Anthony Santangelo, Esq., MBA, Visionary Inventor, Entrepreneur and Patent Attorney (USA)

Anthony has lots of hats, from a Marketing MBA to inventor, attorney to entrepreneur and it seems… anything else inbetween! There is a lot of awesome insight, especially on the legal side (in plain English) that I think anybody in business should carefully review and study for their own sake. If you are a designer, inventor or entrepreneur, I think you should seriously consider getting a hold of Anthony for a legal opinion – there aren’t that many people with such a wide grasp of business intersecting with ideas.

Key takeaways from this interview include:

• If you feel under-appreaciated and under-utilized, leave.
• Being an intrapreneur in business does not necessarily get you ahead.
• The most common mistake that every Inventor makes is inaction. In the patent law there are times when a lack of diligence for just two weeks has lost the person their battle for some patent right.
• People now say that we have to change the patent laws because there are too many cases. This is like saying we should make auto theft a non-crime because we have too many car thieves on trial
• The problem with lawsuits is that they engage the principals so they incur a huge lost opportunity costs. Instead of operating a business profitably all of that owner’s attention is turned to some legal proceeding.
• Getting money from Angel and venture-capital people should be avoided as much as possible. The most typical scenarios leave the innovator with only a small percentage of his company at the IPO stage and he has usually been eliminated from the company even before that stage.
• Happiness is not really part of the equation since the people we sold to would be perfectly happy if we sold everything at a huge loss and they got the lowest possible price. Winning requirements contracts is of course a great way to make a ton of money if you’re an entrepreneur.

You can follow Anthony at his law office website at http://njtriallawyer.tripod.com/ and on Twitter at https://twitter.com/santangelolaw.

You have a rather diversified educational background, jumping from your MBA in Marketing to becoming an attorney focused on the fields of business, real estate, admiralty and taxes. What made you want to become a lawyer after studying marketing for so many years?

Well John I’ve always been a compulsive Inventor but I’m also an adult with ADD. I’m very restless intellectually.  I need to learn something new every single day. I sort of perpetually am the square peg trying to fit in the round hole.

I like to base important decisions on thorough research and careful reasoning.  I knew that I had picked the right career one day when I was working as an intern for a popular judge. During the trial he pointed at a witness and looked at me and said. “Anthony we need to know if that witness is qualified to be an expert here.”

The response to that question was a 46 page typed bench memo which encompassed the law of expert witnesses. It was also a careful review of the particulars of this witnesses education and abilities. Frankly he did not qualify as an expert.

This is the type of careful research, review, analysis and writing that I always wanted to do. I always detested the typical American business persons shoot from the hip attitude about important business decisions.

I would have stayed in business except that I was not good at doing what you need to get ahead. I always found that American business is exactly like the play “How to succeed in business without really trying.”  If you come from the same alma mater as your boss and you drink the same scotch as your boss and you play a good round of golf with your boss you will advance rapidly through the corporate ranks, otherwise your career might not be so satisfying.

I always attacked every job I ever had as if the business was mine I call this being an intrapreneur. Unfortunately being an intrapreneur in business does not necessarily get you ahead. Regardless of how many new sales or profits you gain for the corporation you might not get promoted.

I am generally not a big fan of the way business is typically conducted in American big businesses. One of the things that I like the least are long ceaseless boring meetings. Most of the meetings I’ve been to are the painful, socially awkward type that you would usually see on a sitcom like “The Office”.

At one such meeting they began to discuss a topic that I was an expert in. The topic was generic injectable pharmaceuticals.  My Director asked if we should cancel a particular line of products because it was not very profitable. Without an agenda or any background information at all my boss wanted to know if we should shut down one of our factories!

This product line represented about $40 million in sales from a 20,000 square-foot facility running for several shifts and impacted the jobs of hundreds of employees in a town that I had a personal affinity with. To keep all those people employed and keep that piece of real estate occupied I would continue to run that business even if it was only at breakeven.

Of course that business even at breakeven would use a tremendous amount of ancillary services such as packaging shipping materials and supplies which would benefit other companies. I personally would be in favor of keeping this piece of our countries productivity running even if it didn’t throw off a profit.

