"You Might Be an Entrepreneur If..." by the SBA 504 Experts


Uploaded by 504LoanExperts on 10.08.2010

Transcript:

MALE SPEAKER: Good afternoon, everyone.
Welcome to another outstanding Authors at Google Talk.
We have a true innovator with us today.
How do you sustain innovation, how do you sell your ideas in
the marketplace, how do you really make things succeed?
We're pleased to host Stephen Key today to
give us some answers.
He is a leading innovator.
He was formerly the head of design for the
World of Wonder Group.
And after delving into the world of Lazer Tag and Teddy
Ruxpin, he continues to work with innovative products, such
as the Spinformation labels, and also a new drink called
the Soyu Natural Teas.
His work has garnered him a few Edison awards, a lot of
buzz in the industry.
But he's especially well-known for his recent book, of which
today's book is the sequel in some ways.
The current book is titled, "One Simple Idea for Startups
and Entrepreneurs." And it continues the "One Simple
Idea" series, though this time focusing on the startup side
as opposed to the innovation and product side.
And so, we'll have the mic available for Q&A. And please
join me in welcoming Stephen to Google.
Thanks.
[APPLAUSE]
STEPHEN KEY: Well, good afternoon.
I'm so excited to be here.
In fact, I grew up in the Bay Area, so
it's like coming home.
I currently live in Modesto, which I call the creative
capital of the world.
And if anybody's ever been there, hopefully I'll get a
laugh from that.
But today, I want to talk about my journey a little bit.
You see, what I do for a living now, what I've done for
30 years, is that I come up with simple ideas and I
license those ideas to companies.
And every time they sell one of those ideas, I get paid.
It's called licensing.
It's basically renting an idea to a company.
And like I said, every time they sell one, I get paid.
Now, a lot of people ask me, how do you do that without a
lot of protection, like patents?
How do you do that when you live in Modesto?
And how do you work with some really large companies?
And how do you license ideas?
So today, I want to talk about some of the things that you
can do because I know everybody here's creative.
I know that.
I know everybody here has had an idea
at one time or another.
And you want to know, hey, what do I do with these ideas?
Do I just let them sit?
And if you do let them sit, you know
what's going to happen?
You're going to see them sooner or later.
I can guarantee it.
If they're not even good ideas, they can be OK ideas.
But sooner or later, you'll probably see those on the
store shelves.
So I want to start at the very beginning.
I grew up in the Bay Area, and my father
worked for General Electric.
And he said, Steve--
after I graduated from high school, he says, you need to
go into business.
And so I went to Santa Clara University.
And I realized I hated it.
I was a econ major, and everybody there had a smile on
their face.
And I couldn't stand it.
So one day I took an art class by mistake and I realized I
really loved working with my hands.
I wanted to create things.
So I went home and I told my dad, I said, dad, I
want to be an artist.
And he said, great.
Do you paint?
And I said, well, no.
And he said, well, you must sculpt.
You like to sculpt?
And I said, well, no.
So my father gave me some great advice and said,
whatever you want to do, just do it.
And if you really love it, you'll be successful at it.
Successful with it.
So I went over to San Jose State and it was a big shock
to the system.
And I joined the art department.
And I realized very quickly I wasn't an artist either.
But I wanted to make things.
I wanted to get my ideas out.
So I left San Jose State a little early without a degree,
and I started to just to make things and sell
them at street fairs.
I was one of those guys that you go to these street fairs,
they have them all over the Bay Area.
And I'd set up a little table and I would sell them.
And I realized real quick--
one of the most important things that I've learned that
if it doesn't sell, you got to kick it to the curb as fast as
you can and find an idea that does sell.
Because if you're living off of your ideas, in order to pay
the rent, in order to pay the bills, you better find an idea
that works.
So I learned very quickly to test, test, and test.
And if it doesn't work, get rid of it.
Find something new.
So I was very fortunate because I'm 27 years old now
and all my friends think I'm the biggest
loser on the planet.
I'm selling things at street fairs.
And sure enough, I read an article in the late '80s--
there was a startup company called Worlds of Wonder.
And they had this talking teddy bear, Teddy
Ruxpin and Lazer Tag.
And I went in for my first job at 27 years old.
And the engineering department hired me because they didn't
really know anything about stuffed animals, and that's
what I was making at the street fairs.
And so they hired me.
And we sold 5 million Teddy Ruxpins at $89.
We were the fifth largest toy company in the world with one
simple idea.
And I was amazed.
My job at Worlds of Wonder was to go overseas and help them
start up manufacturing.
Since I was a designer now, first job, I'd go over there
and I realized that the creator of Teddy Ruxpin was
making a million dollars a month in royalties.
And I was on a production line watching this and making sure
those teddy bears, they look great.
And I realized right away I wanted to be that guy.
I wanted to be the guy that was collecting the royalties.
So I left Worlds of Wonder, came back, and moved to that
little town over there in the central valley, Modesto.
