Everyday Inventors hear terms, phrases, abbreviations, or acronyms and have no idea what they mean. This is compounded by the fact that most people are reluctant to ask the meaning of something they don’t know for fear of looking uninformed. So, I thought I would make a listing of a number of these terms, phrases, abbreviations and acronyms and give a plain English interpretation to help expand everyone’s understanding.
AA (Age Appropriate) – Make sure you have your target audience correct before you contact a company. Example companies that cater to kids 5 and under do not want to see items for teens.
ABD (As Built Drawings) – Normally these are drawings showing all the parts that went into constructing the product and have been added along the way from start to finish.
Add-on – Product or service added to the main product to increase interest and sales in the main product.
Advance on Royalties – payment made prior to the product going to market to the Inventor. Once the product is on the market the inventor does not receive any royalties until the advance is equaled in royalties paying the company back for the advance.
AfterMarket – Parts/accessories that were not originally installed, or they can be replacement parts for the original parts. Example: Various kits you can purchase for your car that were not original equipment when it was made.
AGR (Adjusted Gross Revenue) – If your royalty is based on this it means your percentage is calculated based on the revenue left after costs such as charge backs, spoilage, damages, returns, allowances are deducted from the profits.
Angel Investor – A individual or a small group of investors that provide capital for start-ups, new ventures and provides business advice and could possibly provide business contacts
Approved Vendor List (AVL) – List of suppliers that have already been vetted by the company to ensure they meet or exceed quality control for the services or parts they provide.
Angel Investor/ Investor – Person(s) or group that invests money for the development and production of your idea/product. This investment is normally for a portion/ownership of the company/product.
As-Built Drawings – Set of drawings showing all the changes made during the construction phase of the product. These normally show the exact dimensions and positions of all the parts making up the product.
ASN (Advanced Shipping Notice) – This is a document sent to the customer letting them know detailed information about their order such as the weight, number of boxes, how the product is packaged and how it is being shipped.
Assembly Deficient – Product that can’t be manufactured in a manner that is cost effective making it profitable to the company.
Blister Pack – Normally a clear or lightly tinted piece of molded plastic attached to a cardboard backing. This blister pack is used to display the product to the consumer. Another name for it is Bubble pack.
Blow Molding – Method for making a product that requires a hollow space. Items such as bottles, cans, containers, jars, etc. The process normally uses two heated internal surfaces of a two-piece mold, hot plastic, and compressed air to make the product/part.
BOM (Bill of Materials) – Comprehensive list of the various materials, components, sub-components, and quantities of each component needed to manufacture the finished product.
Brand Extension – Utilizing the company’s current brand recognition of products to the consumer to help launch additional new products into that line.
Branding – Method used to promote the product to the consumer. A proper branding campaign can be more effective than patenting to protect your product from knockoffs.
Business Plan – Documents that summarize how the company will be structured operate, and how money contributed by investors will be used. It gives an investor an overall view of the company and the projected milestones they will meet and the proposed profit the company and the investor is projected to attain.
Buy Back – Normally a provision in a contract where the seller agrees to buy back the merchandise for a certain price after being sold to the retailer if it arrives damaged, unsellable, customer returns, late shipment (such as a holiday item that arrives after the holiday) and other issues that the two parties have negotiated into the contract.
CADs (Computer Aided Designs – Designs generated by the designer using computer software depicting the object so that it can be machined, tested, give specific dimensions, material specifications and more to aid in the production of the object.
CE (Commission of Europe) – The CE mark is used to certify a product has met the European Union health, safety and environmental requirements that ensure workplace and consumer safety. If a manufacturer wants to sell their product throughout Europe they need this CE mark to avoid having to go through further product modifications from other European countries.
Clam Shell Packaging – Container that can be clear or tinted that has two halves that come together to form the enclosure to hold the product.
Class of Goods – Primarily used by the Patent Office when filing for a Trademark.
CNC (Computerized Numerical Control) – Automated controls guide machines and varying tools to do the job that used to be done manually. A number of these machines use CAD (computer aided designs) or CAM (computer aided manufacturing) written programs to run the commands to operate the machinery.
COG (Cost of Goods) – Total cost attributed to the production of the product sold by the company including the material and labor costs.
Cold Calling – Contacting a company for the first time to pitch your idea/product and not knowing anyone within the company.
Cold Forging – A process mainly used on small pieces where the metal is not heated but still pressed into a die to get the required shape.
Consumable – Product used by consumers or businesses that have to be replaced regularly. Examples: paper products, foods, fuels, and more.
Cooperative advertising – is locally placed advertising between a retailer/wholesaler and a manufacturer to hopefully help increase sales of the product. The cost is generally split between the two companies.
Copycats/Knockoffs – Product that is built similar to the original and is in direct competition with the original product. It may also be in violation of the original products patent. The term for this violation is called infringement.
Copyright – Form of protection provided to the authors producing original works. Normally designated by a ©.
CNY (Chinese New Year) – Chinese holiday marking the start of the New Year. The holiday begins on the second new moon after the winter solstice and ends on the full moon fifteen days later. It is marked by visits to family and friends, special meals, fireworks, and gift giving. During this time period most factories close or have a very limited staff. This translates into Production time will be delayed and quotation requests will be processed slower.
CPC (Cooperative Patent Classification) is a listing jointly established by the USPTO and EPO (European Patent Office) to develop and maintain a listing of classifications used by both offices in the process of granting patents.
CPO – Can mean a number of things such as Certified Pre-Owned in the auto world, or in the business world Chief Procurement Officer. In the ASOTV world it means Cost Per Order. That is the amount spent on advertising and marketing to procure the individual sale. CPO can also be called Cost Per Acquisition.
Crude Prototype – Prototype that is not factory finished but is designed to show proof of concept. These can be homemade out of parts from existing products, 3- D printed and use a variety of materials to “GET” the point of the product across.
CSA (Canadian Standards Association) Recognized by OSHA (Occupational Safety Health Association) as a Nationally Recognized Testing Laboratory from which you can have them test your product and if it passes their standardized testing you can put the CSA symbol/logo on your product showing it has passed their testing and certification process, CSA is very familiar with U.S. requirements.
Customer Life Cycle – This is the cycle of steps a consumer goes through when deciding, buying, using, and having loyalty to a service or brand.
DBE – A Disadvantaged Business Enterprise
DC (Distribution Center) – Location used for receiving, redistribution, and sometimes temporary storage of goods. Other terms used are Branch Warehouse or Distribution Warehouse.
Decoy Product – In many cases the same company is making the same product but of a lower quality and price. So, no matter which one the consumer buys the company makes a sale. You can also see this done under the store brand name and the known brand name of the same product.
Deliverables – Something specified to be accomplished or met in a contract.
Demand Letter – Letter sent to a company trying to get royalties from that company due to the fact they have been selling your product without permission or a contract and threatening legal action for patent infringement. Sometimes also referred to as a “threat letter”.
Designated Area – Normally referred to in the contract as the area in which the company licensing the idea/product can manufacture and sell the product. Such as Worldwide rights, North America rights, European rights etc.
Die Casting – A process of metal forming where molten metal is forced into a mold/form and put under pressure to fill all the cavities to produce a part or object.
Direct Response (DR) – Method of selling a product to consumers via television direct purchase.
Discontinuous Innovation/ Disruptive Innovation – Product that enters a market and takes it to the next level and affects the current products on the market eventually making them obsolete. Example would be the laser printer versus the dot matrix printer. Another would be a black and white TV versus a color TV.
Discrete Manufacturing – The opposite of Repetitive Manufacturing because your product is accounted for by distinct serial numbers, distinct number of units, instead of accounting for production by weight or volume as in some other processes.
Display costs – Cost of a display holding your product divided by the number of units it will hold. If your display will hold 40 units each unit is 1/40th the cost of your display.
Distribution Channel – Manner that services or products get from the vendor to the consumer.
Distribution Grant/List – Listing of the various retail locations, internet channels, distribution channels you have authorization to market/sell your products.
DMP (Deceptive Marketing Practices) – Misleading or false statements used to gain consumer appeal for a product.
Drop Forging – Normally done by a very heavy specific shaped die dropping down hammering the hot metal into another die to get a uniform shape.
Drop Shipping – Process of moving (goods) from the manufacturer directly to the retailer without going through the normal distribution channels.
Due Diligence – Period where the company interested in possibly licensing a product does their research into that products market share, cost, return on investment, profit margin, manufacturing process and more before deciding to make an offer on the product offered for licensing.
Durable goods – Product with a longer life span than consumables such as computers, phones, furniture, electronics, automobiles.
