taining lists and addresses of the patentees to whom
patents have issued the current week. These lists,
primarily intended to be used as a source of benefit
for inventors and business men, have been perverted
by the " patent sharks," who circularize the patentees
with then: fraudulent so-called money-making schemes.
Their pratings are enough to cause any man to make
a wry face.

If for any reason you have to employ a professional
promoter, secure the services of a lawyer to guide you
in such affairs. See him before closing any agree-
ment with the promoter or with the investors. If
he is representing your own interests, he can guide
you safely and intelligently where others fail. Retain
him while negotiations are being carried out. Do
not entrust the well-being of your undertaking to
the lawyer of the other side. Lay the whole plan
before your attorney.

Knowing when your enterprise reaches the magni-
tude that calls for the assistance of an efficient pro-
fessional promoter is knowing just what your chances
are of realizing the benefits from your invention at
present or in the distant future. And in order to
know whether you need the professional promoter,
consider for a moment what a contract with a com-
petent promoter calls for, especially in such large
cities as New York.

154 Sale of Inventions

Francis Cooper, in a most valuable work entitled
" Financing an Enterprise/' published by the Roland
Press, New York City, states what terms should be
set forth in any agreement entered into between a
party seeking investors and a promoter undertaking
to find them. They are as follows:

1. The agreement should designate specifically the

enterprise covered by its terms.

2. The agreement should be confined to the im-

mediate issues, to the one enterprise on hand.

3. The agreement should be clearly defined in its

scope.

4. The agreement should be limited as to time.

5. It should make provision for any partial ful-

fillment of its terms.

6. It should provide for any modification or read-

justment of the original plan.

7. It should state with precision the commissions

that are to be paid.

8. It should state whether the commissions are

payable on the net amount secured or on the
gross amount.

9. It should state when and how commissions are

payable.
10. If the promoter is to advance the money to pay

the expenses, that should be specified in the

contract.

You should prefer a private presentation of your
proposition if the undertaking is not large. This is
simpler, less expensive, and usually more within the
inventor's own ability. When but few men are to
be dealt with, the formalities are simple; the whole
thing is manageable. The public presentation usually

Raising Funds — What Plans to Adopt 155

contemplates a large number of small contributors.
A private presentation enables you to get a partner
and avoid the expenses of the long-drawn-out method
of organizing a corporation. In doing so you play
your best card.

A corporation is good only where an immense
amount of capital is involved; also it is not bad where
the interests are diversified to a great extent. But
for the person who has a start to make in the world,
the corporation is useless. It is so much easier to
obtain a partner, so much quicker and less expensive.
Selling stock certificates is ordinarily a very hard
proposition, especially where there are no assets to
show but the good-will of the promoter. It is good
where you need more than $10,000 in cash or have
assets or an established business upon which to base
your claims. It is good where a business has already
been started.

Where you need a little money at the start, a part-
nership is the only sure and sensible course. It is
easier to get along with one partner than with many
stockholders. The best feature of a partnership is
that your partner cannot force you out merely by his
own sweet will. In a partnership it is customary that
one puts in the money, the other furnishes the brains
and does the work, and that both share alike in the
profits. It is not necessary to squabble about these.

If your scheme or device is original and you have
a good plan, employ business brains to Work for you,
directly or indirectly. Carlson had $500 and an
idea for a kitchen cabinet. Seven years later he had
a $50,000 furniture factory. Gates was a clothing
salesman. He had less than $1000. He invented

156 Sale of Inventions

a scheme of selling clothing at a $i down. Within ten
years, the extension of credit to the small salaried
persons made him a large fortune. These men had
ideas, clever schemes coupled with financeering genius.
Why not at least imitate them?

It is only when you have an established business
that the banks will help you. The question, " When
does the bank say ' no '? " was put to the president
of a large bank in Chicago. "Never, when the bank
can help it," he replied. You generally consult the
bank when you need more capital in your business.
Why not do it when starting the business, which is
the first consideration? It also means proceeding
along the line of least resistance, the easiest way.
There are exceptions to every rule. If you understand
the mainsprings of human conduct, you can start big
as well as small enterprises in an unusually short time.

Sometimes in promoting an enterprise, local per-
sonal pride enters as an important factor. It is well
known that many small towns are seeking to have
factories established there. If you can show the im-
portance of establishing a factory to manufacture
your invention in any such locality, you may easily
raise the money from local residents.

If the enterprise appeals to, and will benefit, any
particular industry or line of business, that fact may
be used to advantage. A banker may subscribe to
an enterprise which promises deposits to his bank.
If a new grain elevator is to be established, the farmers
of the neighborhood, who will be benefited by its
erection, may be interested. Sometimes, offering some
special person a position in a new enterprise will be
influential in securing capital. He must, however,

Raising Funds — What Plans to Adopt 157

be competent to perform the expected service. If the
young man cannot subscribe himself, he will convert
himself into a very active and interested agent of the
enterprise and help you to find investors. You may
cause some influential man to become interested by
offering him the treasurership. Such men give solidity
to the undertaking, create confidence in its future,
and are a material aid in securing subscriptions. Some
men act because their friends act, having themselves
no intention of subscribing to stock. They follow the
crowd. Some one is needed to make the start, how-
ever. If the " initial break " is effected, the rest is
comparatively easy. They come in while there is a
" high tide."

At the very beginning in looking for investors, it
is necessary to obtain names and introductions. These
investors may come from among your relatives, friends,
and acquaintances or from among the general public.
Do not waste time with relatives, friends, and ac-
quaintances as a rule. We will tell you the reason.
If you can approach them in the same way you can
strangers, then by all means do so.

Be sure that the proposition presented to friends
is a sound one. Friends will go into the enterprise
largely because of their confidence in the promoter.
They do not scrutinize his offering so closely as that
of a stranger, and they naturally demand special con-
sideration and better protection. If the enterprise is
not successful, they think that their confidence has
been abused. An unsuccessful enterprise is likely to
make trouble for its promoter whether floated among
friends or strangers. They do not care to listen to
explanations afterward.

158 Sale of Inventions

Therefore financing among friends, if conditions are
right, is easy. The enterprise must be suitable, the
proposition fair, the friends must have money to
invest, and the promoter must possess their confidence.
To get them interested, a pencil and a few scraps of
paper take the place of a prospectus. If an enter-
prise is looked upon with doubt, the promoter's in-
genuity will be taxed to remove the unfavorable im-
pression. He must then be prepared to demonstrate
the safety, suitability, and the profitable nature of
the enterprise. If he cannot do this, he should not
present the matter to his friends at all.

The soliciting method is the cheapest, but it is to
be tried only where you cannot spare the money for
an advertisement. It simply requires time and shoe
leather. You call on any man in his office and explain
your proposition. It calls for a little nerve and courage.
After you have seen a few men, the awkwardness will
leave you and you will be surprised at your own ability.

Circularizing requires that you send a circular to
a few hundred or thousand business men in your
vicinity. You should get replies in proportion to
the attractiveness of your proposition. This plan
is good in small towns where the advertising facilities
are not of the best. If the circular is well written,
the replies will be of such a nature that you will have
a good chance to get a partner. It is slower than
advertising in the papers. Its advantage is that,
the postage being the main cost, one may prepare a
list of names and mail a few letters from time to time.
Its disadvantage is slowness.

It is possible that such correspondence alone will
suffice. If the device invented interests the persons

Raising Funds — What Plans to Adopt 159

addressed, they will surely not let slip the opportunity
to get in touch with the inventor. If they are not
interested, it is best for an inventor to know this early
in the game. He will thereby avoid spending con-
siderable money. The inventor of an improved shoe
lace wrote and sent samples of his product to several
large shoe manufacturers. It is admitted the results
were disappointing; but if the shoe lace had been
worth adopting, his letter would certainly have led
to business. Where letters are sent out, they should
aim to persuade and convince; they should contain
the " punch " so as to lead to action. If a prospectus
does not accompany the letter, the explanation has to
be more lengthy. As no personal work is supposed
to follow up the printed matter, the latter must be
effective to induce action. Corresponding to ' the
skill with which the printed matter has been prepared,
the returns from circularizing vary from nothing to the
most gratifying.

If your proposition calls for the organization of a
corporation, circularizing will help. To get the best
results from this method, it is necessary, first, to get
the most up-to-date list of names; second, to send out
the best kind of facsimile letter with the name and
address perfectly matched at the top and accom-
panied by a well- written and attractive prospectus;
third, about fifteen days after the first letter, to mail
a second and then a third follow-up letter to those
not answering the first. Above all, take pains with
the first letter. You should get the best returns in
this way.

You may try circularizing by way of experiment,
but your effort in experimenting must be on a sufficient

160 Sale of Inventions

scale really to prove the success or failure of the plan.
Just what number of letters should be sent out depends
upon the undertaking. «/

The letters should usually be very short. You may
employ a letter and a prospectus. Business men do
not throw away letters coming into their offices under
two-cent postage and addressed to them, without
first reading the contents, in whole or in part. The
function of the letter is to present the important
features of the enterprise with such strength and at-
tractiveness that the interest of the reader will be
aroused. The best authorities say that mailing in-
vesters a printed circular is not as good as sending
an imitation typewritten letter. This, however, must
be very well done.

It does not necessarily follow that because your
prospects are very numerous, circularizing them is the
best plan. The nature of the proposition is the de-
terminant factor. People of small means do not like
to hoard their money. The money should be working
for its owners. Everybody knows and wishes for this.
The modest three to five per cent of the ordinary con-
servative investment is, as explained before, not
attractive enough. If these people can be convinced
that an undertaking is reasonably safe and that by
investing therein, they will secure at least eight or
even ten per cent, with good prospects of larger re-
turns and perhaps a doubling or trebling of the original
investment, they will be ready to accept such a good
proposition. The objection against public presenta-
tion is that in order successfully to work up this army
of small investors, it is necessary to do extensive, ex-
pensive, continuous able work. Public presentation

Raising Funds — What Plans to Adopt 161

is good where speculative enterprises are started, in
which the risks are excessive and the rewards equally
great in the event of success; but it may be safely said
that this is not the way for the average inventor to
realize on his own invention.

There are people around you, among whom you
move, who can do you the greatest measure of good in
closing with your prospect. Take the newspaper
reporter as an example. He is among those best able
to assist you in raising capital because of his experi-
ence, talent, and occupation. He can talk fast, write
fast, reason fast, and argue fast, and he can do all these
things remarkably well. Pay the reporter who is not
too much taken up all the time with his work to assist
you, to urge your prospect to a decision. Reporters are
a determined set. The editor often sends them out
to get a story at any cost, so they are used to over-
coming obstacles. You should explain your position
to the reporter after selecting a suitable sales method.
The reporter will do all the talking necessary. He is
usually a very good judge of men. You may pay hiTr>
a contingent fee if you succeed in landing the prospect.
While it is out of his line, he can adapt himself to
soliciting for you. The reporter can also assist you
in writing a " catchy ad." Reporters are a clever,
brainy set. The landlord is not the only one, there-
fore, who can help, nor is the drummer.

Try the insurance man. Make an appointment with
the inventor and take the insurance man along, having
first acquainted him with your plan. The insurance
man is always right at hand, easy of access, always
ready, and always enthusiastic. He is therefore al-
ways greatly to be desired as an able aid in securing a

162 Sale of Inventions

partner. Let him interview the prospects who answer
your newspaper " ad." He has gone through the
hardest trials of business, and therefore he can be
expected to perform for you this important service.

Next comes the advertising man. An advertising
agency is often instrumental in starting you on the
right road to success hi obtaining capital. Besides
getting out the " ad " for you, some one in touch with
the agency may help you interview the prospect. In
a very large city you will find such advertising agencies.

Get in touch with an advertising solicitor of one of
these agencies. Tell him what you want to do, ask
his advice, and profit by his experience. As a class
advertising men to-day are counted among the smart-
est of men this country produces. An " ad " man is
always looking for some new idea, some new experience
upon which to build a business education. He is
always hunting the odd dollars. He is sensible, talka-
tive, wise, a good thinker and reasoner. He is easy
to find, easy to interest, and very important to enlist
in business matters. He can write a nice " ad " for
your prospectus. Offer to pay him a set price for
each interview, contingent upon his or your success.
Place your " ads " in the papers, secure the names of
investors, and go after them according to any of the
foregoing plans. You may use people in your vicinity
in any of the ways already suggested.