And I met this wonderful woman there.
And we ended up starting a family and raising three kids.
So what I started out to do-- and it was really simple.
I thought if I just showed a company a great idea, if they
liked it, they would pay me.
It was as simple as that.
And I remember the first idea I came up with.
You see, I love playing basketball and I have this--
my office.
And just to have some fun, I would shoot a little Nerf
basketball game.
I had a little ball there and I'd shoot it.
And it was boring, I realized I wanted to
create something different.
So I went down to the store.
I went to Toys"R"Us and I looked at all
the basketball games.
And I realized they were all just square.
And they were really boring.
And so I put my creative cap on.
I started coming up crazy ideas of what could I do to a
basketball game?
And I couldn't wait for my wife to get home because I
came up with this one idea I wanted to share with her.
You see, the woman I met at Worlds of Wonder, Janice
Kimball, she had gone to Stanford.
She has her MBA at Northwestern.
And now she's at Gallo.
She's vice president of marketing for Gallo, the
largest wine company in the world.
She's the highest-ranking women they've ever had.
And she's excellent at new products.
So I can't wait for her to get home because I want to show
her my new basketball game.
And so we put the kids to bed and we slip into bed.
And I have this big sketch pad and I'm here to tell you guys,
the last thing you want to do is bring home your work.
The second thing you don't want to do is bring home your
work to bed.
And we sat there and I went through my ideas with my wife.
And she said, Steve-- at the very end, it
was the last idea.
It was a basketball game.
And I took the picture of Michael Jordan from a poster
and I just slapped it on the backboard.
And I called it Hoop Hoop Hooray.
It was a terrible name.
So I shared it with my wife and she says, Steve, that's
the worst idea I've ever seen.
The chances of you licensing that idea are
about one in a million.
Come up with another idea.
So the very next day I sent it off to that company--
it was called Ohio Art--
because they had the license for Michael Jordan now.
And I loved Michael Jordan.
But It was a little picture.
And when I sent my idea in, they loved it.
And three days later, I had this contract from Ohio Art.
And they called it the Michael Jordan wall ball.
And it sold for 10 years.
And every time they sold one, I got paid.
So it allowed me to basically do whatever I want.
But for 10 years, I collected those royalties.
Now, I want you to imagine this.
It's Saturday morning.
I'm sitting on the couch.
I have my kids there and Janice is on the end, and I'm
sitting there.
And Michael Jordan comes up on this commercial and he shoots
it and he makes the bucket.
He turns around, looks at the camera and says, this is the
best looking backboard I've ever seen.
And I'm sitting there, and I look over at my
wife and I'm going--

What I realized and what I want to tell everybody here,
the only opinion that matters when it comes to ideas is the
companies you're licensing it to.
It's not your friends, it's not your family.
It's those companies.
Now, what's really great about licensing ideas to companies--
I call it renting an idea to a company--
is that you can do it anywhere in the world.
And you can do it just by taking a few steps.
And I want to go through some of those steps.
These same steps are in my first book called "One Simple
Idea." McGraw-Hill contacted me about two years ago and
they said, Steve, you've got this great system of how to
license ideas.
You've licensed ideas in the toy industry, the novelty gift
industry, the packaging industry.
Why don't you share how you do these 10 steps?
So I did.
And I've been teaching these 10 steps for many, many years.
And people have been following the steps and they've been
licensing ideas.
So I'm here to tell you that you don't
have to start a company.
I mean, everybody thinks that I'm going to
have to raise money.
I need to protect my ideas.
And I'm going to need to start a company, and all this stuff.
And I'm here to tell you, you need to look at licensing if
you're creative.
Because companies are looking for ideas.
In fact, how many people have heard of open innovation?
Raise your hand.
OK, a few.
Open innovation, it's really simple.
Companies have realized, we don't have
all the great ideas.
So they realize that if we open the doors to everybody,
people can submit ideas to our company.
And one company is leading the charge, it's Procter & Gamble.
You can go to their site and they list what
they're looking for.
So what they've decided, and I think a lot of companies have
decided is that, look, I might have the brightest guys in the
back room, but how can I expand my reach of ideas?
And it's called open innovation.
If you're not familiar with it, please take a look at it.
You'd be amazed at what companies want your ideas,
what companies are looking for ideas.
And it's global.
It's not just here, it's around the world now.
It's called open innovation.
Please look at that.
Now, let's get back to, what do you really need
to license an idea?
Well, it's really quite simple.
You need to study the marketplace.
You need to find a hole.
Now, you don't want to reinvent the wheel.
When you reinvent the wheel, it takes a lot of money, it
takes a lot of education, it's going to take a lot of time.
But if you look at any marketplace and you find that
uniqueness that other people have missed--
and what's really amazing, if you look at it close enough,
you can look between the lines and you will see openings.
I like to look at those as finding crumbs on the table
that big companies have missed because they're too busy
either putting out fires or running
their day-to-day business.