DVBE – Disabled Veteran Business Enterprise
EAN (European Article Numbering) – Standardized 13-digit bar code system for identifying almost anything. The EAN code is compatible with the UPC.
Effective date – Date all parties agreed the agreement comes into full force and effect. Other terms that can be used that have the same meaning are: agreement date, execution date, signing date, commencement date.
Elasticity of Demand – Typically viewed where you see an increase in sales as the product price drops and a decrease in sales if the price rises.
ETL (Electrical Testing Lab) – They are recognized by OSHA (Occupational Safety Health Association) as a Nationally Recognized Testing Laboratory from which you can have them test your product and if it passes testing you can put the ETL symbol/logo on your product showing it has passed their testing and certification process. They are known for having a lower cost structure than UL certification and quicker turnaround through their process.
Excessive Inventory – Can be as bad as Obsolete inventory but from a different angle. Excessive inventory can be due to over-ordering or misjudging the market and getting stuck with overstock and nowhere to sell it.
Exclusive Contract – A contract written giving the company/individual exclusive rights to market/sell the product in a certain market. This leaves the product available for other markets. Example: If you had a product that could be sold in the pet and the toy market and you signed a market exclusive contract for the pet market you are still open to go and sell or license that same product in the toy market without conflicting with your contract in the pet market.
Exclusivity – An agreement between the inventor and the company stating that the company will be the only party entitled to manufacture and sell your product. It can be written for one market or all markets.
Exploded View – Drawing showing the product disassembled so that the viewer can see the relationship of all the parts to each other. These are also used to in owner manuals to help the consumer order new parts.
Family Mold – This is a mold that makes multiple parts at one time. You cannot use it to make just one of the parts within the mold. It is all of them or none of them. Example would be model car kits that have the doors, the hood, sand the mirrors all on one frame you can snip the parts off of as you make the car. If you wanted to make just the doors it is not possible.
First Right of Refusal – When an inventor or company has a written contract stating that they will allow company X to see all ideas they design first, and they will not send them out until written notice is given that company X has no interest in that product/idea. This is done prior to sending them out to other companies for review. You can also have a clause in your contract that says they have first right of refusal for products in a certain market and all others are free to pursue elsewhere. If the company passes on the idea the Inventor is free to move on to the next company. just make if you go this route that there is a set time limit for the review and the response. Otherwise they can hold your idea indefinitely keeping it off the market.
Floor Shipper – This is a prepackaged display of a product ready to go straight onto the retailer store floor. The display can be made of a variety of materials such as corrugated cardboard, plastic, wood, metal. You normally see these at the end of aisles or along the aisle as a standalone display.
FOB – Can be used as Free on Board or Freight on Board. It generally refers to which party the seller or the buyer pays for shipment and loading costs.
Fulfillment – Distribution process of moving products from the factory to the retailer, managing sales, and collection and distribution of funds.
Gap in the Market – This is where you find void in the market that has potential customers, and no one is serving a need/service. These gaps can be opportunities for companies or individuals to grab a customer base and expand their reach into the marketplace.
Gap Analysis – Process where you look at a particular product, its place in the market, its competitors, and figure what market share and profit you could attain.
Garbage-in Garbage-out (GIGO) – Term used to describe the fact that your data/research is only as good as the information source you have gathered it from in the first place. So, if you get faulty information, your final analysis will be faulty.
GMP (Good Manufacturing Practices) – Set of guidelines used in the manufacturing industry to ensure they follow a set of standards giving them consistent quality in production. This can include employee training, the types of materials they use in production, testing of the product, procedures used to run and maintain equipment, standard and random testing of the product, and documentation giving a paper trail showing that compliance of standards. This is all done to ensure the first product and the last product manufactured are of the same quality.
Hold Fee – Monetary payment made to inventor to allow company to keep your product/idea longer for further evaluation or development without the Inventor sending it to another company.
Hold Harmless Clause – A section in a contract/agreement that states one or both parties agree not to hold the other party liable/responsible for damages or other issues that may arise. These issues are normally stated in the agreement upon which they both agree.
Hook – The main feature/function your product has that will make a consumer see value in having your product. Example: saves time, saves money, does the task faster, easier than other product.
How Many Turns a Product Will Have – Refers to how many units of a product you will sell on the shelf and how many times you will need to refill it in a year.
ID (Industrial Design) – You will sometimes hear companies say “We will have our ID department look it over. Or “It is in review with ID”
Impulse Item – Product that is normally staged near the register in hopes that a consumer will see it and buy it on the spur of the moment. It can also be considered anything that was not a planned purchase.
Indemnify – Normally seen in a contract, it protects a person or company against damage or loss.
Industry Standards – Criteria within an industry that sets the rules they use for day to day operations.
Inflating an Innovation – Act of adding on parts or features that have no real benefit to the product other than to make it look more elaborate.
Injection Molding – Method similar to blow molding except you are squeezing the mold under high pressure. Molds are normally made from ceramic, steel or aluminum and used to make solid objects but blow molding objects are normally hollow inside.
Intrinsic Value – This is the price you see on a good or service based on its demand and availability. It does not reflect the quality of the good or service. Which means just because it costs a lot or a little doesn’t mean it is good or cheap.
Intuitive Use – Example- seeing a knife you quickly understand it can be used to cut or puncture an object. In the case of some products, you have to ask the question: Does the consumer understand the purpose of the toy, tool, product by just seeing it or is there a learning curve involved? Will it need a commercial built around it, specific packaging detailing how it is to be used, will it require an onsite video playing to get the consumers attention to the products value?
Intuitive Use/Function – Product is such that the consumer understands its use without the need for a detailed commercial or instruction. Example: a pair of scissors.
Investor/Angel Investor – Person(s) or group that invests money for the development and production of your idea/product. This investment is normally for a portion/ownership of the company/product.
J-Hook – Method used to suspend items outward from a shelf so consumers can see them easily and hopefully make an impulse purchase.
Kill Fee – Amount you are paid for services rendered if the deal/contract is cancelled.
KISS Method (Keep It Simple Stupid) – taking a look at any project, process, idea and finding the simplest
and most direct path.
Landed Cost – The total amount it costs of a landed shipment that includes freight, insurance, port fees, purchase price and any other costs that might be incurred to bring the product to the final port of destination.
Letter of Intent or MOU (Memorandum of Understanding) – Either document is used to state each parties intent and course of action to meet a common goal. These documents are normally followed by a formal contract between the two parties once everyone is in agreement.
Liability Risk – The risk associated with liability for a product purchased by an individual that may cause or has caused damages to those owning the product. Most companies try to avoid these issues by proper design, testing and quality control of the product. Companies can purchase insurance to help defer the costs of lawsuits which may arise from liability issues.
Licensing Agreement – Document stating the terms of payment both parties agree to for licensing the product. These can include minimums, advances, royalties; payment schedule, length of contract assigned rights and whatever can be negotiated by both parties.
Licensing Agent or Licensing Broker – A person who represents you and your product to possible investors, manufacturers, and licensing companies. They get a percentage of the royalties of any licensing deal accepted as part of their services.
Licensing Evaluation/Review – When a company takes the time to consider adding a new product to their product line. During this time the company evaluates the cost to bring the product to market and if it can be done at a profit.
Like for Like Sales – Process where you compare this year’s sales figures against last year’s sales figures to determine which products within your line moved better than the others.
Limitation of Liability – Disclaimer you normally would see in a contract where you would list the conditions/limits under which the disclaiming party can be held liable for damages or loss.
Line Extension (sometimes called Brand Extension) – Adding new products to an existing brand and hoping that the existing name recognition will help fuel sales and exposure of the new products.
Line of Credit – is a loan from a bank, Investor, Angel Investor, for a set amount that the Inventor can access as needed to order more product, run the business. The Inventor can pay it back immediately or in agreed increments over time. Depending on the deal the Inventor may have to give up X amount of their product or company shares as part of the deal.
Line Review – When a company is showing their product line to a retail chain in hopes of either establishing a line of products within that retail chain or expanding the current line they have within that chain already.
Line Sheet – Breakdown about your product you are selling letting the retailer know minimum quantities needed per order, the price per unit, a photo of the product, if they come in varying colors or sizes, discounts for orders over a certain volume, what are your best sellers, payment terms, lead time on orders, shipping method, damage and return policy.
LOG (Letter of Guarantee) – Letter written by a bank requested by the Inventor who has entered into an agreement to buy items from a supplier. The LOG provides assurance from the bank to the Supplier that the Inventor will fulfill the obligations of the contract.
LOI – Letter of Intent – in most cases a LOI shows that a company is interested in moving forward toward a contract and outlines some of the terms under which they plan on proceeding.
Manufacturing Broker – Person, company or group that will find a factory to manufacture your parts or product and takes a direct fee, or percentage of each unit made as payment.
Margin – The difference of the cost price of a product/service and the selling price of that product/service.
Markdown money – is a form of rebate/incentive a manufacturer pays to subsidize a retailer’s clearance pricing after the regular season is over to help them get rid of the excess stock on hand.
Market Entry Barriers – Generally means anything such as competition, cost, manufacturing issues that will hamper you from getting to market.
Market Pull Product – Product where it is a solution to consumer/market need normally to solve a known or perceived problem. Hopefully to generate sales.
Market Push Product – When the company comes up with a product they like to build out their line, don’t have consumer interest, but try to get the consumer to buy it.
Market Share – The percentage share a company has of total sales within a given market.
MBE – Minority Business Enterprise
MBS (Manufacturer’s Break Strength) – Point at which the product will most likely fail. There are many variations of this break point depending on the materials used and the product itself. Example- the break point for a rope is different than the break point for an audio speaker. Each has its own set of parameters at which it will fail.
MGP (Manufacture Gross Profit) – Difference between the development price and the wholesale price.
Milestone – A scheduled accomplishment that is met within a project. This can be a deliverable event in a contract or a process/project most milestones are measurable and observable and are one portion of a series of milestones to end with the completion of the project.
Minimum Advertised Pricing (MAP Pricing) – Price a manufacturer sets as the lowest level a product can be sold for and still be within their profit margin.
Minimum Performance – this is typically the lowest projected sales expected on a product, or the lowest units sold allowed per the contract before you can void the contract.
Minimum Royalty Payment – The lowest amount per your contract you will receive quarterly in royalties no matter how many units of the product are sold.
Minimums – Clause in the contract that states whether your product sells X-amount units or not, you still get paid X-amount per year.
Misdirected perception in packaging (also involves perceived value) – When you make the consumer feel they are getting more for their money by making the packaging bigger. Example: Potato chips are sold by weight not volume, but the larger bag makes you think there is more inside until you open the bag. Think about how many products you buy that have a lot of dead space in the packaging.
MOQ – Stands for Minimum Order Quantity. The minimum amount of product you have to order to get the product and the company selling to you to make a profit.
Multi-Brand Strategy – This is the practice of marketing a number of competing products by the same company but using different brands to compete against each other. This allows the company to gain more shelf space and keep others limited to smaller shelf space. It also makes it look like there are more players in that space than there really are which can give the impression to the consumer this is a need product. The company hopes it gets the consumer thinking “Why else would there be so many choices if it wasn’t something a lot of people are using.”
Multi-Market Functional Product – Products that are specifically designed or found to have use in more than one market. Example a child’s toy that can also be sold as a pet’s toy. Or another example a medical tool that can also be used in the automotive market
New product investment process (NPIP) – Getting a product to market takes a lot of steps. Utilizing NPIP is a process where each step is given the same critical overview as the one before it to ensure you have no weak links that can cause failure.
Niche Market – A small segment or specific segment of the overall consumer market. Examples: scuba divers, race car drivers, needle point, farm tractors, math teachers.
Non-Disclosure (NDA) – A document that both parties’ signs agreeing to keep any information discussed or shown confidential. Each party must get a signed original for their records of the document.
Non-Exclusive – An agreement that the company has the right to manufacture and sell your product, but the Inventor is still able to make the same agreement with other companies.
OBE – Other Business Enterprise
Oblique Drawing – Three-dimensional drawing of the object that can be used by yourself or a business to showcase the product and its features.
Obsolete Inventory – Product that has reached the end of its life cycle normally determined when a product has not seen any sales within a set time. The company generally ends up at a loss as they try and dump the inventory.
OEM (Original Equipment by Manufacturer) – Producer of the end product. Example: The motor for your car that was originally installed at the facility where the car was built
Offshore – Generally referencing manufacturing done outside the United States.
One-Off Item – Normally a single item for sale or a single item you add to a line of products or a single item that is totally different from all the other items the company may currently produce. This can be a challenge to get into a company or store because it is a single item and may not fit their current planogram. Or it is an item that would require its own space that affects the other products displayed in that area. Example: You have developed a unique new type of dog leash and want to get it into PetSmart. There are seven other companies selling multiple dog leashes that takes up 8 feet of their shelf space from the floor to the top of the shelf. Are they willing to move, condense or remove any of the current leashes from this spot in order to place your one item?