But it is the lawyer you should consult at all times
and at every stage in the marketing of your invention,
and especially in disposing of the whole or a partial
interest in your patent. You should also consult a
lawyer at times in order to close with your prospect.
Visit him and ask him first what his fee will be. Most

Raising Funds — What Plans to Adopt 163

lawyers will prefer a contingent fee, which should
not be over $50 for each $1000 you are trying to raise.
That would be a fair price, as you must do the pre-
liminary work, pay for the advertising, interview
prospects, etc. If reasonably certain of the lawyer's
ability, you can pay him a stipulated sum down.
After having placed the "ad," received the replies,
and selected the most promising prospects, get them
to go with you to the lawyer, or take the lawyer
with you to interview them. The lawyer is not work-
ing for his fee only; he values also the future legal
business of the new firm.

You need the assistance of a lawyer even before you
apply for a patent. Thus when a transfer of an in-
vention or a patent is made and an inventor agrees
to part with an interest before an invention is com-
pleted, there will be need of a contract for the future
transfer of rights to the invention. This contract
is not an assignment but only an agreement to assign.
It conveys only an equitable interest, which equitable
right may be enforced in a court of equity by a suit
to compel specific performance. If there are condi-
tions to be fulfilled by the transferee, such as the pay-
ment of installments or royalties, the perfecting or
exploiting of an invention, its advertising and push-
ing, these conditions should be clearly and distinctly
stated. Give the dates on which the installments or
royalties shall become due, the manner in which they
shall be paid, the amount of advertising to be done, its
character, the ways in which the invention shall be
pushed, or the degree of excellence in construction to
which the manufacturer should be held.

An inventor may be entering on a contract for the

164 Sale of Inventions

operation of his patent. Perhaps among the inci-
dentals a satisfactory royalty is mentioned but no
minimum production clause. Such an omission is,
of course, fatal. The attorneys on the other side
cannot be expected to call this fatal omission to your
attention. There may be local laws materially af-
fecting your contract of which the lawyer has par-
ticular knowledge. When dealing with strangers, it
is best to engage an attorney to look after your legal
interests. If your means are limited, let the attorney
know.

Patent lawyers should, if possible, be consulted
about licenses to make, use, or sell an invention.
Never think of giving a license or arranging a royalty
agreement without seeking the best legal advice
obtainable.

Also seek commercial advice. The legal advice is
necessary that you may see that there is nothing in the
contract which will act to your disadvantage. The
commercial advice is necessary that you may see that
the terms of the contract are fair to the inventor com-
pared with the advantage derived from the inven-
tion. Licenses are often most difficult to arrange to
the satisfaction of both parties. There are many
acts of the inventor which do not seem to be binding
upon him if no good contract exists. But when it is
too late and valid rights inhere by virtue of these
acts, the inventor cannot repudiate them. If an
article sold is of such peculiar construction as to be
of no practical value unless it is used in connection
with some subordinate parts, covered by another
patent owned by the inventor, the right to use the
latter in cooperation with the former might be implied

Raising Funds — What Plans to Adopt 165

from circumstances. Shop rights are also implied
licenses. A machine made with the knowledge and
consent of the inventor before his application for a
patent, carries with it an implied license from the
inventor good for any purchaser.

Expert legal knowledge of the characteristics of a
license must also be obtained by the inventor. A
license to make, use, or sell in a limited territory, in the
absence of an agreement to that effect, does not pass
to an executor or an administrator. And a license
cannot be taken possession of by an assignee or receiver,
unless there is a provision for that in the license. Nor
can a licensee, holding a license which is terminable
at the licensor's option, manufacture a great quantity
of articles ahead of time and sell them after the license
is relinquished. Again, the man who puts up the money
is shrewd enough to protect his own interests and is
sure to hire a lawyer, as witness the protective clauses
usually inserted in assignment contracts, or more
specifically in royalty agreements: that royalty may
be deducted for all goods returned; that no payments will
be made during any suit brought against an assignee; that
the royalty terminates if the patent is decided invalid;
that future inventions will also be assigned to the as-
signee.

If you know just what kind of assignments to make,
you are thoroughly primed when it comes to transferring
an interest in your patent. An assignment is of the
invention itself and may be made either before an
application is filed, before the patent issues, or after-
ward. If made before the filing of the application, the
assignment should refer to the date on which the ap-
plication was executed and should be forwarded with

1 66 Sale of Inventions

the application papers. If made after filing but be-
fore the issue of the patent, the serial number and
date of application should be given. If made after
the patent has issued, the number and date of the
patent should be stated. This is in order that the
Patent Office may identify the particular invention
transferred. This is as necessary with patents as
with land deeds.

An assignee of a patent should have his assignment
recorded in the United States Patent Office. Imme-
diately upon the assignment of a patent, send the
document to the Commissioner of Patents, Washing-
ton, D. C., with a fee of $1.00 for three hundred words
or under. For documents over three hundred words
and under one thousand words, the recording fee is
$2.00; for over one thousand words, $3.00 is required.
Upon receipt of the fee the document will be recorded
and in time will be returned to the sender.

CHAPTER XVIII

ADVERTISING FOR CAPITAL

LEADING UP TO A PARTNERSHIP OR

CORPORATION

THE purpose of this chapter is to show that it is
not a hard thing to raise capital if one does the
right thing, if the right kind of association be-
tween the inventor and capitalist exists. Your chances
of raising capital, if you go about it in the right manner,
will be as good as one in four, so eager is the world to
welcome ambition, so generous is the reception to the
man who really tries.

It will be shown that forming a corporation or a
partnership offers to the inexperienced inventor the
easiest solution of the problem of raising funds. //
you are not inexperienced, strike out for yourself and
do not ask for any assistance. Make a noise in
the world. Choose always the quicker method. By
acting for yourself, you save valuable time and gain
in publicity. You must be very careful in your pre-
paration when you intend to rely on your own efforts.
It is necessary for you to know the limits of your
power and whether or not a matter is within your pre-
vious experience. You must be able to convince others
of your ability to handle the enterprise. If you feel
confident, however, then fight the good fight; plunge
right into it, and you will get results. First, place
the " ad " calling for investors in the papers. Next,

167

1 68 Sale of Inventions

guard against discouragement, for just at this point
most ambitious people fail. Either they are afraid
to spend the money for an " ad "; or if they place an
"ad," they insert only two or three lines in one paper
and call that a fair test. They expect to succeed
without a flourish of trumpets. Do not deceive your-
self into thinking that two lines are as good as four,
that ten are as good as twenty, etc. That argument
is certainly false. More than anything else it has
forced men to work on a strict salary basis instead of
being their own bosses. In spending money to-day
it does not pay to be wedded to an opinion.

Advertise for prospects. It pays to advertise and
to draw on futurity. Get out an advertisement and
make it Ug enough to attract. Do not be thin-skinned.
Insert it at once. When you get the replies, you will
see that it is only a question of time until you will get
the money. Remember, this practical method is not
only for to-day or to-morrow. Try it every time.
Nothing is more important than selecting the right
kind of newspapers. Pick out the best ones. Select
the progressively conservative, not the radical paper;
the truthful, not the false; the substantial, not the
trashy; the masterful and sensible, not the sensa-
tional, — the paper the business man reads, and then
you are sure to have your " ad " read by the right
kind of people, those who have money. Financial
advertising pays. Over a million dollars is paid to
the newspapers of this country every week for just
such advertisements as you are advised to place. It
is out of the question that the people who spend all
that money in one week are deceived. They are not.
They are wise. They were convinced by the logic

Advertising for Capital 169

of events, reason, observation, and experience. They
do not spend by halves.

Use what is called a blind advertisement. It is a
very good plan. A blind advertisement is one that
states as much of your proposed plan as may be de-
sirable and which contains either a newspaper number,
a post-office box, an address in care of some one else,
or any other scheme for securing inquiries without
letting your own identity be known publicly. Use
this blind " ad," because it is private and shows the
relative values of various advertising mediums. It
may pull as many results as any other " ad." Have
it inserted in one or more of the leading daily or Sun-
day papers in your vicinity; you may even try the
leading national weeklies. The following are chiefly
held for this purpose: New York Herald, New York
World, Minneapolis Tribune, New Orleans Times,
Milwaukee Sentinel, Detroit News, San Antonio Light,
Washington Times, Los Angeles Times, Cleveland
Plain Dealer, Pittsburg Despatch, Cincinnati In-
quirer, Denver Post, Boston Globe, Indianapolis Star,
Portland Oregonian, Baltimore American, Des Moines
Register, Kansas City Star, Omaha World Herald,
Dallas News, San Francisco Call, St. Louis Globe
Democrat, Seattle Post Intelligencer, Chicago Record
Herald, etc.

After a few trials you will find out what the replies
cost. You should get five replies for every $1000
you want to raise; i.e., out of five, you are reasonably
certain to get a partner with $1000, out of ten replies,
a partner with $2000, and out of twenty replies, a
partner with $4000. In any campaign you will find that
a reply from a $500 man will cost less than a reply

170 Sale of Inventions

from a $1000 man because there are more people in
the $500 class than in the $1000 class; again, many
in the $1000 class would risk part but not all.

If you can start with a small amount, then word your
" ad," " A few hundred wanted " or " A few thousand
wanted." The cost of replies should not be more than
$5 where any amount less than $10,000 is wanted. In
reality it will be found to be nearer $i than $5. As
a general rule, replies will not cost more than $5 each;
some have not cost more than 25^ each. The average
cost is about 50^ for each $1000 or less. Thus a reply
from a $3000 man would cost $1.50; from a $5000
man, $2.50, etc. These figures are given in a general
way as approximately correct. The circulation of
newspapers varies from day to day. No one can
tell what one " ad " will do on any given day; how-
ever, after finding out the cost of a few replies, you
may be able to reach a basis for determining the rest.

If you have placed an " ad " for partners and failed
to get them, it may have been either too small to attract
attention or too poorly written. We are referring now
to getting replies, not to landing your prospect. That
depends upon the nature of your proposition.

Investors are not interested in flowery language em-
ployed in prospectuses. You cannot beat it into their
heads by mere words. They want facts. If you have
failed, do not let that discourage you, and do not be
thrown off your balance. Put out a bigger " ad "
next time and try a different paper. An advertise-
ment costing ten dollars is practically certain of bring-
ing replies. As far as publication is concerned, if it is
a choice between daily or Sunday newspapers, you
should pick out the one having the most financial

Advertising for Capital 171

advertising or the one having the most classified busi-
ness chances or opportunities.

After you have obtained a sufficient number of replies
from the newspapers, what is the next thing to do?
It is to select those among your prospects who will
make the best partners or stockholders, so that you
may be able to start the enterprise as soon as possible.
A corporation should be organized for a growing business
in need of more capital, while a partnership should
be resorted to for the purpose of starting a business.
A partnership is best even if you must come down a
peg in your plans.

It is necessary to know why you should advertise
for partners. Finding a partner is the best plan.
The money secured through partnership belongs en-
tirely to your enterprise. There is no interest to pay
on it, and you are in no danger, when loans are sought,
of being forced to go out of business to pay back the
money. There is an old saying, " Choosing a part-
ner is like choosing a wife." Many an investor says he
is willing to join in your enterprise, but does not want
to invest until all the stock is sold. When only one
feels that way, it does not matter much, but when they
all feel that way you are up against a snag. The
very hardest part of selling stock when organizing a
corporation is the getting of the first thousand dollars.
That much real money in sight gives more confidence
than can be secured in any other way. It is harder to
convince twenty men than five. It is just as hard to
sell one as another. Do not overmeasure your op-
portunities.

You must be sure that your partner will prove an
asset to your undertaking. He should be of the right

172 Sale of Inventions

sort, willing to cooperate when needed and to do
nothing when not needed. Before admitting a partner
you should know:

1. About his ability, his past record, his standing

in the community, his technical knowledge,
his education, his personal habits, and his
financial expertness.

2. Whether his knowledge, experience, and ability

complete yours, and whether you could work
with him to advantage.

3. Whether he has a disposition that inclines him

to restlessness.

4. Whether he is ambitious; whether he will put his

best efforts into building up your concern.

5. Whether he is honest; whether his character

warrants complete trust.

Do not believe that the party you deal with is of
no importance and that the main thing is to get the
money. Do not simply lay his funds under contri-
bution. Never join with one whose dealings you
cannot approve, whether as a matter of business
honesty or business prudence. If you do, you are
sure to regret it. Your business associates should
be of the same disposition as yourself. If they have
foresight and executive ability, they have the qualities
especially needed. Where it is a question of preventing
a miscarriage of the entire venture, it is to your in-
terest to select some one in whom you can confide.

In a partnership contract, see that the following
stipulations are included by your attorney:

i. Provide for joint appraisal or an arbitration com-
mittee to settle differences between your esti-
mates of the values of the business.

Advertising for Capital 173

2. If one partner presents a proposal for the dis-

solution of the partnership, the other should
have the right either to buy or to sell.

3. Even responsibility in the addition of new

capital.

4. A clear division of duties.

5. The amount of profits to be taken out of and the

amount to be put back into the business.

6. A fair interest on all investments.

7. A salary basis, in case profits are not divided

evenly.

Always choose the practical man to shape the
destiny of your affairs. Any man can distinguish
between a business success and a business failure, be-
tween an experienced and an inexperienced person,
between the novice and the dunderpate, between a
practical man and a doctrinaire. In every case prefer
the practical man.

Unless your partner is the right kind, he may merely
prove a dead weight. Remember that taking in
capital means sharing the profits and sharing the
risks. Again we say, be careful of your associates
as partners. An inventor once advertised for capital
to float an enterprise. He received five answers,
four from chattel mortgage sharks and one from a
man who had a little money and desired employment
for himself as well as for it. The inventor accepted
the last offer. His partner appeared at first to have
some ability. The inventor's good opinion of him
did not last, however. Every night when the in-
ventor came in tired but loaded with orders, his part-
ner would be waiting for him with a typewritten list
of matters upon which he wanted to consult. The

174 Sale of Inventions

inventor would skim through the list and tell him
what to do. What he was told, he would always write
down for fear of forgetting. He had waited for orders
until he could not overcome the habit. In a few
months, capital ran short. The partnership was
dissolved, although the interest in the patent was still
divided. Later the inventor sold the patent for
$10,000 and was obliged to give $5000 of it to his
former incapable partner. It is not like hiring an
employee whom you can always fire, but a case of
always having to divide the profits when you dis-
solve. There is no saving clause to overcome this
as long as it is a partnership arrangement.

How about a corporation? A corporation is an
artificial creature in law, consisting of one or more
persons united in one body under certain grants to
secure a succession of members without changing the
identity of the body. It is empowered to act in a
specified capacity or to transact some designated
business the same as an individual. A closed cor-
poration is one in which vacancies are filled by the
corporation itself. A sole corporation consists of a
single person at any one time invested with certain
legal capacities and powers not otherwise possessed.
A joint stock corporation is one in which the ownership
of stock is divided into shares. A close corporation
is an incorporated company the stock of which is held
by a limited number of persons and is not in the hands
of the public. Usually in a close corporation there
is an agreement or understanding among a few stock-
holders, whereby each is prohibited from disposing
of or selling his interest without consent of the others.

Capitalization is the bone and marrow of a corpora-

Advertising for Capital 175

tion. To the inventor about to start a corporation,
the question of capitalization is doubly import-
ant because it measures his own interest in the com-
pany. In this aspect capitalization has two entirely
distinct and very important functions: (i) as a con-
venient means of apportioning the interests in the
company, and (2) as a measure of giving value to the
enterprise. Suppose a partnership business owned
by three partners and valued at $100,000 is to be
incorporated. One partner owns a one-half interest
and each of the others a one-quarter interest. One
hundred thousand dollars will be the capitalization of
the new corporation, and this will be divided into
shares of equal value. Suppose the par value of these
shares to be $1000 each; there will then be a hundred
shares in all, of which the first partner will receive
fifty and the other two partners twenty-five each.
If the capitalization should be $50,000 instead of a
$100,000, the number of shares would be changed,
but the proportion of holdings would be the same.
The first partner would have his one-half interest and
the other two each one-quarter interest, as before.
The basis of calculation is different, but the results
are the same.

Let us say an inventor devises some mechanism.
It is not demonstrated or patented, but it probably
exists as a rude draft or model. The device must
be worked out, and for this purpose the inventor must
secure financial assistance. He will go to a few friends
and try any of the methods already suggested. Sup-
pose he obtains $1000 to complete his invention and
offers the investors a one-half interest, reserving the
other half to himself. Two or three of these people

176 Sale of Inventions

may form a little pool, one putting in $500, another
$400, and another $100. A corporation would be
formed. This corporation, however, cannot be based
on value, because real value of the untried invention
as yet hangs in doubt. The capitalization is simply
made to measure the interest of inventor and investors.
In order to save big corporation fees a small capital-
ization will be best, say $2000 divided into twenty-
shares at $100 per share. Of these shares the inventor
will take ten; the first investor, five; the second,
four; and the third, one. This company would be
looked upon only as a temporary bridging arrangement
to carry the enterprise to a point where the value of
the invention might be determined. When the in-
vention is completed and it becomes necessary to
increase capitalization in order to make it represent
the real value of the invention and the enterprise, re-
organization will be necessary. /The new idea of the
value of the enterprise comes in. The capitalization
of $2000 no longer represents value. It represents
the proportionate holding of shares by all the stock-
holders.

It is necessary to understand how the stock is divided
among the prospective stockholders; also how the
stock is to represent the inventor's real interests.
One way of passing a controlling interest in a corpora-
tion to a certain class of stockholders is by means of
preferred stock. This is a better scheme of raising
money than the issue of bonds or a loan protected
by securities. An issue of preferred stock is preferable
to a bond issue, because preferred stock receives
dividends only if such dividends are declared. Bonds
may even endanger the very existence of the under-

Advertising for Capital 177

taking, for it is necessary to take steps to meet the
loans. However, sometimes a bond issue to be at-
tractive is made profit-sharing. It may be provided
that in case preferred dividends are paid at a certain
date and fall in arrears, preferred stock shall have,
the right to vote, or that control of the company shall
pass to the preferred stockholders.

When stock is issued, it should be fully paid and
nonassessable. This encourages subscriptions. In any
event, it should be noted that stock not fully paid,
either technically or actually, subjects the party to
whom it is issued to a liability for the unpaid balance
as long as he holds the stock. The corporation claims
the payment. The courts hold the stock to be fully
paid if an invention is given for stock. Capitalize
in the right way and leave watered stocks alone.
Watered stock means an increase in the issue of capital
stock with no corresponding increase in assets. It
is of no consequence when used to place control in
the hands of any class of stockholders.

Investors may be expected to make exacting de-
mands. They may wish to control the company.
The control goes with the majority of the stock. The
persons owning this majority usually elect the board
of directors and through this board control the com-
pany. However, the control of the corporation may
be given to the investors in different ways:

1. By giving 51 per cent of voting stock to the

investors, the inventor retaining but 49 per
cent. This gives the investors little more than
one half the stock.

2. By giving an equal division of the stock, the

inventor being deprived of the voting power.

178 Sale of Inventions

3. By issuing a portion of the inventor's stock as

nonvoting preferred stock. This is not con-
trary to any laws.

4. The stock might be divided equally between in-

ventor and investors, but the board of di-
rectors to be selected acceptable to both and
the management to be left to a voting trust.

5. Stock might be divided equally between the

two parties, but so classified that the ma-
jority of the directors would be elected by the
investors' stock.

The inventor should always be careful about pro-
tecting his own interests. Where the inventor has
not bound himself and has found an investor or in-
vestors, it is better for the parties to organize a cor-
poration (with the assistance of a dummy where
necessary), especially where the amount needed to
start business is considerable. Make a contract with
the investors from the very start, fixing not only the
interests involved but also certain exact relations and
regulations as to the mutual conduct of the parties,
e.g., that a certain amount shall be invested, that
neither shall sell his interest save with the other's
consent, that the invention shall be salable, and that
either shall agree to sell his interest to a third party
at a price fixed in advance. These and other contin-
gencies can be provided for.

The personnel of the corporation is of the utmost
importance. The organizers or controllers of the
company do not need to be mechanics or persons of
business prominence, but they should be men of affairs
and able at least to know a good man when they see
one. Him they should elect as executive head. Un-

Advertising for Capital 179

less this is done, if the stockholders are ignorant of
business affairs and incompetent to manage a business
concern themselves or to perceive their shortcomings
in this respect, the concern will in nine cases out of
ten go to the wall before it has been long in existence.
It is just as necessary to bring in good judgment with
the capital as it is to start out with a good invention,
especially where the task is to reap profit out of the
venture.

The board of directors controls and guides the
affairs of the corporation. Its members are elected
by the stockholders in the following manner: If the
board of directors is composed of five members and
there are two classes of stock, each class will be given
the right to elect two directors, and by agreement
among these a fifth director may be appointed. If
no agreement is reached, then the board will have to
get along with four instead of five members.

Eliminate the promoter from organizing a corpora-
tion. He may enter into the factors that determine
the capitalization of your enterprise. At the time of
the organization of a corporation, the equality of cor-
porate assets and issued stock perhaps holds true;
but in time, as business develops, it does not ordinarily
f exist, owing to fluctuations in the value of stock,
market conditions, etc. Variations between the value
of the enterprise and its capitalization are supposed
to be reflected with more or less accuracy in the market
quotations. However, value is the obvious basis of
capitalization. Sometimes the capitalization of a
new enterprise is complicated by the necessity for
payments to promoters. The inventor should avoid
the " promotion " idea of his invention if he can

180 Sale of Inventions

possibly help it. Payments to promoters are necessary
in order to reward them for their services in bringing
moneyed people together.

Very frequently it is difficult to know exactly what
offer must be made to secure money. Sometimes
overcapitalization may be inviting to capitalists even
in cases where the inventor gets half the stock and the
investor the other half. Suppose an invention is
worth financially $200,000 and that it requires $25,000
for operating funds. If the large investors are ap-
pealed to, in order to attract them, you must give
$100,000 in stock or even more for the required $25,000
in cash. If, however, the investment is apportioned
among a number of smaller investors, each putting
in a few hundred or a thousand dollars, it is probable
that from $50,000 to $75,000 face value of stock or
less would be enough to raise the money. Under this
second plan the stock given for the money would be
at least $25,000 less than under the first. Against this,
however, must be set the additional trouble of reach-
ing smaller investors. In either case, if services of
promoters are necessary, the cost of getting money
will be increased by the amount given these promoters,
the value of the owner's interest diminishing as the
amount of stock given for the money increases.

In capitalizing enterprises founded on inventions, the
anticipation of earning power is customary. Any
close estimate of these anticipated profits is, of course,
impossible. The capitalization must be large enough
to take into consideration future emergencies. Profit
probabilities are usually capable of approximation.
Profit possibilities are not, as the grounds of expecta-
tion are too uncertain, too remote, or too unknown.

Advertising for Capital 181

Selling stock is about the hardest nut the inventor
has to crack. Investors may fool the inexperienced
inventor into believing that they are organizing a
corporation when, in fact, nothing of the sort is done.
It is necessary here to untie a knot. If the investor
demands a nonvoting, nonparticipating preferred stock,
or perhaps an issue of bonds to represent the actual
money invested, the undertaking is not in the nature of
stock investment but is rather a loan, a fixed charge
and liability imposed upon the assets of the corporation.
Of course, the investors receive dividends and interest
and finally receive their money back. Capital ex-
pressed in shares of stock is thus different from a loan
expressed in bonds.

Capitalization is defined as the face or par value
of the stocks and bonds which the corporation has
issued. In every state of the union the laws provid-
ing for incorporation either directly or indirectly
require the corporation to have a specified capital
stock. The amount of this capital is, in most states,
fixed by the charter of the corporation. The parties
to the incorporation determine this before application
is made for a charter. It represents the amount of
money which the incorporators think necessary for
the successful operation of the enterprise. Thus if
they capitalize at $25,000, presumably they either
consider this amount of stock requisite to the pur-
poses of the undertaking or believe that dividends can
be paid upon that amount.

In certain states a certain proportion of the capital
stock must be paid in. It must have been issued for
value received by or for the corporation prior to the
act of incorporation or before it begins business. Thus

1 82 Sale of Inventions

in Maryland one fourth of the capital stock must be
paid within one year of incorporation, and in New
York one half must be paid within the same time.
It is usually sufficient, however, if that payment be
made in property or services. In the District of Co-
lumbia the provisions are more severe. Here the
entire capital stock must be subscribed for in good
faith, but ten per cent of these subscriptions must
be paid in cash in good faith before the charter is even
filed. So it is necessary to consult the state laws
concerning the full payment of all issued stocks.
Every dollar of outstanding stock is supposed to rep-
resent a dollar of value actually received by the cor-
poration.

Raising capital for stock is easiest when your friends
or business associates will subscribe. Always con-
sider whether interested stockholders will be a help
to your enterprise. A plumber decided to raise
capital to finance his invention. He had some re-
sources of his own and could have raised the necessary
money by borrowing on his collateral and on personal
notes. He reasoned, however, that if he should form
a corporation and sell the stock to the plumbers in
the district where he expected to do business, the
success of his venture would be assured. The plan
succeeded. The users of the company's product were
directly interested in its welfare. Their support alone
secured enough business to establish the enterprise.

Again and again do " ads " appear in the papers
calculated to raise money for stock incorporations.
Take into consideration that some men buy stock
because their friends buy. Selling stocks by means
of expensive prospectuses has already been discussed.

Advertising for Capital 183

The smart stock salesman never asks for all the money
at once. It is usually the case of ten per cent down,
balance in installments. The investor always has an
eagle eye for the safety of his principal. He wants
profits. If you are well informed, you will sell stocks
easily. The investor will not ask you one tenth the
number of questions if he sees that you understand the
subjects with which you should be familiar. There
are many inducements held out to prospective stock-
holders for buying stock. Let the prospective investor
have the opportunity of investing at ground floor
prices. Do not ask par for a corporation just begin-
ning. Start a limited number of shares at a fair price
and create a market for them through circularizing.
You can then offer the next allotment at an advanced
price. Treat the investors rightly. Give them a
square deal for their money.

In due time a corporation organized under excellent
business managers, pushed forward in a good market,
and meeting with satisfied consumers, will " cut a
melon," which means that the corporation will make
an extra distribution to its stockholders. This takes
the form of an extra large cash or stock dividend.

CHAPTER XIX

SALESMANSHIP AND BUSINESS —
GENERAL CONSIDERATIONS

QUESTIONS of policy arising in the course of
marketing an invention must be considered
upon the broad lines of salesmanship and
business. As a knowledge of the principles of busi-
ness with their peculiar bearing upon patents is of
the utmost benefit to every inventor, it calls for sep-
arate mention in this work. This chapter deals with
the salability of an invention. A machine can be
made to do almost anything but sell goods.

In every sale, three factors are to be considered: (i)
the goods, (2) the salesman, (3) the buyer. A sales
talk is anything communicated or issued having as
its object the making of a sale. Before you are ready
to effect the sale of any article, your proposition must
be just right. The man who thinks seriously all
around his proposition, who studies every objection that
can possibly arise, who sees mentally the temper
of his prospect and adjusts himself to it, is the sales-
man who will bubble over with enthusiasm, energy,
and determination which the prospect will find it
difficult to resist. Every proposition must be resolved
into its elements. If you do not grasp your propo-
sition yourself, how do you expect to make it clear
to your prospect? Understand that every sale is made
in the mind. Four steps constitute every sale: at-

184

Salesmanship and Business 185

tention, interest, desire, and decision. Selling re-
quires a knowledge of the working of the human mind.
You must make your prospect think as you would
have him think, and you must know what thoughts
will produce the right kind of action. You must use
suggestion in getting your prospect to display the
right mental action, which may be instantaneous or
require time. When you make a sale, you make it
because of what your customer thinks. He must
be made to give a willing ear. To be successful you
must understand the line of thinking that will make
him buy.

Any salesman knows the importance of obtaining
the right attitude of a prospect before making a
sale. Always get the buyer's point of view. Shape
your selling talk so that you can change from one
motive to another instantly. There are generally a
number of motives that will prompt people to buy any
line of goods. You can generally find out what a
man's experiences have been before you have gone
very far with your talk, provided you give him an
opportunity to tell you.

In trying to influence men, you may feel your
prospect working with you or against you. You
test the springs of action. The man who can hide
his thoughts is generally the man who figures and
deliberates. He is a sound and logical reasoner and
generally successful in business. The voice is the
most important factor in making a sale. When you
make a statement to the average man, look him straight
in the eye. You may use your hands in making ap-
propriate gestures; you cannot avoid doing so at
times. A hearty handshake is an effective gesture.

1 86 Sale of Inventions

Don't be afraid to offer your hand to a magnate or
a banker, as you have no reason to hang your head in
approaching him. Your voice is oftentimes your
best ally. The better command of language you have,
the better will your voice be adapted to influence
people. In building your talk, select your words with
care.

Let your prospect talk, but be sure you hold him to
a well-defined line of talk. Keep him upon your
ground. It does not always take argument to sell
goods, but it most often takes originality and deep,
genuine thinking on the part of the salesman. Be
prepared to get interest in the face of objections.
While getting up interest, don't mention price. Al-
ways talk for your prospect's interest. From the very
start show that it is for his interest you are working
and not for your own alone, that your motive is
not a wholly selfish one, that you are not only selling
him an interest in your invention, but that you intend
to stand back of him with the right kind of service
and see that the invention sells. This will be a clincher.

You cannot talk intelligently about an article un-
less you understand how, when, and where it was
made. You cannot always tell whether your prospect
is interested simply because he watches you and pays
strict attention while you are giving your selling talk.
If a question is properly asked, it will give you a fairly
good idea of the mental attitude of your prospect, how
much he knows, and how he feels about it. You have to
go at it single-handed. Don't do all the talking your-
self, and don't let him do it all. If he will not talk,
fire a battery of questions at him. If he talks too
much, take the initiative and don't give him a chance.

Salesmanship and Business 187

You must make your prospect conceive the whole
proposition in the early part of your talk. Never
let any man tell you anything about your own goods.
You are supposed to know more about them than any-
body else, and you must convince your prospect that you
do. When you bring forth something that pleases,
the facial expressions will indicate it; if it is something
that displeases, you will also notice it. Do not let
him put you on a false scent.

In making your approach, make it in such a manner
that your prospect does not feel that you are after
his pocketbook, that he is expected to buy something.
Seventy-five per cent of salesmen fail to get attention
because they either do not know or otherwise disregard
this simple precept. Your prospect passes judgment
on you and your proposition within sixty seconds
after he meets you. You must see the necessity of
getting on the prospect's side of the fence. In making
your approach, consider the temperament of the man,
his education, environment, and profession. Deter-
mine his point of view in advance, and you will have
a better chance of landing him. You must be needle-
witted.

Getting conviction is harder than arousing interest.
It is the last step in making a sale which wins. You
should be able, while giving your arguments, to find
the real motive that will pull your prospect across. It
is easier to combat a thought before it is uttered than
afterward. To get conviction, you must dwell on
each point until your prospect is absolutely convinced
before you pass to another. If you endeavor to show
that your prospect is wrong, you can do it only by argu-
ment. If you fail to convince his judgment, you fail

1 88 Sale of Inventions

to get action. Conviction is the result of understand-
ing and understanding is the result of knowledge.
You must apply this knowledge in a logical manner.
Your prospect's questions, his facial expressions, his
conversation, will all give you an idea as to what his
past experiences have been. They will tell you whether
or not it is necessary to use argument.

Be sure you keep him thinking as you want him to
think. Be sure you hold his attention every moment.
If your invention has no particular advantage, over
your competitors, you will find it impossible to create
a desire on the part of an experienced buyer. Know
your talk thoroughly; study your prospect; gauge
him carefully; introduce your profit talk tactfully to
his notice; build your talk step by step until you have
created the right moment to get him to resolve to put
up the money.

Whether you intend to make a sale by a personal
call or through correspondence, you should classify
your prospects. As human nature does not vary
greatly, an unfavorable approach will produce an un-
favorable decision. After you have found the men
who will buy your goods, divide them into groups,
arranging the groups so you can get the professional
men in one section, the laborers in another, the farmers
in a third, etc. You will have to tone your letter
differently in each case.

Have a definite business policy in selling your goods.
The idea of Wanamaker is, " All may help, none
shall hinder." You should standardize the best way
in which to sell goods. When you have to hire sales-
men, get specialty salesmen, those who are masters
of their field. The salesman of an adding machine

Salesmanship and Business 189

cannot sell successfully both to bankers and to retailers;
electrical equipment companies find that one man
cannot sell both generators and electric light bulbs.

Marshall Field said, " The customer is always
right."

You must keep everlastingly at it and push your
business. Don't get discouraged. After all, a man
gets just what he deserves. If he wants business,
he has got to pick it up. Every large and successful
advertising campaign has been based on the idea that
people will buy if the suggestion to buy is made strong
enough.

CHAPTER XX

SIZING YOURSELF UP AS A BUSINESS

MAN

t | ^HERE is one great reason for your failure to
obtain capital to push your invention to a
successful termination. It is a lack of detailed
knowledge of what steps to take to be reasonably
sure. You have been a waiter on Providence. The
other hindrances will pale into insignificance beside
this one great bar to progress. You must know how;
then you can help yourself and will not always have
to depend upon others. You must draw yourself
up to your full height. If you are sure that you
will not make a good business man, choose a good
manager, and enlist capital from business men who
are good organizers. To secure a good manager is
not an easy matter. Good managers are constantly
employed and are not looking around for new open-
ings. An inventor should always remember that a
business concern with an up-to-date selling organiza-
tion will probably sell more of the products than a
poorly organized company. Thus the total amount
of royalty received per year from a large sale of in-
ventions may lie even greater under a small than
under a large royalty.

As a rule it can be quickly ascertained whether an
inventor is a good business man by finding out what
his attitude is as to estimating royalties and his knowl-

190

Sizing Yourself Up as a Business Man 191

edge as to what enters into consideration in fixing
royalties. The sum total of all the pointers con-
tained in this book will not avail the inventor if he
fails to understand that royalties are based on a pro-
portion of the net profits which are expected to accrue
from the sale of the invention. He must remember
that the term " net profit " means the amount which
remains after deducting from the gross profits (the
difference between factory cost and selling price)
the cost of conducting the administrative end of the
business. For example, if the factory cost plus royalty
of a patented lock is 2off and it sells for 50^, a gross
profit of 30^ is made. But the factory cost is not the
true cost. To this figure must be added the cost of
doing business, such as office expenses, salaries of
officials, cost of advertising, salesmen's salaries plus
expenses, and whatever losses are caused by bad
accounts. Assume that this amount represents 20 per
cent of the selling price, i.e., zoff. This amount, added
to the factory cost, would make the true cost 3off.
In other words, instead of making 3Off, as the gross
profit would indicate, the net profit is but 20ff, or 33^
per cent less than the gross profit. That is the way
a level-headed business man would view the situation.
No country ever furnished such favorable condi-
tions as this great land of ours for starting a business
in a small way and building it up rapidly. One
requisite is experience; the other, taste or adapta-
bility. If you have no natural liking for any busi-
ness and it is out of your reckoning, do not go into
it with your own or somebody else's money. It is no
credit to waste the other man's money. It will never
do to take chances. If you do not understand the

192 Sale of Inventions

business, you can hire some one who does. The more
a man knows, the more confident he ought to be in
his own field.

There is no mystery about selling your invention.
A man loses force when he lets himself become con-
fused by the bigness or the complexity of the things
around him. A young man came from a country
town to a great city. He was at first greatly be-
wildered by the tall buildings. In every business
house he entered, he was confused by its extent and
complexity. The bigness of things overpowered him
and made Him feel uncomfortably insignificant. But
one day as he stood looking at one of the tall build-
ings, he reasoned that it was merely a pile of bricks
placed one on top of the other. Men like himself
had put it up. The plan was great; the plan was
a thought which enabled him to learn to think. In-
stantly the mystery of the tall building was gone and
the bigness of things ceased to overpower him. He
succeeded partly because he had learned that cities
are built a brick at a time and that even the greatest
of things are not mysterious when we reason them
out. He himself had raised up the curtain.

When you are seeking to interest men in starting
you in business by furnishing capital, you are trying
to sell a part of the future products of your brain for
a consideration. If you are a man of the best quality,
you will stand squarely on your legs. The better
salesman you are, the better are your chances to win.
You must understand the fundamental principles of
salesmanship and have infinite capacity for details.
You have perhaps felt sure that you could not raise
the capital yourself. You may feel the lack of knowl-

Sizing Yourself Up as a Business Man 193

edge or experience, therefore you must seek help.
You can become independent of one kind of work
only by learning how to do another kind. You must
put every ounce of your energy into the crucible.

Inventing is a business like everything else. The
key to your achievement is your ability to wield in-
fluence over men. If you want the confidence of men,
you must give ample proof that you deserve it. Idle
money never made any one rich. You must set it
at work. Generally " luck " is merely the result of
foresight and nerve. You must lock the wheel of
fortune when it reaches you. Follow your own judg-
ment; as a rule it will be right. The distinction be-
tween the successful and the unsuccessful man is that
the man of success knows not only the value but the
necessity of action. With him to wish is to act.

Pattern your efforts after men who, as inventors,
have made good as business men and whose products
have founded industries. There is the rub: The
vast majority of practical inventions are made by
men of whom the public never hears. There should
be a way to make them known. Mr. Edison is a type
of inventor who has the money idea of any invention.
It was pounded into him by very severe knocks.
You must have imagination in this line of work — this
more than technical experience. Don't be a machine
for others all the time. Take all the advantages
offered for betterment. Now or never!

If your invention has merit, don't be afraid to push
it for all it is worth. The business world is searching
with a lantern for men with an original as well as a
practical frame of mind. Hold yourself in readiness
for your main chance. " The biggest asset of any

194 Sale of Inventions

big industrial corporation to-day, " said the chief of
the engineering corps of a great corporation, "is to
obtain men of the right sort." " The right sort " is
denned as follows: " It is easy for us to get good,
faithful, plodding scientists. They all have their
place and we could not do without them. But the
difficult thing is to get men who think differently from
other men, who do not follow precedent but will strike
out new and original lines for themselves. Out of these
men, we get our development" He is referring to in-
ventors, men who do not tread beaten paths.

Start up and do something, and forget everything
else. If you are past your prime and enjoy a good
state of health, get started. Have you done the
biggest things you are capable of doing? How long
have you been just an ordinary employee? Do you
realize that habit is getting a tremendous grip on
you? Are you just waiting? For what? Orison
Swett Marden, whose " Success " books have stimu-
lated many men in different walks of life, says in his
book entitled " The Victorious Attitude " : " There
are thousands of devices in the Patent Office in Wash-
ington which have never been of any use to the world
simply because the inventors did not cling to their
vision long enough to materialize them in perfection.
They became discouraged. They ceased their efforts.
They let their vision fade and so became deenergized
and lost the power to realize them. Other inventors
have taken up many such ' near ' successes, added
the missing links in their completion and have made
them real successes." The secret of all this, you
will find, is to make a profit from the labor of others.
Use your head. It is there for that purpose. Do

Sizing Yourself Up as a Business Man 195

both the planning and executing for a while, then let
others execute while you provide the sinews of busi-
ness. This is called " knowledge of the world of
affairs."

CHAPTER XXI
ELEMENTARY CONTRACT LAWS

THERE are certain principles of law which every
inventor should know and apply in the course
of his dealings with financial people in order
that no unfair advantage be taken over him by men
big in the commercial field. They relate to the mak-
ing and execution of valid contracts. It is hoped that
the inventor will familiarize himself therewith, as
there are times when he may not have the opportunity
to consult a lawyer.

The rules of law governing contracts are of great
importance to the inventor, just as they are to every
business man. This consideration of law forms an
important part of every discussion of points relative
to exploiting inventions. You must know the various
ways of interesting capital and their several advan-
tages and objections, because it is in just this con-
nection that a great many inventors make a fatal
slip. There have been numerous suits between li-
censers and licensees owing to misunderstandings of
agreements or contracts. Most of these could have
been prevented if care had been taken before the
contract was drawn to make sure that the " minds
of both parties met," as the legal term puts it. Those
who make contracts should know law in order to be
exempt from mistrust.

196

Elementary Contract Laws 197

In every contract and in every sale there must be
an offer and an acceptance. The minds of the two
parties to the sale must have met on a specific object.
You may agree with your merchant to take a suit of
clothes at a specific price. There has been an offer
and an acceptance, and the minds of the parties have
met. The sale is complete, although no money has
yet passed and the suit is not in your possession. The
acceptance of the offer must be absolute and in ac-
cordance with its terms. In the above illustration,
if the merchant offered you a suit for $35 and you
offered him $30 for it, the contract is not complete
and there is no sale, because you are introducing new
conditions into the contract. Even if you return
later in the day and agree to take the suit at $35, you
cannot, if the merchant refuses, compel performance,
as you failed to accept his original offer.

Brown might offer to sell you his house for $1000.
You accept his offer provided he will take $300 down
and your 30-day note for the balance. This is a qual-
ified acceptance and does not constitute a contract.

The Offer must actually be Communicated to the
Party Accepting It in order to Meet the Requirements
of the Law. — If the offer reaches the second party in
an indirect way, the offerer is not bound to perform.
Thus A. may offer to sell B. his horse for $100. B.
refuses but tells C. about it and C. accepts the offer.
A. is not compelled to sell the horse to C. However,
if his offer is made to the public, then any man meet-
ing the requirements of the offer can compel A. to
perform.

As a general rule the acceptance must be made in
the manner in which the offer is made. If the offer

198 Sale of Inventions

is made through the medium of a letter, the acceptance
should be made in the same way. This also applies
to a telegram. If the offer is made by mail and the
acceptance is made either by messenger, telegraph,
or telephone, provided the means of acceptance is
speedier than the mode of offer, the contract is valid.
If you accept a contract by mail, it is complete as soon
as you mail the letter. Even though the letter be
lost, the contract is valid, and the offerer has no right
to sell the goods. If he does so, you can compel him
to perform or sue him for damages. He may protect
himself, however, by stipulating that the contract
shall not go in effect until the acceptance has actually
been received by him or he may designate a time limit.
It practically comes to the same thing. If I offer you
a thousand yards of woolen cloth at 50j£ a yard to
hold good for ten days, you may accept it at any time
within the ten days. If you mail your acceptance on
the evening of the tenth day, the contract is binding.

Silence as Acceptance. — The offer may be with-
drawn at any time before it has been accepted. How-
ever, if it was accepted before it was withdrawn, the
contract is complete, even though the offerer has not
yet received the acceptance. If a consideration is
paid to hold the offer open for specified time, the
offerer cannot sell until the expiration of that time.

Rights of an Agent. — If you are acting as an agent
of a firm, any contract made by you will be binding
on the company, even though you happen to be a
minor. If you are clothed with authority to sell
certain goods and quote certain discounts and these
are accepted by the buyer, the contract is valid and
binding although you may orally stipulate that those

Elementary Contract Laws 199

figures will be subject to the approval of the house.
The mere fact that you are clothed with the authority
to quote the discounts and that there has been an
offer and an acceptance made in good faith, makes the
contract binding.

Consideration. — In order that your contract may
be valid, there must be some consideration, although
if the contract has been fully performed by both
parties, it will not be set aside merely because there
is a lack of consideration. The mere fact that you
make a promise to give certain articles to another
party, is not necessarily binding on you. However,
if the gift has already been made, it cannot be
revoked.

Valuable Consideration. — The consideration must
have real value. It is not necessary for it to be equal
to that offered, but in law it must have some value,
because it would be impossible for the courts to tell
whether or not a thing has the value it is supposed
to have. If I am indebted to you for $100, I might
send you $50 and if you agree to accept this for the
account in full, you may later collect the other $50.
However, if I send you $50 and any article regardless
of what its value may be, and you accept it, the claim
is considered settled. If you make a promise to ex-
tend my period of credit for six months longer after
the obligation becomes due, the promise is void unless
I pay some consideration in lieu of it.

A contract need not always be in writing except
when we deal in lands, where it is an assignment in-
tended to be recorded in the United States Patent
Office, and in all cases where the law provides that
instruments shall be in writing. However, under the

2OO Sale of Inventions

Statute of Frauds a contract not to be performed
within one year must be in writing. The Statute of
Frauds also provides that any agreement to answer
for the debts or defaults of another must be in writing.
If John Brown enters Smith's store and remarks,
" Sell to Jones or any member of his family all the
groceries he needs and I will pay for them," this con-
tract need not be in writing. But should Brown say,
" Let Jones have all the groceries he needs, and I will
pay for them if he does not" this contract, under the
Statute of Frauds, must be in writing.

Fraud. — Where there is real fraud entering into
the contract — it makes no difference whether it is
on the part of the offerer or the one who accepts —
the fraudulent party is liable in tort. If you are a
salesman and make a false statement, knowing it to
be false, you will be held accountable for it. If you
make a false statement believing it to be true, you
will not be held for fraud. If the party who has been
defrauded accepts any of the benefits of the contract,
the court will offer him no redress.

Contracts. — The contract may also be oral. It
may be an implied contract. In order to make an
implied contract valid, it must be not merely a mental
determination on the part of the second party to
accept, but must include some action to show that
he intends to do so.

Title. — It is important to know when a title passes
in a sale. When you go to a clothing firm, select a
certain suit, and agree to pay $35 for it, then as soon
as the offer has been made and you have accepted
the suit, the title passes immediately, although you
have paid no money and have not got the suit. How-

Elementary Contract Laws 201

ever, if the firm agrees to alter the suit in any respect,
the title to the goods will not pass until such alteration
has been made.

Making a Change before Delivery. — Where there
is a contract for the sale of specific goods and the seller
is bound to do something to the goods before delivery,
the title to them does not pass until the change has
been made. You may purchase an auto and agree
to pay two thousand dollars for it with the stipulation,
however, that your monogram is to be painted on the
door of the machine or, perhaps, that the tires are to
be changed. The title does not pass until such changes
have been made.

Sales. — In making a sale by sample, there is al-
ways an implied warranty that the goods will be
salable and merchantable.

Breach of Contract. — It is not unusual to find a
case in which one of the parties to a contract of sale
will not perform his part either because it is oppressive
or for other reasons. The question then arises: " What
are the respective rights of each of the parties under
these circumstances? " The purchaser may refuse
to perform his part of the contract by declining to
receive the goods, or after the goods have been received,
by declining to pay for them. In case the title has not
yet passed to the purchaser and he has not received
the goods and if he still refuses to accept them, the
seller may avail himself of either of the three follow-
ing remedies: (i) He may resell the goods after first
actually tendering them to the purchaser; (2) he may
hold the goods for the purchaser and sue him for the
entire amount of the bill; (3) he may keep the goods
and sue for damages to cover the difference between

202 Sale of Inventions

the sale price of the goods and the market price thereof
at the time the contract was made.

Payment. — A check is not legal tender, and the
man who takes it in payment of goods, does so at his
own risk. If in the sale of goods no place of payment is
designated, it is the duty of the purchaser to find the
seller and remit to him. A receipt is generally con-
sidered evidence of payment.

Power of Attorney. — When a person wishes to dele-
gate to an agent or a representative the right to tran-
sact any business which necessitates signing checks
drawn against his account or the signing of papers
which carry any obligation, he issues to such agent
or representative a written power of attorney, a reg-
ular legal form conveying to him the power to sign,
placing a limitation as to time. Such power of at-
torney shall be in force as the circumstances of business
may require.

If one party agrees to stay with another and give
services and the other party does not agree to give
payment for services, the agreement is void. A mere
contract to sell an invention to a prospective buyer
is not an assignment.

Hire your own lawyer. Do not be tied down by
onerous contracts. The manufacturer usually in-
sists on his own attorney's drawing any agreement.
Consequently, an inventor must be sure that the legal
phraseology of the contract follows the oral arrange-
ment already made. Never under any circumstances
sign a contract until you have submitted it to com-
petent counsel to whom you should state in your own
language your understanding of the arrangement.
He will tell you whether the contract follows it and

Elementary Contract Laws 203

also whether there is any opportunity for a future
misunderstanding owing to the phraseology. To
detect any variation will mean a use of the " biter
being bit." Any price the attorney reasonably charges
is worth the service rendered.

CHAPTER XXII
MISTAKES OF INVENTORS

X^jHAPTERS could be written on mistakes of
I . inventors and patentees, but a word to the
wise is sufficient. In order to gain the ready
ear of the inventor it has been deemed advisable to
correlate and assemble here various suggestions bearing
on all the topics discussed in this book. They are
so vital and all-pervading that they had best be con-
sidered together. The inventor who carries with him
the precepts herein mentioned may obtain more
momentum for his efforts to sell his invention and
may have his eyes opened to undreamed realities.

It is doing the right thing at the right time that
marks the successful inventor. The quickest way
in which this can be done is to avoid doing the wrong
thing at any time. Hence this is a chapter on don'ts.

