Patent licensing disasters by Eli Whitney

Imagine inventing a devise that put America on the map, wrecked civilizations and changed the world, and you still end up dying broke. If you are a history buff, patent expert or licensing lover grab a copy of Big Cotton I forgot how great a read it was until I went through my notes again last night.

Eli was a bright young tutor from Yale heading South via boat to try his luck teaching the children of wealthy plantation owners. In a chance meeting he bumped into Katy Greene, the widow of a revolutionary war hero. Katy saw potential in the young poor teacher and asked him to sit in on a meeting of plantation owners. They had a big problem, an old problem; nobody could solve how to increase cotton processing speed. It took one worker 16 months, full time pulling the sticky green seeds out of enough cotton to make a 500 pound bale. After hearing the problem, Eli said he would come back with an answer. That week his big idea came while watching a cat trying to catch a chicken. He noticed that the chicken got away but the cat had feathers in his paws. That image jarred Eli’s mind into looking at the problem from a completely different direction.

“Instead of picking out the sticky green seeds one by one, why not comb the cotton away from the seeds?”

10 days later Eli came back with a working prototype that was so good, the basic mechanism and motion is still used today. Katy’s fiancé proposed he build the machines and he would license them out as fast as he could make them. He sent the design to Washington DC and Thomas Jefferson, the Secretary of State at that time signed his patent registration in 1794. The government was a lot smaller back then! Every cotton farmer in America wanted one. Greed took over and they charged the farmer 1/3 of the crop plus the cost to build a machine. Why all the excitement? The gin reduced the labor on 500 pounds from 16 months to 10 days! When they eventually added steam power or horses, they could produce 500 pound bales in 4 hours!

Improved gins came on the market with better licensing terms and they remained inflexible even in the face of a new issued patent on a competing product. By 1797 Eli had built 27 gins and nobody wanted them. He had set in motion the biggest economic upheaval ever to hit America, people around him were getting fabulously wealthy and he sat frozen with indecision. In relative terms it would have made the internet bubble look normal because almost the entire South was already dependent on farming. We cannot imagine how crazy it must have been to crank that gin wheel and know all the cotton you could crank had a buyer ready to snap it up.

Eli’s landmines we want to avoid with patent licensing:

• Alienated prospective customers with exorbitant royalty rates.

• Refused to license their design to other manufacturer to meet urgent demand.

• Opened themselves up to knockoffs because of their inflexibility.

• Went broke trying to repair the damage instead of changing course.

To see how staggering this invention was. The year of the invention, America exported 500,000 pounds of cotton to England. In 1800, just seven years later, it exported a whopping 17.8 million pounds! Think of the gold and silver pouring into the south to buy all the cotton and you watch everyone else get rich on your idea.

Just remember your best ideas are in the future. Don’t ever get married to a new innovation and become inflexible in the face of reality. The higher you price the license and royalties, the harder people will try to go around the patent. The really wealthy self made business builders put together a sting of winners, not one lucky grand slam. Next time you are at the negotiating table, remember Eli.

“Honey you smell like a Wendy’s jalapeno burger!”

I took that as a vote she liked the testosterone bouquet I was throwing her way. I just got back from the gym, so the acknowledgement was a sign I earned the right to eat one at least. My wife informed me that she did not intend it as a complement. It was her kind way of telling me I needed a shower, fast!

I have always heard that Las Vegas pumps in the right smell to keep you alert, happy and foolish. Not sure if it is an urban legend spun by losers at the craps tables or the truth. I do know this. Women are bloodhounds when it comes to nasal perception. I remember going to the movies with my wife when she caught a whiff of some 1988 mojo musk. She made me believe that time travel was actually possible! The detail behind the décor, sounds, fashion and cool hair styles was incredibly created by some strange emanation from a movie theater lobby. She even remembered, “Forever Young” by Alphaville was playing in the background. I have always thought that my wife had an extra nose DNA strand or two. I found out from my gym loving brethren, I am not alone. Hollywood seems to agree. It is always the woman featured as the CSI nose detective putting the aromatic clues together to hang her husband.

We are not marketing women hard enough through the nose! The reason women have so many choices in perfume versus men is not about more disposable income, they have finely tuned honkers. Like wearing the same dress to a party, they actually get miffed if another woman has her scent. I don’t think a guy could pick out his own cologne in a police lineup.

What about trademarking a scent for a retail franchise, car dealer or sports equipment? Yep, you can do it, but the key is specificity.

Until recently, the vast majority of countries only allowed the registration of marks that could be perceived visually. Today in the United States and the EU, marks could be the subject of protection providing they have a “distinctive character” regardless of the class you are registering the scent for. A good example a scent that won EU trademark protection was the smell of freshly cut grass. The smell was registered by a Dutch perfume company that uses it to give tennis balls their aroma. The key is that the product shape, sound, scent, color or other device must serve to identify a product as coming from a particular source.

It will take awhile for marketers to realize the nose can also be a protected infringement zone. With names, words, songs, colors getting snapped up, it is really tricky to make it through life without some trademark litigation if you want to create something in this world. I think scent is the last great bastion of marketing without the threat of trademark litigation around every corner.

Are you missing a memorable hook that can make a woman recall a 20 year memory with just one sniff? Why not create a nasal strategy to complement your audio and visual marketing? What should your business smell like? If the MGM lion roar and the Yahoo yodel are distinctive enough to trademark, I am sure you can come up with a smell that will be remarkable. Meanwhile, I will be trying to figure out how to get the smell of the ocean to waft your way each time you log onto the Whale! Surf the web by smell? Yikes!