Operation Cost Target (OCT) – Normally refers to the max amount a company will spend on a particular project. This usually covers the material, labor and overhead associated with the project to make final completion.
OPP (Opening Price Point) – This is typically the lowest price a supplier can offer to the merchant and can be the lowest priced item in that category. The merchant uses this item as a way to gain the consumer’s attention and create the illusion of value hoping the consumer will be more receptive to higher price pointed items in the store.
Opportunity Cost – Decision or lack of decision that prevents the movement of your product.
Patent – An issued document by the U.S. Patent Office that your patent claim has been recognized by the U.S. government and that you own that claim. It helps protect your right to that unique patent and claim.
Patent Agent – Works with the product developer/Inventor to negotiate patent agreements. Does similar work as the Patent attorney but is normally not a lawyer.
Patent Attorney – Writes patent claims, researches the patent, and works to help the client obtain a patent on their idea/product.
Patent Maintenance Fees – Payments made to the patent office to keep the granted patent active/enforced. These fees are generally due at 3 years, 7 years and at 11 years. Failure to pay can result in your patent being abandoned/expired.
Patent pendency – Average time in months from filling to either issuance or abandonment.
Patent Search – A search done by a patent lawyer, patent attorney or patenting firm to see if any other patent has been issued on the same or similar concept you have in mind. Any claims similar to yours will have to be addressed and rebuttal as to why yours is unique from the patent issued.
Patentee – Person granted the patent. Can also be called “patent holder” or “patent proprietor” or “assignee.”
Perceived Value – What a consumer sees as value that prompts them to buy one product over the other.
Plan-o-gram (POG) – This is a drawn plan that designates the placement/ location of the product on the stores shelves. These plans are normally prepared by the corporate office for the store/retail chain for its employees to follow and maximize sales.
Polypropylene – Referred to as PP for short and also called polypropylene. It is a thermoplastic used in a wide array of products such as plastic containers, plastic parts, various packaging and more.
Polyethylene – Referred to as PE for short and also called polythene. It is one of the most commonly used plastics. It can be found in plastic bags, plastic containers, bottles and more.
POP Display or Point of Presence Display – These are typically those mobile/portable displays you see in stores that focus on selling a particular item or themed products. They are easily moved from one location to another to gain consumer attention and prompt sales of those items.
Press Forging – Using hydraulic pressure to force the hot metal into a die to get the desired shape.
Prior Art – Material publicly available prior to the priority date of a patent application which may prevent the grant of a patent.
Product Adaptation – This is where you take a current product and make improvements/modifications to the existing product to hopefully make it stand out from the others currently on the market.
Product Development – Normally consists of a business, a division of a company or companies that work on all or a single branch of the process that has dealings with design, innovation/creation and marketing of new products.
Product Determination – Process of taking the initial idea down to its base components to finalize the parts needed for the finished product. Example: Will a screw, a clip, glue be the best solution to hold a component in place and which is most cost effective?
Product Family Expansion – When a product belongs to a line of products. Example: such as cleaning items and by adding this product it is expanding the line of products aiding in cleaning. It can be sold individually or put with a grouping to enhance the selection a consumer might purchase at the same time. Such as a mop being sold in a section with buckets, sponges, brushes, brooms. These are a different type of impulse buy since you came in for the mop but now seeing the brushes or broom you decide you might as well get one while you are there.
Product Ghosting – Another name for knockoffs of a product where you make it so close to exactly the same the consumer doesn’t really notice the difference.
Product Launch – Date the company plans to have the product on store shelves available to consumers.
Product Line – Collection of products produced by one company for sale for profit.
Product Placement – A method of getting your product expose/publicity by having the product used in
something the public sees such as advertisement, media events, celebrity endorsement, used in a movie or TV by the actors or placed in view in the background.
Product Search – Can be a company that holds an innovation search for a sponsor/company looking for innovation in a particular area. It can also be the process of doing a search to see if a product already exists within the marketplace.
Products Footprint – Amount of space it will take up on the store shelf or on the store floor as a display.
Proof of Concept – The ability to demonstrate via a prototype, engineering model, 3-D animation, etc. that your product will work as claimed.
Prototype – Functional model that can demonstrate your products features. It can be crude or manufacture ready in quality.
Prototype Molds – Molds generally used to for prototyping short run manufacturing and used as a bridge tooling before moving to large-scale manufacturing. Doing short runs allows for proof of concept, testing the market, weeding out bugs before going to the final tooling and rapid production.
Provisional Patent – A cheaper method to file a holding spot with the patent office for one year on your idea. During that one year you need to be working toward preparing a full patent, getting your product to market or seeking a company to license the product from you.
Public Pair – (Patent Application Information Retrieval) A great resource for finding out if maintenance fees are current or the patent has lapsed. Gives information on issued or published patent application status.
QR Bar Code (Quick Response Bar Code) – Normally a two-dimensional bar code that is inside a square block and can be read by most Smart Phones. It is associated with a link to a website, additional information, phone number, text, video and wide variety of other information. They are very commonplace outside the United States but gaining popularity.
Realistic Expectations (in reference to inventing) – Having a good vision of the reality of a situation understanding what cannot and can be done. A good practical understanding of how things work and what can be expected. Knowledgeable of the industry they work within or at least willing to learn how the system works.
Retail Price – The price for a product or service sold to the consumer. Note: This price is not used when calculating an Inventor’s royalty rate.
Retainer – Monetary payment made to inventor to allow company to keep your product/idea longer for further evaluation or development without the Inventor sending it to another company.
Repetitive Manufacturing – Process of making the same product during a manufacturing cycle. This normally happens in an assembly line type of environment.
RFID (Radio-Frequency Identification) – Wireless non-contact use of radio-frequency electromagnetic fields to transfer data.
ROI (Return on Investment) – This is what investors look at before putting in any money. What will the return in profits to them be versus how much they have to put in? This is where they decide what the risk factor is.
Roll Forging – You get the shape desired by running the hot metal between two rollers.
Royalty Overage – Money paid in royalties above the minimum rate in the contract. Example, your contract states the minimum you will receive in a year in royalties will be $50,000 and due to great sales you received $85,000 in royalties. $35,000 would be the Overage paid.
RTA (Ready To Assemble) – Examples of this would be the desks, bookcases and shelves you can buy but have to assemble once you get them home.
RTP (Ready to Play) – This is referencing items that you can unpack and do not require assembly in order to use.
Running Royalty – Royalty paid to the inventor based on the number of units sold or manufactured instead of a onetime lump sum.
SBA (Small Business Association) – Organization that helps small businesses with loan programs and mentoring/counseling. They also ensure a certain percentage of federal dollars are expended to small businesses.
Seeding the Market – Placing small amounts of new product in strategic retail locations
Sell-In – Wholesale price a retailer is given from the manufacturer.
Sell Off Period – If an agreement/license has been terminated it is the amount of time the licensee has to sell off any remaining inventory.
Sell Sheet – A one or two-page document with drawings, and benefit explanations specific to the product. This allows the reader to get a full overview of the product and its marketability.
Shipping Container – Container that can be sealed and reused normally used to ship product from one country to another via ship or overland by truck or train. They are typically two sizes twenty foot in length and forty feet in length.
Shelf Life – For items such as produce, meats and other items that deteriorate it is the time that the item can remain effective/viable. For other goods, it generally means how long they expect it to remain in inventory.
SKU (Stock Keeping Unit) – Every SKU is identified with its own unique number tied to a particular item. This helps track product and inventory. These numbers can be tied to the items EAN or UPC.
Slotting Fee or Slotting Allowance – is the amount charged to producer or manufacturers by the retailers for a variety of reasons such as stocking the product in its warehouse or keeping X-amount of inventory on hand. It can also be charged for the marketing expenditure spent by the company.
SME (Subject Matter Expert – Person that has the most knowledge of a particular subject. In an inventor’s case they should be that expert on their product.
Spoilage – The number of items broken in a shipment from the factory or fulfillment center to a retailer.
Sole license – Means licensor grants licensee exclusive license except for retained nonexclusive license of licensor.
STEP and IGES – Neutral file formats used to transfer files between various CAD software. Editing these is normally not available because the history tree is unavailable in this format.
Strip Hook Display – These are typically a narrow strip of flexible plastic with vertical tabs used to hold a product hanging off the store shelf.
Sub-License – This is where the original company or person who licensed the idea/product and signs a licensing agreement with a third party to distribute/sell the idea/product. Per your agreement with the original company you should receive compensation for those sales.
Targeted Release – Holding a shelf ready product back until a specific season or date to gain optimum sales and exposure.
TD’s (Technical Drawings) – Drawings showing enough detail, dimensions, and notes sufficient for the object’s construction.
Technology Break – Point where current technology and manufacturing knowledge don’t meet the needs to produce the product.
Term Sheet – Document/framework that is used as a starting point in negotiations between two or more parties that can cover some of the following items, Licensing Fee, royalties, percentages, advances, payment schedule, milestones each party must meet, length of the proposed contract and more. Each Term Sheet is specific to that particular situation and what each party brings to the table and is willing to accept. Based on the Term Sheet a contract can be structured more rapidly, and all the legal terms can be added to make it official and ready for all parties to sign
Termination Rights – Normally part of a contract explaining each parties rights to terminate the contract. These can include failure to meet certain goals/milestones, violating certain terms, failure to pay royalties and more.
Test Marketing – When the product is exposed to a select sample of the population, so the company can get a snapshot of consumer’s reaction to the product and based on these results
Trade Barrier – This has a lot of moving parts. The barrier is normally imposed by the government on the exchange of international services or products. This can be enacted by tariffs, customs policies, import/export policies, restrictions on licensing, quotas limiting so many of a certain product into the country, technology transfer restrictions and a host of other factors.
Trademark – What consumers recognize as the brand/insignia of your product/goods. A Service Mark and Trademark are very similar to each other with the exception that a Service Mark doesn’t apply to products/goods, it only applies to services. Symbol, name, device or even a word that is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others. You can sometimes see the same name used by two different companies because they are in totally different categories of trade.
Trade Secret – Know-how, confidential information, formula, process that gives the company/individual a competitive advantage and if the know-how, confidential information, formula, process is disclosed will harm the company/individual.
Upfront Payment – payment made prior to the product going to market to the Inventor. Once the product is on the market the inventor does not receive any royalties until the advance is equaled in royalties paying the company back for the advance.
UL (UnderWriter’s laboratory) – Recognized by OSHA (Occupational Safety Health Association) as a Nationally Recognized Testing Laboratory from which you can have them test your product and if it passes their strict standardized testing you can put the UL symbol/logo on your product showing it has passed their standardized testing and certification process. They are known for having very high standards in compliance and do follow-up with companies to ensure they maintain those standards in production.
Unit Cost – Final cost to the manufacturer after adding in all the associated costs to manufacture. This can include the materials, molds, shipping, taxes, tariffs, employees, etc.
Unrealistic Expectations (in reference to inventing) – Unreasonably idealistic in their approach and vision of how things really work and what they feel should happen. Could be deemed impractical and difficult to work with from a company’s perspective. Not knowledgeable of the industry they are working within and feels the industry should bend to their demands.
UPC (Universal Product Code) – This is normally a 12-digit barcode placed on the item being sold. UPC is used for pricing at the checkout, inventory, sales, ordering stock and a host of other options. Twelve digits are used in the United States and 13 digits in Europe.
Vanishing Point Of Return – Point where the Inventor has sunk so much money into the invention they feel they can’t stop now. This feeling works great for everyone selling you services.
What the Market will Bear – The top price the consumer will pay before they decide it is too costly for what they are wanting/needing. Example: Music CDs could sell at $8 and still make a profit, but music companies know consumers are willing to pay $12 and up for their favorite music group.
White Labeled or Private Labeled product – A white label product and a private labeled product are the same thing. Basically, a white-label or private-label product is a product or products made by one company that other companies rebrand to make it look as if they had made it themselves.
Wholesale Price – The price a company charges for a product normally sold to a retailer. The retailer will then increase the price they paid and sell it to the consumer. Note: This is normally the price used when referring to a royalty rate percentage paid per unit in a licensing agreement to an Inventor. It is not to be confused with the Retail Price that is charged to the consumer.
Wish list – Some companies will send out a list specifying the areas they want to see new ideas.
WLL (Working Load Limit) – This is normally the recommended safe area in which the product performs as desired/designed.
Work for Hire – Normally a fee paid for services rendered where the person providing the service has no legal ownership of the finished product. Example: You have a prototype made by a company. They performed the work, but you own the finished product. If you sell a million of them they do not get any further compensation than the fee you paid for the original service of having the prototype made.
3-D printer – Utilizing CAD drawing input the printer makes a 3-D solid model of the design.