There is no reason for an inventor's failing to ob-
tain commercial success in disposing of his patent at
a profit, if he will ascertain what is necessary for
success. This is a day of short cuts. If you take
the long way round, you will never arrive. You must
keep moving. Spend your time and money on money
savers rather than on frills. Do not fritter away
your money on untried schemes. Always get the
advice of a specialist before you entertain high hopes
about your invention. Visionaries don't count these
days. Most inventors allow nobody enough time to

204

Mistakes of Inventors 205

size an invention up. Don't look for an immediate
success unless you are familiar with the points dis-
cussed in this book, for every successful inventor exem-
plifies the precepts revealed. Always follow your
better judgment in disposing of your invention. No
doubt, you have noticed in your experience that every
time you acted against your better judgment you
made a mistake. That is to say, when you followed
impulse in preference to a cold, calm weighing of
facts, you found you were wrong. This is a common
experience of mankind. Whenever, in an unguarded
moment, you became over-enthusiastic, no doubt you
found ,you were sitting on a barrel of gunpowder.

Some inventions drag along for years without getting
to a paying stage and then suddenly make fortunes
for their owners when the patent is almost run out.
You may find yourself in a similar position. It may
happen with one in a thousand, but you may be the
lucky one.

There is no recognized body of men known as patent
brokers or patent agents who make a regular business
of selling inventions. These cannot exist, because
such a business would require a diversity of knowledge
and quality seldom found in an individual. The
selling of a patent requires a very intimate knowledge
of the practical side of the trade to which it particularly
relates. No man can claim the possession of such an
experience in every trade.

An inventor is an optimist, for a pessimist would
not invent anything. The great bulk of inventions
are improvements which enable a person to do a thing
in an easier way. Other inventions are revolutionary.
The real inventor is almost always a worthy man,

206 Sale of Inventions

and he remains honest after being knocked in the
head incessantly. Being honest himself, he believes
all others honest. Thus he sometimes becomes the
victim of an unprincipled promoter; this is the un-
fortunate part of it.

Often a matter of a fraction of a penny decides the
question whether the article will be a commercial
success or a failure. All questions of cost must be
fully worked out by the inventor so that he will come
fully armed at every point with facts and figures, not
only for defense but also to carry conviction to the
mind of the person to whom he speaks.

The worst possible thing to do is to misrepresent the
actual facts or figures. Convince yourself first that
your invention will be a success. No inventor who
has tried this advance investigating work has ever
been sorry for it after, or has failed of success in secur-
ing capital when he has exerted himself, especially
when his invention has proved meritorious. Don't
confuse invention and financeering. To invent is
not synonymous with get rich quick. No mechanical
system can be operated at a hundred per cent efficiency,
as you know, so don't make such extravagant claims.

CHAPTER XXHI

THE SAFETY VALVES OF MARKETING
INVENTIONS

f | AHE way to wealth is as plain as the way to
market. " If depends chiefly on two habits:
industry and frugality. Waste neither time
nor money, but make use of both. " Without in-
dustry and frugality, nothing will do and with them,
everything." — Franklin.

" Opportunities exist everywhere for men who are
determined." — Governor D. Forrest Richards.

George E. Walsh, a successful inventor, said that
in his experience he had been a little over-enthusiastic,
but that he did sell inventions. He was glad to sell
a game and puzzle outright for $150, only to find out
later, to his great disgust, that had he handled the
thing right, it could have been made to net him a
hundred thousand dollars which others actually made.
He advises the inventor either to make his invention
himself or to sell it on a royalty basis. Such cases
speak volumes.

An inventor offered an important invention to the
largest paper manufacturer. He turned down an
insignificant cash offer and accepted a royalty con-
tract which he signed. But imagine his surprise
when he found that the company failed to manufacture
the invention, and there he was without any remedy or
recourse. Here was a typical critical situation, a

207

208 Sale of Inventions

lion in the inventor's path. Years and years passed
with the situation the same. Suddenly he awoke to
the fact that he had failed to specify in the royalty
contract the time when the thing was to be marketed.
Now there are no sovereign remedies for such cases.
By acting prudently you will avoid such troubles.

The stationery of promoting companies is usually
all that could be desired; indeed, it is often overawing
with its names of officers and references. Usually a
handsomely printed pamphlet is mailed to inventors
which makes it appear as if the company had handled
practically all the successful inventions of the day.
In this way, the company gets many patents; some
that prove valuable are gotten rid of in numerous ways
unknown to the inventor. But enough of such dis-
heartening instances.

There are probably more inventors or would-be
inventors at work in this country than there are doctors
or lawyers. They turn out tens of thousands of
practical and impractical devices, only a small per-
centage of which is patented. Not all may prove
successful, but the money earned on some is incal-
culable.

The average inventor who wishes to sell an interest
in his patent, say a half, quarter, or eighth interest,
usually makes an assignment of this to the investor
in consideration for so much cash. The procedure
is disadvantageous both to the inventor and his part-
ner. It makes, in fact, an undivided and indivisible
partnership which leaves either party free to deal
with the invention as he pleases without accounting
to the other. Now it makes no difference if you
assign a one-hundredth interest or a one-half interest

Safety Valves of Marketing Inventions 209

therein. The fact is that either of you can proceed
to exploit the invention without accounting to the
other. In this condition it is practically impossible
rto negotiate the rights of either separately, and the
whole cannot be sold without the consent of both or
all those having an interest. It is a predicament
from which reason recoils.

Either party can grant a license or territorial rights
to the invention without the consent of the other and
without accounting to him for the profits. In so doing,
he sells only of his own. Thus the invention, instead
of being a monopoly, may degenerate into a competi-
tion in which the interests of both are wrecked; or
it may be wrecked from your failure to agree upon
the manner of procedure. When both parties are
reasonable and cooperate fairly, no disadvantage re-
sults; but friction is apt to occur and this should be
avoided by inventor and capitalist. The way out of
it is to place the title in the hands of a trustee, or., by
incorporating conditions of mutual agreement to sell
in a contract of assignment. This mode of contract-
ing for capital is largely confined to cases where capital
is sought to perfect inventions.

An invention, however clever, cannot be exploited
without expense. Of this the expense of exploiting is
greater than the expense of patenting. Outside the
crop that grows on the soil, there is no single source
which has produced such great wealth for this nation in
the past as the patent system. The prime stimulus to in-
vention is reputation. The fact that makes men work
at almost anything in the world, when they are men
of the proper stamp, is the reaching out for reputation
and credit for having accomplished something.

210 Sale of Inventions

An inventor has imagination. He has high ideals
and has people's sympathy. The ordinary run of
inventors are well paid; many of them have made
large returns. Frederick P. Fish, Esq., one of the
foremost patent lawyers in the country, is authority
for the statement that inventors as a class are better
off than lawyers. There is a reason why they should
be. They do financially better than poets, and yet
their work is somewhat in the line of poetry.

In the course of a few years a good invention may
be superseded by one that is better. An invention
may be in a form which is practically worthless until
it has been redesigned, reshaped, and reorganized so
as to be better adapted to a thousand and one condi-
tions that the inventor very likely does not know
anything about.

The bad feature about royalty contracts, which
makes an outright sale preferable, is that royalty
agreements make it necessary for an inventor to watch
the business very closely, and that he usually cannot
do.

Financing an enterprise in New York City is not
an easy task, as the writer knows from his own ex-
perience. He made an invention and put it on the
market, but was not acquainted with the best market
at that time. It cost him quite a little fortune to get
started. You must come armed to withstand a long
siege, although it is possible to live economically in
the city. The people of New York are very cos-
mopolitan; as long as a man dresses reasonably well,
they care not how he lives when not in sight. A New
York banker told the writer, who made a deposit in
the former's bank with a view of beginning the market-

Safety Valves of Marketing Inventions 211

ing of his invention, that " every inventor comes to
New York attracted to the city like a magnet and
thinks that the people will fall for his invention. They
do so whether or not there is likely to be a market
for the article, because they know that money is
plentiful there." Do not think that when you come
to this city, your past history and present standing
are a sealed book. This is not the case. They will
look you up through some commercial agencies or
through private sources. While there is plenty of
money in New York City for good enterprises, the
competition among the latter is very strong.

George M. Reynolds, President of the Continental
and Commercial National Bank of Chicago, a leading
banker, says: " Nobody can make a fortune by saving
money from a salary or from wages. I think I have
never accomplished anything big in my life, that my
friends have not urged me to take a different course."

A man, to make money, must think for himself.
There are always on all sides people ready to give
advice. Then there are those who are always seeking
advice. It is better to fail once in a while than never
to have the courage to succeed. Courage is as much
of a necessity to the man or woman who wants to
build up a fortune, as it is to a soldier on the battle field.

CHAPTER XXIV

SUGGESTIONS FROM THE AUTHOR ON

EVERY PHASE OF SELLING

INVENTIONS

1. After a man once gets the idea that he is capable
of bossing instead of being bossed, we say to him he might
as well die fighting to be a business man as to die working
at some job which to him is nothing but slavery if it
offers no means of advancement. Be it far from us to
judge a man by his past. Most of us have "Histories."
We all do about as well as we can " considering." But
from to-day on, things may be different.

2. Take a partner. Do your best for two, three,
or four years, then sell out and go by yourself. We
should like to see you eventually in an entirely inde-
pendent condition. There is nothing like being your
own boss. Plans in this book are intended to pave
the way for your success in carrying out that idea. You
can cooperate with us. You should find men with
practical suggestions to write the ads and letters appro-
priate to the nature of your invention.

3. A good rule for every inventor is, " get it down on
paper." This is not only done for the information of
others but also for making a point clearer in your own
mind.

4. When you need aid, first seek a friend, — a friend
who is ever ready with a jolly reply, a good story, a happy

212

Suggestions from the Author 213

thought. Take such a friend into your confidence.
Be very sure of his loyalty first. Study your plans
together. You may succeed in interesting him. He
may not be cleverer than you, but he can say things which
would not be appropriate for you to say about yourself.
Two heads are better than one. More than one friend
should hardly be necessary. This plan is for one who
is inexperienced, bashful, one who hates to take a turn-
down. He who is nervy, ambitious, unafraid, courage-
ous should go after the capital himself in any of the ways
suggested.

5. Whom should you choose among your friends?
Look them over and pick out the one whom you consider
loyal, clever, and withal a good talker.

6. Advertising for partners always brings a per-
centage of replies from investors who have plans of their
own, different from yours, perhaps better. This applies
also to any of the class we have already referred to as
making good seconds to assist you. You will find
that they have plans. Listen to them; sift out the bad
ideas and accept those that are genuinely serviceable.

7. Thinking is all right, but action only makes for
success, just as yeast added to flour makes the dough.
Do not be disheartened if your proposition does not
succeed right of the red.

A frequent objection to starting in business is the lack
of capital. Possibly your lack of experience in your
proposed enterprise has kept you from trying for capital.

8. Perhaps you have tried for the money and failed,
have become discouraged and gone back to the old place
with a heart as heavy as that of Job in all his misery.
That experience should not trouble you in the least.
Other men have suffered the same defeat and then turned

214 S<de °f Inventions

it into victory, why not you? If you have su/ered defeat
and humiliation in this way, there is alt the more reason
why you should be guided by the counsel and advice of
those who know, and thus save yourself further sad
experiences of a similar nature.

9. " // you want to succeed in the world, you must
make your own opportunities as you go on. The man
who waits for some seventh wave to toss him on dry land
will find that the seventh wave is a long time coming.

You can commit no greater folly than to sit by the road-
side till some one comes along and invites you to ride
with him to wealth and influence." — JOHN B. GOUGH.

Money raising is a question of a little study, applica-
tion, and patience-, that is all there is to it. Merely a
little knowledge, a little trying, a little time, and the
thing can be accomplished.

10. The secret of the inventor's success is never-ending
application. This has enabled corporations such as
the National Electric Light Association, the Western
Etectric Company, etc., to have inventors1 departments.

11. Owing to the European war there have come
gala days for the inventor. No other age witnessed
such keen rivalry in things mechanical. The inventor
must supply the wants of man. It is true that many
ideas of the utmost commercial importance are slumber-
ing. We are trying to make the inventor a better busi-
ness man so as to enable him to help himself in a hun-
dred ways he never thought of. You have but to try.
The rewards are great enough.

12. There is only one thing in the word "investor"
which distinguishes it from the " inventor " and that
is the " s." This " s " stands for " success." Every
inventor should understand this from the very beginning.

Suggestions from the Author 215

13. Where an invention can be put to several different
uses and can be used in different lines of manufacture,
deal with each line separately. In this way the inventor
can kill two birds with one stone and sell two compute
patent rights while owning but one patent. Thus the
manufacturer of flour is not interested in cement, so if the
new process of grinding be equally applicable to both,
the patent rights might be sold separately. The rights
for an improved line reel were sold separately for use as
a clothesline holder and for a surveyor's tape, while the
inventor still retained rights for other purposes, e.g.,
as a fishing tackle. The inventor must always consider
such possibilities. He cannot assign certain claims of
a patent without at the same time assigning the entire
patent.

14. The inventor should retain at least a minority
interest in the corporation organized to push his invention,
even if in addition he has a royalty, this in order to have
a voice in the management. If the inventor has taken
royalties and does not own stocks, his contract should
make proper provision for protecting his interest, e.g.,
causing the directors to consent to certain actions of the
corporation affecting the inventor's interests, such as his
right to inspect the books.

15. See that your prices are reasonable. Place a fair
price on your invention, and you will do a brisk trade. If
you charge an exorbitant price, your sales will be small at
the beginning, and it will be difficult to start a profitable
business. Besides, high prices excite competition and
infringement.

1 6. Over six hundred million dollars are spent an-
nually in the United States for various forms of ad-
vertising. Logical advertising methods in marketing

2i6 Sale of Inventions

inventions will always triumph sooner or later. Cream
will always rise to the top; water will always find its
level. ThereJ$ no stopping it. The successful man who
advertises is no slacker when it comes to spending money
to get business. Not he. " The sky's the limit" is
his slogan.

17. // your invention is for use among farmers, the
easiest and best way to get them interested is to get up a
list of names of farmers with money in any locality you
are interested in. Such a list would not cost you more
than an average of $£ per name. The important thing
about this plan is the fact that the farmers you go after
are known to have money and you want only them. One
way for an enterprising inventor would be to write a
letter to the assistant cashier of the bank in the towns
you are interested in, offering $£ a name for a list of
local farmers of standing. When the list comes in, have
it copied in triplicate and send a copy to the justice of
the peace and the editor of the newspaper in each town
asking them to check the list for accuracy and to add
any names not listed. For this service there should be
enclosed with each letter a check for one dollar.

1 8. To a young office manager came the opportunity
to purchase the patent rights of a household specialty.
Investigation showed a ripe field for the article. Ac-
cordingly he roped and branded his opportunity. He
started out right from the very beginning and sent out
circulars based on a carefully selected and verified list
of names. Each circular brought back orders. Within
a month the business found itself. This seeming marvel
was accomplished simply by knowing how to compile
and handle lists of names.

19. Do not forget that for every inventor defrauded

Suggestions from the Author 217

by the manufacturer there are scores of capitalists who
have lost fortunes financing impractical inventions.

20. Eliminate all sentimental feeling in connection
with your invention. Be its own worst critic. Adjust
your viewpoint towards it so, that instead of its becoming
a part of you, as so often happens, you can, figuratively,
criticize it through the eyes of your unfriendliest ac-
quaintance. The novi-ce will at times cover up a known
defect, refuse to admit it, even to himself, in the hope
that no one else will discover it. Get that line of reason-
ing out of your mind instantly. Every invention has or
will develop a competitor. You may be sure he will
find the defect. What is the use of deceiving yourself
when to do so results to your own misfortune?

21. // the inventor has confidence in the money-
making possibilities of his invention, the best plan will
be that of operating the invention on a royalty basis.
In considering the method the inventor sometimes fails
to recognize the fact that a royalty, if sustained in amount
year after year during the life of the patent, is the same
as having a sum of money invested during the period,
which would pay in interest the amount of royalty received.
Thus if the royalty amounted to $500 per year, it is the
same as though the inventor had $10,000 invested drawing
interest at five per cent per annum during this period.

Licensees do not need exactly to ascertain the precise
validity of a patent, for they are not buying the rights.
They are merely buying the use of the invention. Still
they will want to know whether the invention can be used
without infringing other and existing patents.

22. The seller should not be required to guarantee
the validity of any patent. That the patent is valid
should be taken for granted by the parties and therefore

2i8 Sale of Inventions

placed at the commencement of the deal among the recitals.
Even the United States Government does not guarantee
the validity of every patent it issues, so why should the
inventor do this?

23. Size, shape, finish, and even the kind of con-
tainer have a marked influence on the successful distri-
bution of many patented articles. When distribution
to the consumer is largely through middlemen or jobbers,
suitable size, pleasing shape, and handsome finish are
frequently the deciding factors between two articles ap-
parently equally operative and selling at about the same
price.

24. Sometimes, after experiment on a model, the entire
nature of the invention is changed. We have in mind
an inventor who, after the expenditure of much time,
thought and money, evolved a successful smoke con-
sumer which, by a not entirely unnatural process in a
model building became an improved furnace feed. Then
by a very singular change, the former smoke consumer
came out triumphantly from all the experiments as a very
effective gas stove. This was patented, manufactured,
and put on the market with much success.

25. Investors object that the largest interest in an
invention enterprise goes to the promoters. Some years
ago a valuable little invention had been perfected and
was ready to be placed on the market. The inventor
offered it to some promoter friends for $25,000 worth
of stock of the company they were to organize. Had
these friends been reasonable, they would have capitalized
it ai a figure somewhat commensurable with the amount
to be paid the inventor, and the invention would have
attained the success it merited. But the promoters
promptly capitalized the enterprise on the unwarranted

Suggestions from the Author 219

basis of $100,000. Of this amount $25,000 was to go
to the inventor and $25,000 to be sold for working cap-
ital. The remaining $50,000 worth of stock was to
come to themselves. The enterprise naturally came to
grief, not from any lack of merit, but simply because
the overcapitalized offering was not attractive to men with
money.

26. If a manager is to give his time to the operation
of the business, a demand for reasonable salaries or stock
compensation is fair.

27. Six or eight-line " ads " are as a rule worse
than useless. The only responses in many cases come
from people who offer to find capital for the advertisers.

They are not reliable, as the writer found when he tried
this expedient in New York City. Do not appeal to
the houses that advertise they can secure capital. They
want advance fees, always demand money. If the enter-
prise is not incorporated they will tell you to incorpor-
ate. If it is already incorporated, they suggest rein-
corporation. They tell you to get an issue of bonds and
to take out foreign patents. They all want retainers.

28. Does advertising pay? There are around two
million stores in the world to-day, and three fourths
of them advertise. It does not seem likely that they
would pay for something of no value. There are over
one million periodical publications in the world, ninety-
nine per cent of which are supported by advertising and
could not exist without it. Are they receiving money
for something of no value? We do not think so. The
larger city papers carry columns of financial advertising
every day, most on Sunday. Many of them have several
pages of such notices. One page costs for one time from
a thousand dottars down. Investors read the papers

220 Sale of Inventions

and look for opportunities, just like the rest of us mortals.
Investors want more money, because the more money
one gets, the more uses he finds for it and the harder he
will try to obtain it.

29. The successful inventor is not a one-idea man.
He must be on the watch for " something better " all the
time until he and his expert advisers are convinced by
actual tests in actual service that the invention is ab-
solutely right in every way. The successful invention
of to-day dominates its particular field. Why? Be-
cause it is better than others.

30. A patent may be wholly without value during its
life. Then some economic change may occur after it
expires which will render the unprotected invention of
great value.

31. Some patented inventions are purchased even
though they are of no commercial value. Their only
value lies in the fact that they contain some ideas which,
combined with other ideas, will result in an entirely new
machine.

32. A patented article often has a secondary value to
a manufacturer. This lies in the advantage the public
finds in patented articles. They prefer to buy these
goods ', and while they really give more money for them
than for other goods y still the maker is able to sell a line
of goods below the market price because of this increased
patronage.

33. Edison says that most large firms prefer to buy a
patent outright. We quote: " Although I have taken
out more than a hundred patents, I never had more than
one under a royalty agreement that I recall"

INDEX

ACCEPTANCE, necessary to offer, 197, 198

silence as, 198

ADVANCE investigation, when necessary, 206
ADVANTAGES, tabulation of, 36
ADVERTISING, capital raising by, no

lack of effective, no

newspaper, 168

promoter sharks, method of, 152, 153

quickest method of, 167

retail dealer, 84

when to enlist service of expert in, i6a
AGE, success independent of, 57, 58
AGENCIES, fostering and selling inventions, 125
AMERICA w. EUROPE, after-war conditions, 86, 89
AMOUNT of money needed govern* costs of replies, 170
APPROACH, how to make toward prospects, 188
ARGUMENTS, answering, of competitors, 35, 36
ARTICLE, condition of, influencing demand, 62

factors of which influence demand, 61
ASSIGNMENTS, conditions and formalities of, 166

example of, illustrated by paper-box, 131, 132

outright sale of patent by, 130

protective provisions of, 131
ATTENTION, how to get, of prospect, 187-188
ATTITUDE, getting, of prospects, 95
ATTORNEYS, royalty contracts should be drawn by, 133

when indispensable to inventor, 164

BICYCLE taken as object lesson in claim writing, Chapter 5
BOARD or DIRECTORS, importance of choosing good, 179
BONDS AND SHARES o* STOCK, difference between, 181
BURDEN of proof of showing merit, 108
BUSINESS, fit for, men must be, 190

invention must be pursued like, 22

knowledge, inventor should gain, 192

221

222 Index

law, necessity of, to inventor, 96
selling invention is a, 28, 29
subjects inventor should be familiar with, 104
working up, in inventions, 120
BRANDEIS, JUSTICE, and opinion on inventions, 60

CALL, making personal, to explain invention, 116
CANADA, means adopted by, for scientific research, 125
CAPITAL, confidence necessary to raise, 55

obtaining, from small beginnings, 29, 30

prospectus to raise, when necessary, 121

raising, not hard, 105
CAPITALIST, eager to invest in right article, 5 7

should pay expenses of a model, 51
CAPITALIZATION of corporations, 175
CAPITAL STOCK, when issued, full paid, 182
CAUSES of failure to raise capital, no
CITY, demand creation as affected by, 64, 65
CLAIMS, broad vs. specific, 42

broad should not be too sweeping, 45

definite, example of, 47, 48

definition of, 41

excessive, should be avoided, in

function of, 41, 42

good, protect, 2

misleading, also misdescriptive, 46

operative structure defined by, 44

redundant, example of, 49

theory of, 6

CLASSES who invest, 112
CLASSIFYING buying public, 136

COMMERCE, after-war preparation for extension of, 87, 89
COMMERCIAL AID, necessity of, for contracts, 164, 165
COMMISSIONER or PATENTS, 60
COMPETITION, is always present, 79

competitors' point of view in, 35, 36

good for business, 73

merit vs., 3

patent claims and, 2

COMPETITORS, estimating number of, in given locality, 63
CONDITION, assignment in contracts, 165-166

control of corporation obtained by, 177, 178
CONFIDENCE, inventor should have, 102, 103

Index 223

inspiring, HI

success obtained by, 56, 57

CONFLICTING IDEAS, shutting out, from prospects, 188
CONSIDERATION in contracts, 199
CONSUMER decides market for article, 70, 71
CONSUMPTION of articles, special factors controlling, 69, 70
CONTRACTS, assigning inventions, 163

consideration, 199

corporation organized under, 177, 178

law of, 196

partnership, 172, 173

CONTROL OF CORPORATIONS, how given, 176, 177
CONVICTION, how to instil in prospect, 188
COOPERATION between inventor and investor, 38, 59
CORPORATION, conditions of starting, 177-178

kinds of, 174

when desirable, 182

CORRESPONDENCE, interesting people by, 159
COST, estimating of inventions, 81, 14, 15, 16

of models, 17

COURAGE of conviction an asset, 211
COURTS, attitude of, on price fixing, 72
CREATING demand for inventions, 61
CRITICS, inventor should listen to, 72

DEALER must be kept supplied with article, 52
DEFECTIVE PATENTS, 10, u
DEFINING limitations in claims, 7
DEMANDS, necessity of, for invention, 61

should regulate supply, 62, 63

trade conditions influenced by, 75
DEMONSTRATION, necessity of, 52

personal, 126, 127
DEPRECIATION, 19, 20

DEVELOPING inventions by a regular stage of operations, 53, 54
DISTRIBUTION, of patented articles in foreign countries, 90

EDISON, inventors should pattern after, 193
EDUCATING the public as to fixed prices, 72
EFFECTS, evil, of partnership agreement, 173, 174
ENFORCEMENT of resale contracts, 73
ENTERPRISE, questions affecting, 98, 102
EQUIVALENTS, how claims cover, 46

224 Index

ESSENTIALS of partnership agreement, 172, 173
ESTABLISHED BUSINESS, needing money, 156
ESTIMATING, cost of introducing article to public, 82

price and cost generally, 15
EXAMINERS, Patent Office, 5
EXCHANGE, value of assignment, 13$
ExcLUsrvENESS, essence of, in patents, i
EXHIBITION, demonstrating inventions at, 127
EXPENSE, estimate of, for starting factory, 704
EXPERIENCE and knowledge, necessary to win out, 119
EXPERIMENT, manufacturer's article is first an, 77
EXPERTS, who are, to pass on merit, 23, 24
EXTENSION of foreign trade, remedy for overproduction, 87

FACTORS, determining price of invention, 3

furnishing talking points about inventions, 38

FACTORY, overhead expenses in, 78

FAILURE, to raise capital, no

to obtain replies from ads, 170, 171

FINANCIAL ADVERTISING pays, 168
assistance, inventors need, 51
men willing to back sound enterprises, 114

FIRMS, big, buy up inventions, 58

FrvE-AND-TEN-CENT ARTICLES and the market therefor, 12

FIXED PRICE, who gets the benefit of, 72

FOLLOW-UP LETTERS, how to be prepared, 151, 160

FORM and substance of prospectus, 123

FORMULA for ascertaining sale of an article, 61, 62

FORTUNES, made on simple inventions, 25, 26

FOUNTAIN PENS, featuring talking points of, 38

FRAUD, when it vitiates a contract, 200

FUNDS, raising, what to consider, 104

FUTURE, big firms cash in on, 62, 63

GLOVES, taken as example of sales opportunities, 63, 70
GOOD WILL of capitalist, necessary to gain, 109

HELP, how to use, of others, 58, 59

self-, requires training, 58, 59
HONESTY of inventors, 205, 206

IMPLIED licenses, nature and character of, 165
IMPORTS, increase of, since the war began, 85

Index 22$

IMPRACTICABLE structure, example of claim covering, 49—50
INCOME, of inventors, 240
INCORPORATION, essentials of, 182
INEXPERIENCED INVENTOR, how he proceeds, 149
INFLUENTIAL MEN, when they join with inventors, 157
INFORMATION, investors want full, 101

which must be supplied, 95

INFRINGEMENTS, theory of, as defined in patent claims, 6
INITIAL OUTLAY, get investor to make, 141
INJURY, caused by price-cutting, 72
INSURANCE MAN, when to use services of, 161, 162
INTERNATIONAL RELATIONS after the war, 89
INTEREST, in corporation, fixing by shares of stock, 175

in corporation, investors want, 147

undivided, 208, 209

INTERESTING men of special knowledge in inventions, 156, 157
INVENTIONS, dependency of various, 32

difference between simple and complicated, 30, 31

six cardinal tests of, n, 12

protecting inventions, 8, 10
INVENTORS, capitalists should cooperate with, 51

places where they flourish, 76

position of, in world of affairs, 108
INVESTIGATIONS, investor wants time for, 69

work, necessity of for inventor, 206
INVESTMENT standpoint, royalties regarded from, 74, 75
INVESTORS, why they fail to back inventions, 114

JOINT OWNERS, of undivided interest, advantages, 136
JOINT OWNERSHIP, how to overcome obnoxious features, 36

LABOR of others, utilizing the, 106

saving machinery, will attract investors, 115

MAGNETISM, personal, necessary for success, 57
MAILING LISTS, how to compile, 137
MANAGEMENT, merit in article calls for good, 29
MANAGER essential to business, 122
MANUFACTURER, as a prospect, 73, 74

cutting out, in selling article, 39, 40

inventor should be, 117

on lookout for good articles, 106

prospect, handling the, 144

what he considers in buying patents, 4

226 Index

MANUFACTURING, estimating the cost of, 104
MARKET, adjustments to conditions of, 87

enlarging, for groups of articles, 91

must be considered before applying for patent, 80

necessary to create, for inventions, 62

practical considerations of, n
MEN OF AFFAIRS, capitalists are, 115
MERIT, buyers' and sellers' views on, 24

prerequisite in modern times, 27
MODEL, after making, first thing to do, 53

cost of, 17

putting, in trim, 52

should be simple and inexpensive, 52-53

when impractical to make, 52

when, should be made, 51

MODEL MAKER may assist in making estimates, 17
MONEY, good inventions have made, 48

in bank, do not expect investors to put, 146

partnership, kept intact, 171

plenty of, for investment, 113

spending, to get initial results, no, in
MONEY QUESTION, talking over, with investor, 142

NAMES of possible prospects, where to get, 137, 138

NET PROFIT, figuring it up, 190, 191

NEW CONCERN better than old, to push inventions, 130

NEWSPAPER advertising, of inventions, 128
placing an ad for capital in, 167, 168
Sunday, when good to patronize, 169

NEW YORK CITY, financing inventions in, 210, 211

NOTICE, newspaper, how to get it, 128

OFFER, and acceptance in contracts, 197

must be communicated to bind, 197
OFFICE, visiting business men in, 116
OPINION, of inventions, who are entitled to render, 24

rendered on merit of invention, 24
OPTIMISM necessary to success, 57
OVERCAPITALIZATION, when necessary, 179, 180
OVERHEAD, how it enters into price, 18
OVERPRODUCTION, remedy for, 87
OVERSTATEMENT should not be made in prospectus, 12

Index 227

PARTNERSHIP, more wieldy than corporation, 171

when best to push new article by, 155
PARTNER, example of unsophisticated, 173, 174
PATENT ATTORNEY, service to be required of, 8
PATENT BROKERS, 25
PATENT OFFICE, and patent attorney, 5

recording assignments in, 116
PATENT SHARKS and their methods, 152, 153
PATENTS, establish boundaries, 5

foreign, advantages of, 90

greatest source of wealth, 92

model should come within terms of, 53

prices of, 14, 15, 16
PAYMENT, made to promoters, 179

under contract law, 19
PERSONALITY necessary in business, no
POLICY, business, inventor must have, 99
POORLY constructed model, 143
POSITION of inventor in world of affairs, 108
POSTMASTER, how he revises mailing lists, 21
POWER OF ATTORNEY, how made and effect, 2
PRACTICAL MAN, always choose, 173
PREFERRED STOCK vs. bonds, 177
PRICE OF PATENTS, danger of overestimating, 16

making due allowances, 16

what determines, 14, 15

PRINTED MATTER as means of broaching new article, 129
PRIOR PUBLICATION abroad, 90, 91
PRODUCERS and price-fixing, 72
PROFESSIONAL MEN who make promoters, 54
PROFITS, earned on inventions after patent expired, 91

forestalling, 181

inventor should talk to investors, 64

made on staple articles, 107

selling surplus goods, 188

post-patent, 83

PROHIBITION of price-fixing methods, 72
PROMOTER SHARKS, advertisements of, 152, 153

part played by, hi organizing corporations
PROPERTY, nature of patent, 92
PROSPECTS, classification of, 188

interest, talk hi favor of, 187, 188

must be made to think right, 186

228 Index

PROSPECTUS, appearance and contents of, 122

how to emphasize statements in, 121

patent should accompany, 121

things to be considered in, 121
PROTECTION of good will by price-fixing, 72

patent, necessity of, 93

when a patent really protects, 10
PUBLIC, are not fools as is supposed, 71

educating the, in merits of article, 39

vs. private promoting of enterprises, 151
PURCHASERS of patents and defective patents, 9
PUSHING AN ARTICLE, three factors which govern, 12, 13

QUALITIES a partner should possess, 171, 172
QUESTIONS, affecting demand for inventions, 62

covering every feature of enterprise, 98, 102

investor may ask, 103
QUICKEST METHOD of succeeding is by advertising, 167

RAISING capital, not as hard as it looks, 105

how inexperienced inventors proceed, 149
RANK, of inventor in world of affairs, 108

of rival manufacturers, 67, 68
REASONING of the price cutter, 84
RECORDING assignments in Patent Offices, 72
REDESIGNED, many inventions have to be, 210
REFERENCES, when to submit Patent Office, 106
RELATIVES, when to be approached in financing inventions, 74
REMEDIES for breach of contract, 201, 202
RENT, payment of by investor, 36
REORGANIZATION of corporation, to fix value, 176
REPLIES, cost of newspaper, average, 170

from classes of advertisers, 170
REPUTATION, inventor strives for, 209
RESALE PRICE, 5, 72

RESERVE FUND, maintaining a, for patent depreciation, 20
RETAILING of simple five and ten-cent articles, 13

when good to sell patent to a retailer, 39-40
RETAIL STORES, patented articles require outlet through, 82
RIDICULE, subjecting the inventor to, 107
RIGHT to use an article in conjunction with another, 165
RIGHTS, of an agent, 198, 199

how prior, are innocently defeated, 91

Index 229

RISKS of manufacturers, 106

ROYALTIES, basis upon which are estimated, 101

factors influencing amount of, 75

when small, are preferable, 74
ROYALTY contracts require watching, 210

SAFETY RAZOR under hammer of perfection, 30
SALES, contract of, passing of title under, 16

total normal quota of, 67, 68
SALES-LETTERS, equivalent to salesmen, 83, 84

how they should be prepared, 129
SAVING of cost where pennies count, 206
SCIENTIFIC RESEARCH, 125
SCIENTISTS, 3

SELECTION, of newspapers in which to advertise, 169
SELLING ARTICLES, how a sale is made hi the mind, 184, 185

obtaining the right attitude of prospect, 185

prospect's interest, talk in, 185, 186

SELLING MECHANISM includes jobbers, dealers and inventor, 78
SHARING control of new enterprises, 145
SHOP RIGHTS explained, 134
SHORTSIGHTEDNESS of learned men, 107
SHOW WINDOWS, personal demonstration in, 127
SILENCE, as acceptance in contracts, 198

examples of simple inventions, 25, 26
SIMPLICITY, as attested by some good sellers, 13, 14
SMALL INVESTORS, 160, 161

manufacturer, 62

SOLICITING, personal, to interest others hi invention, 158
SPECIALTY SALESMAN, operations of, 91
SPREADING OUT in selling policy, 26
STAPLE ARTICLES vs. patented articles, 39
STATEMENT of invention, how received when oral, 68
STATUTE OF FRAUDS, hi regard to sales, 200
STOCKS vs. bonds, difference between, 77
STOCK-SELLING, how to facilitate, 182
STUDY DEPARTMENTS of big firms, 62-63

SUCCESSFUL OPERATION, how inventions stand the test of, 31, 32
SUGGESTIONS, making proper use of, 141, 142
SUNDAY NEWSPAPER advertising, list of papers, 169
SUPERIOR article, what makes an article a, 28

feature conferring merit hi, 29, 30
SUPPLY of article must be steady, 71, 72

230 Index

TALKING POINTS, of articles in general, 35, 36

of inventions, 35, 36

TERMS and stipulations of promoters' agreement, 63
TERRITORIAL rights, selling advantages of, 134
TESTIMONIALS, obtaining, to boost inventions, 29
THOUSANDS of inventions made yearly, 32
TIME to develop ideas, 22
TITLE, when it passes under contract, 200, 201
TONE and individuality of sales letter, 159
TRADE, exhibits, demonstrating in, 127

extension of, after the war, 89
TRAINING, necessity of, for success, 56, 57
TRAVELING SALESMAN, when to obtain cooperation of, 145
TYPES, of corporations, 174

of inventions, 30

UNDIVIDED interest bugaboo of assigning, 208, 209

UNITED SHOE MACHINERY Co., policy of, ground for its prestige, no, in

USE OF INVENTIONS, instances of, 15

may furnish talking points, 38

value of, 14
USING SERVICES of others, the advertising man, 162

the insurance man, 161

the lawyer, 162, 163

the reporter, 161

VALUE OF INTEREST, in undertaking, 176
VICTIMS of unscrupulous promoters, 26

WANTS of America, to come first after the war, 24
WAR, trade extension after the, 2
WATCHING, royalty contracts require, 210
WORK, invention should be put to, 119
WORKING INVENTION, money needed for, 134, 135

under patent license, 68
WRITING, contract must be in, when, 200

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