But there's opportunity for people like myself and for
others that want to start companies, that want to
license ideas.
So you're looking for sleeping dinosaurs, is
what I like to say.
And once you find that opportunity, you need to
submit it to a company.
Now, everybody asks, Steve, aren't you afraid that
someone's going to steal your idea?
I'm not afraid at all.
Because some things have happened, some things have
changed in the last 10 years.
Number one, because of open innovation, a lot of companies
are looking for ideas-- number one.
And because of the internet, if someone treats you poorly,
you can talk about it.
Now, that has changed the whole game, the profile.
Companies are a little bit afraid of people posting
things that are negative about their company.
So companies are playing fair for the first time.
And number two, intellectual property.
Has anybody here filed patents?
Anybody know about patents here?
A few?
OK.
The United States Patent and Trademark Office has these
great tools.
They're very, very affordable.
And the first tool I like to talk about is called a
provisional patent application.
It's a wonderful tool.
You can file it yourself for $125.
Meaning you can play the biggest game in
the world with $125.
Now, that is truly amazing.
It's called a provisional patent application.
If you're not familiar with it, go to the USPTO and start
reading about provisional patent applications.
It's a wonderful, wonderful tool.
And there's many other ones as well.
So look at those tools.
You know what those tools do?
They give you perceived ownership.
Because I don't think you ever own anything.
Everybody wants to own something.
I don't think you do.
Now, I have 13 patents.
One of my patents is on a technology, like here.
I don't know if you can see it.
But when you turn the label, you get additional
information.
I'm going to pass this around.
This technology, it's called Spinformation.
It won an Edison Award a year and a half ago.
And I remember being back in New York with my group.
Here's another one.
This one's got animation when you spin it.
You'll see animation.

Now, what was really great about this idea--
well, first of all, it won an Edison Award along with Coke,
Nike, Apple, Stephen Key Design, my company .
And I was really amazed at how powerful a simple idea is.
How powerful an idea is by finding opportunities, filing
a provisional patent, and going down that road.
Now, I'm going to pass those around.
What you're seeing now, that's called AccuDial.
That's a correct way of dosing your child by the weight of
your child, not by the age of your child.
And you're going to see this more and more.
We rolled it out up in Canada.
And you're going to see some of the national pharmaceutical
companies use this next because it's the correct way
of dosing your child.
But this gets even better because I have 13 patents on
that technology.
13.
I've even--
AUDIENCE: [INAUDIBLE] technology?
STEPHEN KEY: Yeah, 13 on this one technology.
Now people ask, wow, 13.
Why so many?
Well, there's a lot of different label formats.
And you start thinking about Pepsis and Cokes, and
Campbell's Soup.
And so I filed all these patents on all these different
technologies.
But I remember--
is anybody familiar with prior art
searching, too, this group?
No?
Well, you can always do--
this is what I love.
Go to Google Patents, which is like a godsend for someone
like myself because it's so easy to do.
The USPTO site is terrible, but Google
Patents is really fast.
But you can look at other people's ideas really quickly
and see if your idea is a new one.
So this idea that I licensed and sold over 500 million
labels with that idea.
And I collected a royalty off of every time they sold one.
And in fact, I just sold my company to a pharmaceutical
company with this technology.
But what's really amazing about it, I don't
own rotating labels.
And I didn't invent the rotating label.
Someone else did.
But I still have 13 patents on it.
And people are always amazed because everybody
wants to own something.
So I remember my attorneys are here, [? Carr & Farrell, ?]
right down the street.
I remember when I first came up with this idea and they
said, Steve, your idea is just too goofy to come up with
something that really could be useful.
And so I showed them the idea and they said, look, we want
to do a prior art search.
And so sure enough, they did.
And they looked around and they said, Steve, you're the
sole inventor of this rotating label.
They couldn't believe it.
So the next thing you know, I get this call, because I'm
making samples, showing it to people.
I get this call from the president of Procter & Gamble.
And they saw this innovation.
They said, Steve, you need to come out to Cincinnati and
give a presentation to our technical group about this
great innovation that you created in Modesto, the
creative capital of the world.
I said, absolutely.
And I went out to Cincinnati.
But before I went there, I asked my wife.
You see, my wife's got that background I told you about.
And I said, I'm going to need some help here because I'm
really a fish out of water.
And she said, I'm not going back with you there.
I said, well, what not?
She said, Steve, you understand.
That's Procter & Gamble.
They're going to eat you up and spit you out.
I said, well, no.
Come on out.
So I said, look, throw on that red dress.
Let's go out in Cincinnati and let's go wow them.
So sure enough, we went out there and the gentleman took
us out to lunch on their campus.
And after lunch, I was so happy.
I thought I finally hit the big time.
I'm going to license my idea to one of the biggest
companies in the packaged good industry in the world and life
is just going to be great.
So after lunch I said to the gentleman, I
thanked him for lunch.
And he said something very interesting to me.
He said, Steve, remember one thing, there is no such thing
as a free lunch.

And I remember looking at my wife and she kind of looked
back and gave me that look of, I told you so.
And we went to the meeting and sure enough we walked down
this long aisle, and there's patents
and patents and patents.
They're trying to scare you now, intimidate you with all
these patents.
So you get in this room.
And sure enough, they all line up.
They have all their engineering, their marketing
people, their engineers.
I mean, there's got to be 50 people in the room.
They all line up on one side and I'm on the other side.
I do exactly what I do best, I kind of spin the label.
And my wife gets up there and talks about how we're going to
cross promote, all that marketing stuff that
she knows so well.
And I had a manufacturing guy there.
And he said, look. he didn't know how he was going to do
it, but he said, hey, since you've got our equipment in
your facilities, we'll figure it out.
That's my team.
And so the gentlemen slides this piece of
paper across the table.
He says, Mr. Key, we're not going to pay you one
penny for this idea.

And I grabbed that piece of paper and they all got up and
they walked out.
Meeting over.
It was that fast.
And I remember I went back and I was in shock.
And I sent that piece of paper over to my attorneys.
And they said, Steve, I'm really sorry, but you're not
the inventor of the rotating label.
We call it Spinformation.
I said, well, why is that?
He said, well, someone else invented it before you.
So forget about it.
And life is over in that particular product.
But it bothered me that here, the largest packaged goods
companies, was calling me.
And they were interested in it.
But they were kind of upset that their people didn't
invent this.
So in a way, to make a long story short, I started
thinking about this over and over and over again.
I realized something's really wrong.
So I received the two patents.
It was invented 50 years ago.
And I started looking at the patent and claims, and reading
and reading.
I'm realizing, there is no method of manufacturing.
So I started calling up companies and they let me in
their facilities.
And I started to realize how to make a label spin.
And so today, I have 13 patents on that technology
that my company, Patent Portfolio, was purchased by a
company called AccuDial.
And now we're rolling out.
So I guess the moral to that story is when someone tells
you no and you still think there's a possibility, do your
own homework.
Always do your own homework.
And always investigate, investigate, investigate.
Because a lot of people just have it wrong if you don't see
it correctly.
So that idea that you see there, rotating label, I sell
a lot of those labels.
But I consider that a fairly big idea because it crosses a
lot of different categories in the food
and beverage industry.
But most of my ideas have had no protection on them at all.
The Michael Jordan wall ball had no protection whatsoever.
And even ideas as simple as ideas like this, I was able to
license this to a company with a one-line description,
plastic arrow with a suction cup, I'm stuck on you.
And a company licensed this and they sold it at all the
hallmarks for Valentine's.
I made $10,000 on one line.
The point I'm trying to make is simple ideas, no matter
what industry that you're in, companies need ideas because
of open innovation.
If it's software, if its new toasters, tennis shoes, back
to school, it does not matter.
If you're creative and you see an opportunity, you should
look at licensing that creativity.
Now, this is what you need to do.
I want to get back to that real quick.
You need to do a prior art search.
Go to Google Patents, take a look around, see if your
idea's new.
But better yet, this is what I do.
I just do a Google Product Search.
And that's the greatest tool on the planet.
It used to be I used to have to go down to the
stores to do this.
But now I can sit in my bunny slippers, get on the computer,
and I can do all the homework right from my desk.
And I'm always looking to see if I find my idea.
But even if I find my idea, online, but it's not in the
stores, I still might go for it.
I still might try to license some variation.
You see, what I realize is that all the ideas that are
out there, a lot of them have been done before.
But you need to find a uniqueness.
You need to find something that's a little bit different
no one has done before.
I like to find ideas that--
I like to make changes on small ideas
that already exist.
And the reason why, there's a marketplace for it already.
You see, if you create this idea where you have to
educate, takes a lot of money, maybe a lot of time as well.
But if you find an existing product, change it up a little
bit, and file a provisional patent application, that gives
you perceived ownership for one full year.
That one full year allows you to call companies and submit
your ideas to those companies.
So that's how I play this game.
And what I've found is that when you call these companies,
most of these companies welcome your ideas.
That's what's so amazing.
A lot of us think I'm going to call this company and they're
going to say, look, we don't look for outside ideas.
That's not true anymore.
Or it's not invented here.
That's not true anymore.
They'll take those calls.
So this is what I do when I call these companies.
And I've done this for 30 years and it seems to work
every time.
It still works today.
I call them up and say, look, I'm a product developer.
I'm not an inventor because they have some weird thing
that you're over in Modesto or someplace working out of your
garage and you're coming out with this crazy ideas.
But call yourself a product developer.
And just say, look, I want to submit an
idea to your company.
Can you help me?
That's the three magic words to an operator,
can you help me?
Now, what's great about these operators, they don't really
know what to do.
So I guide them.
And there's a couple places you want to go and there's a
couple places you don't want to go.
You don't want to go the legal department
because if it gets--
any attorneys here?
Probably not.
If it gets over to the legal departments, it's going to
hang up for a while.
If it gets over in purchasing, it's going to be
hung up for a while.
So the two departments that you want to call, you want to
call the marketing or the brand manager, that person
doesn't care where a great idea comes from.
Their job is to go from point A to point B.
Or someone in sales.
If you call someone in sales--
I love these guys.
Number one, they do answer their phone.
Number two, if they like it, they'll sell it for you.
So [INAUDIBLE]
is really great.
And the way to find the names of
everybody now, go to LinkedIn.
So calling these companies, it's really quite easy.
And it's fun.
In fact, I teach this one class where I tell everybody,
call a company you have no intention of submitting an
idea to and see what they say.
Tell them you're a product developer, you want to start
submitting ideas.
What's the process?
Who do I need to talk to?
And see how easy it is to get in.
But here's the catch.
Your idea has to have wow.

It doesn't have a little wow, it needs to have a wow.
If it doesn't have that, you're going
to have a hard time.
I like to take my ideas and I like to be able to condense
them down to one sentence, one powerful, emotional sentence.
Like for the label it was really simple, I can add 75%
more space to your package.
Because I knew these companies need more information--
for drug facts, for multiple languages, for weight-based
dosing, for contests.
I knew they need the real estate.
So I sell real estate back to them now with
the rotating label.
Find that one-line benefit statement of why it's great.
You'll use that one-line benefit
statement when email them.
Your subject line might be that
one-line benefit statement.
Find their pain.

And companies all have a pain point.
Find a pain and have the solution.
Now, sometimes I'll come up with a solution that I don't
even know it will work.
And people are always dumbfounded by that.
Say Steve, why would you do that?
Well, number one, I want to see if people are interested
in it first.
Can you imagine working on a project for year, can you
imagine filing patents and then realize that
no one wants it?
All right, so I do it a little bit differently.
I study the marketplace.
I try to find those sleeping dinosaurs.
I find those companies that are looking for ideas.
And the way I find those companies is I just go down to
where my product's going to sell, I find that shelf, I
call all those companies.
And then when I submit them, submit those ideas to them, I
do it two different ways.
I call first to find that connection, find
someone on the phone.
I want to submit an idea to them.
I send them a sell sheet.
And a sell sheet is like a one-page benefit statement at
the top, my one-line benefit statement, a picture, a
drawing, a prototype, whatever you have, and contact
information.
I don't tell them a lot.
I don't give them the nuts and bolts.
I just don't do that.
I give them enough to whet their appetite for them to
call me back.
Because once they call me back, then the dialogue, then
they dance starts.
Now, what's really great about it, I talked a little bit
about this earlier.
When you file a provisional patent application, that gives
you perceived ownership.
Companies don't know if that's going to issue or not.
If you have a really big idea, file multiple PPAs.
Start building your wall.
Because companies, number one, they need ideas.
Number two, they don't know if it's going to issue or not.
So the chances of licensing are very, very good.
In fact, most of the people I work with, including myself,
have licensed ideas that will never get a patent.
So it's very interesting.
I remember I gave a talk at the United States Patent and
Trademark Office, David Campos that runs the USPTO said to
me, Steve, aren't you happy?
We're going to fix the patent system.
We're going to make it so they issue these patents really,
really fast.
And I said, no.
I like that it takes forever.
Because it's like playing the card game.
They don't know if it's going to issue.
That's the way licensing works for me.
These 10 steps, if you want to know more about them, they're
in the book called "One Simple Idea." It's been number one on
Amazon Small Business for almost 18 years.
I think it fluctuates up and down.
It's being translated in five different languages.
It's a great way to get your creativity out.
Because I know there's a lot of people here that are
thinking about ideas.
You have ideas, but what do you do?

I guess what I'm saying to you, it's a global opportunity
for anybody.
It's the way to be creative.
And it's the way to get your ideas
without starting a company.
Now, real quick.
My second book that's out, just came out November 5,
great timing with the election and everything, is about how
to do startups.
Because I started a company a couple years ago on a very
simple idea.
And I'm all about really simple ideas.
Because number one, if it's simple and small and
inexpensive, it's easy to launch.
You can do it yourself.
Doesn't require a lot of capital.
Now, I know I'm here talking to a really large company, and
that's not the way this is done here.
But for a lot of us that want to start small, little
companies, if you find a small idea and you test your idea,
you can start a company basically on fumes.
By testing, testing, testing, getting that feedback, and
then launching.
And I want to show you something else that I-- a good
friend of mine, I'll show this.
He plays guitar.
How many people play guitar here?
Raise your hands.
A few.
And he was a musician.
He had a music store.
He came to me a couple years ago and he said, Steve, why
don't you do something to a guitar pick?
I thought, why would anybody do anything to a guitar pick?
It's been the same shape forever.
Who cares?
And he said, no, I think there's something here.
So I came up with guitar picks in the shape of skulls, and
vampires, and even Mickey Mouse.
And what's really interesting about the story was that I
think anybody else would have said, wow, why bother with a
guitar pick?
Well, what was interesting about that, I
became a Disney licensee.
We sold at Walmart, 7/11, 10,000
stores around the world.
At the biggest shows we won awards for our guitar pick.
It just goes to show you, you don't have to reinvent the
wheel sometimes.
It can be a small idea that can have--
that can be powerful.
I sold that company a couple years back.
It's still running today's.
It's called Hot Picks.
And you see that they picks around the world for a lot of
different famous bands and things like that.
So the second book is about venturing, startups, how do
you do it without spending a lot of money?
I think you'll really enjoy it because it talks about staying
small, finding a simple idea, don't reinvent the wheel, and
how to start this stuff to where you're not breaking the
bank or you have a garage full of stuff you can't sell.
So anyway, just to clarify the first book, "One Simple Idea,"
is about licensing, how you can license ideas from any
place in the world, how to leverage yourself with the
one-line benefit statement, how to protect your ideas with
PPA, and how to contact companies.
It's absolutely an easy read.
I think you'll enjoy it.
The second company say, hey, look, I'm going to find those
crumbs that the big companies are missing.
I'm going to start my own little business, how do I do
it with a little bit of cash?
How do I test it?
And how can I run a business successfully?
And when I talk about that, it's one thing to come up with
an idea one time, it's another thing to keep that business
running over and over.
With the guitar picks, we did over a million dollars a year
selling guitar picks.
I never thought in a million years we'd
do that much business.
And I'm proud to say it still exists today on a very, very
simple idea.
So does anybody have any questions?
AUDIENCE: Thanks for coming and talking.
Great, interesting ideas.
You mentioned something casually at the beginning,
which is and you checked with your lawyer--

so that sounds like one of the missing ingredients in doing
this is you have your sidekick lawyer somewhere.
Could you talk a little bit more about engaging lawyers?
STEPHEN KEY: Yeah, I love lawyers--
sometimes.
What I try to do myself, I try to do as much work myself
before I get lawyers involved.
And it's easy to do now.
I can take in the marketplace, see if my product,
see if it's out there.
I file my own provisional patent applications.
It's easy to do.
I don't get lawyers involved in that either because it's
just simple to do and there's some great software.
It's basically you have a problem, here's a solution.
So I do that myself.
And even the licensing deals, I negotiate those myself now.
Because I've done them a few times, I'm very
comfortable with it.
But let me tell you where you need your attorneys in.
If you have a big idea, you're going to have to look at it
differently.
Like with the spin label, I knew right away that in the
packaging industries, that could be huge volumes in the
packaging industry.
So I knew I needed a wall.
So I met with [? Carr & Ferrell ?]
and I said, look, I've got a big idea here.
How to protect it.
How to keep it away from the smaller guys, or the guys
coming after me.
And so we built a wall of IP, those 13 patents, of all the
different ways of protecting it--
from trademarks, to copyrights, to patents.
Now, what's great about that, I was in federal court
defending my patents.
A lot of people never get that great opportunity.
But a small little toy company, I showed them my
idea, they signed NDAs.
And next thing you know, it was on a number one hit toy.
And I took that toy company to court in
federal courts, San Francisco.
And that toy company was LEGO.
And I remember seeing my name when I went to the court.
It was Stephen Key Design versus LEGO.
And I realized right then and there, how do you fight LEGO
when I'm one guy?
But I realized because of patents, you can play the
biggest game in the world.
And sure enough, three years before it went to trial.
Or three years after talking for three years, two weeks
before it went to trial we settled.
So patents are important.
But getting back, why do you use attorneys?
When you have big ideas, you need to talk
about long-term strategy.
Simple ideas, maybe yes, maybe no.
A lot of companies don't care about patents with simple
ideas because they come and go so quick.
If you waited for a patent to issue, you might
be waiting too long.
So for simple ideas, PPA is a very powerful tool.
But if you've got a big strategy, talk to someone that
understands IP and how to build your wall going forward
to keep everybody out.
Because when you have a wall, you know
what it says to everybody?
This guy is serious.
And it sends that message.
So that's when I use my attorneys.
And also, every licensing agreement that I ever sign, I
always have a licensing attorney look it over to make
sure I haven't missed something along the way.
Because they get very technical at some point.
AUDIENCE: Thank you, Stephen.
Quick question.
It looks like you've been successful both routes, with
licensing and then building companies, and
running those companies.
What would you say is kind of your litmus test or your
thought process for knowing when to license versus when to
create, build, and run a company?
STEPHEN KEY: Great, great question.
How do you know what path you want to take?
It's the same path at the very beginning.
You want to, first of all, do your homework.
Test the marketplace.
Study the marketplace.
That means go down to the store, see if
your product's there.
Do a prior art search.
Look at the whole environment to see.
And then ask yourself a couple questions.
Number one, can my product be made?
And a lot of inventors don't ask that, or entrepreneurs.
Can it be made at a price where everybody makes money?
Number two, does it have a wow factor?
Can I describe it in one sentence that people go, hey,
I want more?
And also, I like to look at it, how big is the market?
So I use those things to kind of test it.
But at the end of the day, even if I wanted to
manufacture an idea, I might try to license it first
because I want to hear what other people say.
Even if it's negative, I want to hear why they're
saying no, no, no.
I want to hear it because I can adjust it, I can turn it,
I can change it.
So for me, I just look at it that way.
Some ideas cannot be licensed.
And what I liked about the guitar pick, it was so simple
it was like, well, I can put a million guitar picks
underneath the table.
Why don't we do that?
And what was really fun about it, it was easy to do and it
was a blast.
It was probably the funnest thing I've ever done.
And it was just with a simple guitar pick.
So that's how I do it.
You keep on learning along the way.
And soon enough, you'll see where you want to take it.
AUDIENCE: So I have a little more skepticism.
My dad did this for a few decades and he sold games and
toys to Mattel and various other companies--
reasonable at it.
But most people don't do very well at this.
There's a lot of people who try.
There are a lot of studies showing that more--
other than in the pharmaceutical industry,
patents cost more to the patent holders than they
receive from the patent.
That it's definitely an atypical story that you have.
So--
STEPHEN KEY: What's the reality?
AUDIENCE: Yeah, what's the reality?
I mean, you take a look at a company like Google.
You want to come talk to us.
We're going to make you sign a contract saying that anything
you say to us is fine, we can use that.
A lot of companies do that.
That's why you're scared of the legal department.
If the legal department gets involved, almost all big
companies will throw one of those contracts at you and not
want to do this.
I think it's great that you've done what you've done, but I
think the reality is it's not nearly as rosy.
STEPHEN KEY: Well, let's talk about reality.
And I think that's a great question.
97% of all patents never make the money it
costs to file them.
97%.
That's huge.
That's like, who's making the money?
The attorneys are making the money, right?
AUDIENCE: I own one like that [INAUDIBLE].
STEPHEN KEY: I don't like that number either.
And I always ask why that is.
And I think it's for a couple reasons.
Number one, I think people file patents that shouldn't be
filing patents because they haven't tested the market yet.
They file patents on ideas.
They don't know if they can be manufactured.
So I think there needs to be a little bit more education.
But let's talk about it's a numbers game.
It's like anything else in life, if you're-- anything you
do, if you do it a few times, your chances of success are
never going to be that-- never going to be great.
If you look at this and say, look, I'm a creative person.
I'm going to submit a lot of ideas to companies.
Your chances of hitting one are much, much better.
So let me give you an idea of how many ideas I submit, so
you really know the nuts and bolts of it.
Because that's very fair.
Ohio Art, when I licensed the one Michael Jordan to them
sold for 10 years, I probably submitted 100 to them, too.
And they all said, no on every one of them.
Absolutely.
So it is a numbers game.
But what I like to do is that instead of paying for patents,
file that provisional patent application, very inexpensive.
Build a relationship with the company once you start
submitting to them.
And they'll begin to know that you're going to come back next
week with another one.
And they'll begin to talk to you, what are you looking for?
And that's how you really win.
To license repeatedly, that's how you do that.
But let me get back to your last
question, too, about patents.
Yes, there are a lot of companies.
Maybe this one here, I'm not sure that is--
you're developing a lot of ideas everywhere.
So why would you look at someone from the outside
because you don't know what he's doing,
he's doing, he's doing.
And that's very confusing to big companies.
We want to open our doors, but we've got to
protect our own IP.
And how do we know if we haven't invented
it before you do?
And I think what happens, the way I handle that, I look for
companies that do have an open innovation policy, number one.
And number two, I file my IP.
And what I mean by I file mine, I don't worry about what
they've done because I've already done my homework.
That's how I protect myself.
And if you want to get into a really big company, I'll give
you one more tip and I'll go to somebody else.
Don't go through the front door.
There's no way I could go through the
front door at Google.
There is no way.
I couldn't do the front door at Coke.
There's no way.
So how do I get through the front door?
You go through their ad agency.
You go to someone that's bigger, that's almost required
to show them innovation.
Ad agencies are almost required to show their clients
new innovation.
Because if they didn't and something happened, it
wouldn't look so great.
So I think you have to look at the culture of the company.
Are they looking?
I think you file your own IP.
And sometimes go in a different door.
AUDIENCE: Did you find differences between companies
in the US and outside of the US?
STEPHEN KEY: Are they different?
AUDIENCE: On that Interaction, yeah.
STEPHEN KEY: I haven't found there's a very big difference.
I licensed a few of my technology to a company in
Japan called [? Celex, ?]
where they had the rotating label on NESCAFE Coffee.
And the conversations were a little bit different, but it
was all about innovation.
It's all about, what do you have--
show us how to make more money.
That's the universal language.
How can we sell more?
And I found it was fairly easy.
A lot of other countries want more IP.
But then again, at the end of the day, you realize that it's
very expensive to file patents in other countries as well.
But that gives you a leg up if you do have some type of IP
protection.
But I think any company, ask them if they embrace open
innovation, too.
And just talk it through.
Hopefully you'll get someone that can understand what
you're trying to do.
It's getting larger and larger and larger.
But it's happening here in the United States in a big way.
AUDIENCE: So how do you approach ideas?
Do you think about the idea from a licensee perspective or
do you think from the end user perspective?
When you think about a problem, do you start finding
a problem that companies will have or problems
that users will have?
STEPHEN KEY: You do both.
You can license ideas that if a company has a problem, you
got a better solution, absolutely you can.
Show them how to save money, how to be more efficient.
Yes.
You can also-- there's a lot of industries, like the hotel
industry, which is huge that you license ideas in those
type of service industries, hospitality industries.
But I like to look at my ideas are not that--
they're not big ideas.
They're simple ideas.
I try to put a smile on someone's face is
what I try to do.
Or find something a little bit different.
But find a problem.
Find a pain point.
I don't care if it's in the kitchen or with your pet,
those are two industries that are on fire.
A kitchen gadget.
People are staying home, so people are looking for those.
But find the problem, either for the customer, identify it.
Or if it's something that can help a company be more
efficient, identify that.
But really understand who is it going to help?
And always gear your sell sheet to that particular pain.
And the other thing I forgot to mention, you know what's
better than a sell sheet I talked about?
A sell sheet is basically when you're driving down the
freeway, you see this huge sign, and
you get it that fast.
That's what a sell sheet does.
But you know what else is working for everybody?
Are videos.
Are little YouTube videos.
Wow.
Make it one minute, show a problem, show a solution.
That is the tool that's been really knocking it down for
everybody these days.
AUDIENCE: Since PPA is only valued for one year, so how do
you make the decision to go for the full patent or just
leave the idea?
STEPHEN KEY: That's a great question.
Your provisional patent application only
lasts for one year.
So that seems like a long time, but it's
really not that long.
And I know a lot of people run into--
after that year and I've shown it to people, I've got to file
a regular application.
Or if I come up with some new embodiments,
I could file again.
Or I'm going to lose it, right?
Do this.
Before you're ready to file, do your homework first.
Get ready to go.
Do your sell sheet, maybe your prototype, know the companies
you're going to call.
Get your hit list together.
So when you file it, boom.
You're ready to take action.
And realize, when you try to license an idea, call a lot of
companies up.
Spend a week just calling companies up and send them to
all of the companies right there.
Get all the balls up in the air all at one time and see
which ones fall.
And if more than one calls you back, congratulations.
AUDIENCE: So you find a problem, you have to come up
with a solution.
What's your creative process thinking?
I'm sure you get stuck many times as we do.
And how do you solve that?
STEPHEN KEY: OK.
That's a great question.
And I think everybody has their own set of ways of
coming up with solutions.
And I have these games I play for myself.
And I think a lot of people that are in the arts play
these games all the time.
So it's really, really easy for them.
And I think that some of us, that we don't do this every
day-- it's a little bit harder.
But my wife used to say, Steve, how can you come up
with all these ideas?
I used to tell her it's like going out in the backyard and
pulling an apple off the tree.
They're there every day.
You need to know how to pluck them off the tree.
And this is what I do.
I always look at changing materials, the first thing.
What materials can to change?
And I always try to get myself in a frame of mind that there
are no good answers and bad--
it's just going through a creative process of turning
over all the rocks.
What's underneath?
What's underneath?
And then I start looking at it differently.
I turn it upside down.
I look from different views.
I play games.
One of the games I play is called mix and match, where I
try to look at an idea and I try to bring
other things to it.
And what does it do?
How to expand upon an idea.
I might do a thing called what if.
What if it could do this?
What if it could do that?
Or solve it.
So I play these little child games that
allow me to open up.
And then what I like to do is I go down to
wherever I am inspired.
If it's to the movies or to the mall, or wherever, where
you get this--
there's a point where your mind kind of
relaxes a little bit.
Sometimes it's before bed or in the shower
that these ideas pop.
That's how I do it.
And I don't overwork my creativity.
What I found now today, I don't come up with a lot of
ideas, but I'm always solving problems with manufacturing
now or marketing other areas.
So if you learn how to use these tools,
I think it's endless.
But you have to find that way of playing.
And it seems like you do a lot of playing here, which I
really do love.
I mean, it's the right environment.
Absolutely.
That's how I do it, anyway.
[APPLAUSE]
STEPHEN KEY: Thank you very much.