//
you're reading...
IP, Patent

Edison Nation Wants YOU(r Patent)

Louis Foreman, co-founder of Edison Nation, recently announced the availability of $25 M in capital to invest in finding and bringing innovations to market.  While this is an interesting idea, I explored the program a little deeper to see what kind of deal inventors are getting.  The incentives created by the revenue sharing in the deal are curious, to say the least.

From Reuters:

Inventors can submit their ideas to the Edison Nation Innovation Fund (www.edisonnation.com) for $25. No other money is required from them to develop the ideas, and they will share the royalties if the product succeeds.

Foreman said the Innovation Fund’s $25 million pot — backed by Edison Nation and other investors — will provide fertile ground for those ideas to take root.

“If you’ve got a great idea, submit it,” said Foreman, an appointed member of the Commerce Department’s Patent Public Advisory Committee. “We’ll figure out how to do it.”

Via North Carolina business to invest $25 million in inventions

Expanding on this proposal on its own website, Edison Nation claims:

Beginning today, anyone with a great idea can log on to (www.edisonnation.com) to register and submit his or her idea for Edison Nation Innovation Fund consideration.  This new initiative from Edison Nation will act as a private investment-style fund for new ideas and will invest up to $25 million in the development of new products or technologies in order to take ideas from concept to consumer.

This is an intriguing concept, but inventors probably want to know what’s in it for them. (Wouldn’t you?) From Edison Nation’s FAQs:

Where can I download and review the legal agreement for the Edison Nation Innovation Fund?

Click here to download and review the Edison Nation Innovation Fund Innovator Agreement.

The Innovator Agreement includes four specific ways that inventors are compensated, spelled out in Exhibit A Form of the “Innovator Assignment and Commercialization Agreement” section 2(A):

In exchange for the assignment of Intellectual Property set forth in Section 1, Assignee shall make annual payments to Assignor, subject to the terms and conditions provided in this Assignment, in an amount equal to:
i. 7.5% of Adjusted Gross Revenues received by Assignee; plus
ii. 50.0% of Licensing Revenues received by Assignee; plus
iii. 40.0% of Assignment Revenues received by Assignee; plus
iv. 4.0% of Brand Revenues received by Assignee.

Of course, each of the revenue bases are explicitly defined in the agreement as well.

Adjusted Gross Revenues means:

Gross Revenues less the sum of all Selling and Fulfillment Costs, Fees and Commissions, and Returns and Bad Debts; any and all refunds, credits, credit card processing fees, chargebacks, and other allowances to customers arising from the return or rejection of goods or otherwise granted in the ordinary course of business, and less any attorney fees directly associated with a legal contract under which any Innovative Products or any of the Intellectual Property is commercialized.

Seems reasonable enough. Gross Revenues, in turn, means:

All monies actually received by Assignee resulting from efforts by Assignee to commercialize any Innovative Products and any of the Intellectual Property, including the manufacture and sale of Innovative Products. For purposes of clarification, Gross Revenues shall not include any monies received by Assignee in connection with enforcement actions against alleged infringers of the Intellectual Property; any monies received by Assignee in connection with licensing of, or the grant of rights under, the Intellectual Property, as well as any monies received by Assignee in connection with the explicit grant of any covenant not to sue under the Intellectual Property; or any monies received by Assignee arising solely in connection with assignment of all rights, title, and interest in, to and under any of the Intellectual Property. Furthermore, any monies reasonably determined by Assignor to be Gross Revenues shall not be considered Licensing Revenues, Assignment Revenues, or Brand Revenues.

(emphasis mine)

Other definitions contain similar language.

Licensing revenues:

Any monies received by Assignee that are received in connection with licensing of, or the grant of rights under, the Intellectual Property, as well as any monies received by Assignee in connection with the explicit grant of any covenant not to sue under the Intellectual Property. For purposes of clarification, Licensing Revenues shall not include any monies received by Assignee in connection with enforcement actions against alleged infringers of the Intellectual Property, and any monies reasonably determined by Assignor to be Licensing Revenues shall not be considered Gross Revenues, Assignment Revenues, or Brand Revenues.

(emphasis mine)

Assignment revenues:

Any monies received by Assignee that are received solely in connection with assignment of all rights, title, and interest in, to and under any of the Intellectual Property. For purposes of clarification, Assignment Revenues shall not include any monies received by Assignee in connection with enforcement actions against alleged infringers of the Intellectual Property, and any monies reasonably determined by Assignor to be Assignment Revenues shall not be considered Gross Revenues, Licensing Revenues, or Brand Revenues.

(emphasis mine)

Are we seeing a pattern? Finally, Brand Revenues:

Any monies received by Assignee that are received solely in connection with the sale of any goods by Assignee that are not Innovative Products, but that are sold under a brand name that has been created by the Assignor, the rights to which brand name have been transferred to the Assignee as part of the Intellectual Property in accordance with this Assignment. For purposes of clarification, Brand Revenues shall not include any monies received by Assignee in connection with enforcement actions against alleged infringers of the Intellectual Property, and any monies reasonably determined by Assignor to be Brand Revenues shall not be considered Gross Revenues, Licensing Revenues, or Assignment Revenues.

Curiously, money received in connection with enforcement actions is specifically excluded from all methods of determining inventor compensation, including licensing revenue! This is an odd exclusion, since it seems to incentivize Edison Nation to pursue infringers through ex post enforcement of any resulting patents, and disincentivize Edison Nation from negotiating ex ante licenses with potential industries.

Advertisements

Discussion

One thought on “Edison Nation Wants YOU(r Patent)

  1. So Patrick. are you an attorney or an inventor, or both? I ask because I have similar concerns about the EN agreement and wonder what to do. I want an attorney’s opinion of this agreement before I hand over my brainchild to them but they make their product search window so short that unless you already have an experienced IP attorney on retainer, there isnt time to get any opinion.. You have to tinkle or get off the potty pretty quickly.

    What is your opinion- the EN agreement leaves me wondering if their cut isnt closer to 80% than the 50% they state.

    Posted by Leigh Martin | August 29, 2011, 5:37 am

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: