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OEM Proposes Exclusive License For Patents

 
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6rico9

posts: 3

Jun 09, 2006 3:49 PM ET    Quote  Report Abuse
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Recently (06-06-06), an offshore OEM (Original Equipment Mfg) made an offer for an exclusive 5 year license to distribute my door closer inventions; see http://doorbutler.com.

This firm currently makes 3MM/yr (million/year), and projects distribution of 5MM/yr in the fifth year. Total global market consumption for closers is approx 12MM/yr.

They have agreed to independent audit of open books; litigation in USA; stiff restitution and risk of loosing license if fraud is ever determined.

Question: What are the risks of dealing w/ offshore mfgs; and how do I best monitor my inventions once in their possession?

Kindly,
Ricardo Alonso
303-742-9551



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Ricardo Alonso
Degrees

posts: 250

Jun 09, 2006 9:27 PM ET    Quote  Report Abuse
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Hi Ricardo
I took the time to look at  (I think) every page of your site and some of your patents. You really have been a warrior out there.  I believe that you do need to start manufacturing overseas to protect your product. If your product is high priced it can make a  juicy target for someone to knock-off. The best way to protect yourself is to take away their perceived margin they`ll receive when they go after the door butler.

It wasn`t clear to me if your would keep selling the doorbutler yourself while the OEM guys sold under a different name, or would the OEM mfg take over the entire brand.

The chances of out-right fraud, say in taiwan or china, is actually quite low. I have never met anyone who has seen this happen.  It`s when people slowly get into financial trouble that things get interesting.

As to how do i monitor? i would be very interested in tracking the physical object. Auditing the books might just get lost in translation. Literally. I would go with a manufacturing inspection agency at the factory.  Say in China. Start this when relations are good. Your inspections would be unannounced and mainly center around the loading of containers.  The goal here is to get a general idea of the numbers leaving the building. If things seem to turn sour ... then you can up the inspections for every container loaded.  Simply the idea that you can do this with an e-mail to Hong Kong can be quite a reminder.

The real question I would be asking (and you might know the answer)
Does this OEM have the ability to distribute. Do you have the confidence in them to sell this product world wide?  Will they defend your product from knock-offs the same way you would, or will they just get bored, and move on to the next product, and sort of half heartedly promote your product. Protecting myself here is where all my focus would be.

Good luck
What an adventure
Jeff

6rico9

posts: 3

Jun 09, 2006 11:42 PM ET    Quote  Report Abuse
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Jeff,

 

Thanks for your positive comments.  Door closers are low priced @ approx $2 to $4.5 USD in volume.  However, the volume is massive @ approx 22,000 units per day.  This OEM makes approx 12,000/day.

 

They aren`t interested in my mark DoorButler, so they will distribute under their own mark, and I will keep my mark in reserve (possibly for sale).

 

It`s comforting to hear that in your opinion fraud might not occur.. maybe this is why they agreed to all my conditions addressing the issue.

 

Concerning monitoring, they have already suggested I contract w/ independent firm to audit.... maybe here I will be careful to demand “on premise” inspections.

 

Yes, this OEM is the real deal.  Again, their market for door closers is 3MM/year to the firms mentioned above.  By my inventions, they anticipate 5MM by the 5th year.

 

Concerning defending, I`m considering obtaining foreign patents in China (to protect from knock-offs), Canada (2nd market) and Australia (3rd market).  However, the OEM really doesn`t think it is necessary, perhaps testament to their focus of immediate global domination for scene door hardware as a result of my patents.

 

I`ll keep everybody posted!

 

Ricardo

 

PS- Joel Walsh invited me to discuss my situation for the radio show on June 19th, supposedly to air on the 24th .



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Ricardo Alonso
Degrees

posts: 250

Jun 12, 2006 12:03 PM ET    Quote  Report Abuse
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Ricardo
Wow,  I can`t wrap my head around 22k units a day

Concerning defending, I`m considering obtaining foreign patents in China (to protect from knock-offs), Canada (2nd market) and Australia (3rd market).  However, the OEM really doesn`t think it is necessary,




When i say defending, I would rather defend my product with a fast team of salesmen rather than international lawyers. The big buyers out there are not interested in buying the Knock-off either. As long as you`re competitive in price the big guys will always go with you.  They just don`t need the hassle.  Even if there is a hint of controversy between you and the knock-off, i bet they`ll go for you. If the OEM gets out there fast, they become the real deal. It then becomes real hard for the knock-off to dislodge the OEM company.

Of course  there`s a lot of details i don`t understand about your business, but my patent strategy would be to cover the largest  # of customs for the fewest dollars. I would want to go with the UK and then the EU. Certainly you can continue on to Canada and Australia and sell there without patents, but secure the big markets a year or two in advance of actually entering the country.


Hey, you beat me to it.  I was going to mention you to Joel. Can`t wait for the show!

6rico9

posts: 3

Jun 12, 2006 12:53 PM ET    Quote  Report Abuse
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Correction and Disclaimer!

Recent post stated:

"Yes this OEM is the real deal.  Again, their market for door closers is 3MM/year to the firms mentioned above.  By my inventions, they anticipate 5MM by the 5th year.".

The bolded  portion of the message should have been stated "... to the `type` of firms mentioned above."  Also, I am not entirely certain that their market includes [all] --any of-- the firms mentioned above.  This message was posted in error. 

However, everything else remains correct as I am being informed.

Ricardo Alonso



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Ricardo Alonso
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