I was thinking that if this product line was canceled all those people would lose their jobs the facility would be closed that space in that industrial park would be empty and it would have an negative impact on the town that I liked.

While I was thinking through the particulars of that decision some other wonk spoke up and said “Let’s dump it it’s a dog.”  And that’s basically how the decision was made.

Afterwards my manager came up to me and said, “Anthony that was in the area of your expertise why didn’t you contribute something during that meeting?” I told her that I was thinking through the ramifications of the plant closing before I could give an accurate answer and she told me that next time I should think faster.

What I find fascinating is that you’ve had your name attached to over 270 inventions in one form or another, with that wealth of experience, what are some commonalities you’ve seen with inventors who end-up being successful with their inventions? Are there some common pitfalls that you’ve seen as well that could have been avoided?

The number one most interesting thing about successful inventors is that they all demonstrate a sometimes irrational belief in their own ability to succeed.

If you think about it for a minute you’ll realize that this is exactly the thing that every Inventor must-have. In my experience every single person I speak to about a new invention says or demonstrates the opinion that it’s the stupidest thing they ever heard.

Just like in the movie “Big” everybody you tell your idea to will just look at you with a blank face and say “I don’t get it.”

To get people to even understand what a new idea is you need to give them a good description show them a picture or accurate prototype and then relate to them the market conditions that will satisfy that products commercialization.

This is something that you can’t achieve with an elevator pitch. That’s usually not enough to convince a layperson that working on this new thing is not really the mental equivalent of going off the reservation.

Inventors make a lot of mistakes. In fact they probably make more mistakes than they do get things right. The most common mistake that every Inventor makes is inaction. In the patent law there are times when a lack of diligence for just two weeks has lost the person their battle for some patent right.

If you believe that your idea has some benefit you should work on it diligently until it’s fleshed out and on the market or where you decide that you no longer want to move forward with it because of financial considerations.

The other big problem in the marketplace are these Inventor marketing companies. It’s estimated that inventors will spend between $200-$300 million with these companies and that up to 75% of that money is wasted.

One of the first things I always tell inventors is that, “If it’s to be it’s up to thee.” You’re going have to be the person that has to flesh out your idea and convince other people to raise money, do research and development, bring it to market, whatever. If you delegate that to somebody else that money is probably going to be wasted.

For example why would you pay an invention promotion company let’s say $200 or $300 an hour to do research that you could do at your local library on a database with a little help from your research librarian.

Inventors need to do two things to bring their product to market they certainly need to work diligently and they also need to be willing to learn some new things in order to satisfy the requirements of investors and licensees who may be interested in commercializing the product with them.

How did you feel when the American Patent Office recently changed their rules from first to invent to first to file? Do you think patents are a worthy investment or is that money best used to get a provisional and marketing?

I think that the system we had worked just fine. I was not in favor of changing patent regulations in such a wholesale manner because the effects cannot be known.

It’s just like Obamacare, you’re faced with 1 000’s of pages of legislation and nobody really knows with the final outcome is going to be.

Nowadays though when I speak to inventors I tell him that they have to see the patent system as if they were one of the great gold prospectors in the gold rush of 48. Just imagine two prospectors side-by-side digging in the ground in the mountains and they both pick up a little pebble that looks like it might be gold. What’s going to happen next is they are going to have to make a run to the land office to stake a claim and the one that gets there first will get the claim and the other one gets nothing.

People now say that we have to change the patent laws because there are too many cases. This is like saying we should make auto theft a non-crime because we have too many car thieves on trial. If there are disputes between affluent patent holders that is just fine. If we don’t have enough courts and judges that’s a different point. Charge the players a fee to use the system if you want.

I like to get technical when giving business advice. In the financial world they will always form a decision by determining the net present value of the anticipated stream of future cash incomes.

All this really means is that whatever effort you make, you should maximize your monetary benefit. Perhaps it would be more profitable to work at McDonalds then promote the next kitchen widget.

Inventors have to realize that first and foremost they are in the business of monetizing their new thing. All of their decisions should be based on maximizing their personal income from the efforts that they make.

In bringing your product to the market you will swiftly learn what the requirements are for you to succeed. You have to completely satisfy your customer in order to be successful in this world. Unless you’re going to self-finance your idea from beginning to end as an inventor your first primary customer is either going to be your investors and business partners or the companies that might license your invention. You have to get to the market before you encounter the public customer.

For example, you may have invented a new product and it’s the type of product or industry where all your potential investors and licensees tell you that they won’t consider you without a prototype and a issued patent. Your decision is going to be whether or not spend the money on the patent and the prototypes to move forward or to just stop at this point.

On the other hand if your idea is perfect for late-night television the as seen on TV people will consider idea submissions even if there’s no intellectual property filed because they know the life of that product is going to be short.  Some great ideas may not even be patentable.

Your decision-making has to be driven by business necessity.  I don’t think that a general response can cover this question.

This is another reason why the old first to invent system was good. If you invented something you could work on it for a while in secret to determine whether or not you should put any more effort or money into it before filing any paperwork.

If someone else invented the same thing later than you it didn’t matter if you could still substantiate an earlier invention date.

Now for all intents and purposes a patent filing is an immediate necessity.

The massive hole, that still exists in the patent system, is that the inventor has to defend and protect their own patent – which can easily cost hundreds of thousands of dollars – and if you don’t have the resources, you are basically voiding it as you’ve allowed somebody to infringe on your patent and you did nothing about it. What are some solutions to this issue? I’ve had a friend go knee deep with their inventions with companies willing to spend large resources just to see if it will be defended.

Yes this is one of the glaring problems of our system. I’m hoping that these situations can be adequately solved by patent law firms taking cases of merit on contingency.

There are no perfect solutions however. Unfortunately in a capitalist republic such as we have some amount of cruelty and discomfort is built into the system. For example using eminent domain your town can condemn your house to build a highway or jug handle or new school and there’s little you can do about it. If something like this happens to you it’s probably best not to perseverate on it.

The answer seems to be something along the lines of get richer faster.

I think the problem is overblown though.

Right now in personal-injury cases nobody goes forward and finances their own case against somebody that injured them. Most plaintiffs use a personal injury attorney who will take a share of the recovery if there is any. This seems to me to be the most likely avenue to resolve these patent infringement claims.

The inventor of the NMR machine Raymond Damadian basically had this happen to him by General Electric. GE continued to develop it’s own NMR machines and violated his patents. The original inventor expended all of his resources trying to defend his patents. Finally I think it was an intrepid grandchild of his who took up the cause and found a Beltway patent firm who would take the case on a contingency.

The story famously goes that Jack Welsh himself smugly approached Dr. Damadian and handed him an $80 million check to settle the litigation for which he wanted complete rights to the inventors entire patent portfolio.

The Inventor tore up the check in his face which completely stunned everybody especially the attorneys.

They went on to win the case which returned them a judgment of just under $130 million and they did not have to give up the rights of their patents to anybody. Other infringing firms such as Siemens quickly settled.

If there’s merit in a case it will probably be able to find a firm that’s willing to gamble some of their effort against a big payday.

If you leave your ego at the door, what is the easiest way to avoid getting into increasingly messy legal fights with business partners? For instance, you may win a legal battle but unless the other party has some resources, still get no money out of a judgement and during the course of events, the business may faulter due to all the distractions.

The best way to follow to avoid problems with your partner is to consider what might go wrong and incorporate the resolution of that problem in an agreement between the partners. Before you get into partnership consider what will happen if one of the partners wants to be bought out What happens if one of the partners no longer wants to participate actively in the business. What happens if one of the partners and you have such a falling out that you can no longer speak to each other civilly.

One approach is to pick a surrogate and a mediator for the agreement. For example if we get into a disagreement my side will be argued by my accountant and our mediator will be a retired judge and we will pick an office which is roughly between our two homes. You can agree that the mediator’s judgment is final.

The partners should previously have entered into long discussions about what they expect from each other in the deal moving forward.

The problem with lawsuits is that they engage the principals so they incur a huge lost opportunity costs. Instead of operating a business profitably all of that owner’s attention is turned to some legal proceeding.

Consider what’s the worst that could happen and then make a contingency plan for it. Also a little research in this area will turn up at least the 10 most likely problems to be encountered in any partnership.

Entrepreneurship has many more valleys than peaks – many end-up just creating a job for themselves… hardly the high-life you see advertised in the news. When should an entrepreneur focus on getting Venture Capital and how do they avoid giving too much equity in return for funds? When things go south, are there some common legal problems with funded companies or is the industry mature enough where everybody just amicably walks away from the table?

In my thinking you immediately need to secure capital sources if your idea has a large cost of development, such as a high tech or Internet idea.

Those inventors who come up with high-tech ideas need the most development before they have an actual product. For example just delivering an electronic product would require a website with e-commerce capability, a shopping cart, credit card etc. Developing the electronic outlet alone can cost quite a lot of money.

Otherwise you should delay or postpone equity investments as long as possible. For example you will do better if you start a business with money that’s borrowed from friends and relatives instead of an angel investor. When the company is established you can get better terms from lending sources.  You may not even need to give equity away to get loans if the business fundamentals are good. For example winning a big contract from the government will result in many lenders stepping up with loans.

There are of course many sources of loans, grants and loan guarantees. A quick search will turn up economic development companies with grants and loan programs you should explore before giving away much equity in your company.

Most garage type inventors may find that they need more money than they thought. They forget that the thing invented is going to have to be developed and designed to be appropriate, safe and appealing for the marketplace.

Additionally, if you are not good at something (And no one is good at everything) you’ll need to use experts. Some of the most common experts are designers and draftspersons, writers, people that negotiate licensing and of course people who are experienced with dealing with venture capital companies.

In general getting money from Angel and venture-capital people should be avoided as much as possible.

The most typical scenarios leave the innovator with only a small percentage of his company at the IPO stage and he has usually been eliminated from the company even before that stage.

When you’re winding down a business venture that has been unsuccessful this will be the time where you receive the benefit of the effort that you put into negotiating your working agreements and other instruments such as asset securitization.

All those agreements you wrote and all of the assets that are securitized should have been created with the mindset of what would happen if the business fails.

For example, if you gave your landlord too good a lease now is going to be the time but he tries to get you to pay for your entire lease term and forfeit your security.

If you guaranteed any loans personally now is the time when those people will attack your bank accounts and try to garnish your wages.

Whoever received a loan securitized by equipment is going to show up and get their security.  If you gave someone a loan which wrapped over all of your business equipment and materials they can come take all of that as security. Obvious only now is that you should have only given guarantees with the minimum amount of collateral that it would take to make the loan.

If you were thoughtful enough to sell equipment or loan money and retain a lien on something now is the time to go out and either collect the payment or recover your security.

You can sell notes or liens at a discount to people who buy them and of course you can sell your accounts receivable to factoring companies.

You’ll find that many people that wind up a business forget to recover their security deposits and to collect their accounts receivable at the end of the business.

People also pray on unfailing businesses by neglecting to return outstanding items and failing to pay invoices when due. I have heard of people taking loans out on failing or merging banks hopeful that their loans would be lost in the process.

There’s usually not even a little bit of money left to wrap up loose ends like this.

Of course income tax returns still need to be filed. Sales tax returns still need to be filed and any other required reports need to be filed even if the company is defunct.

It would be nice if there was some money that has been prepaid perhaps to the accountant to cover some of the wind up expenses.

Since most people assume a business venture will be successful many people will end up going into personal bankruptcy and foreclosure on their personal homes in the event of a catastrophic business failures.

Another point is that most people are completely unprepared for business failure. It’s hard to let people go, it’s hard to tell your landlord that you have to be leaving and you have to negotiate the end of the lease.  It’s hard to get your security back. It’s hard to get your utilities turned off. It’s hard to sell equipment.  Everything is hard.

I dealt with one business owner whose business failed after a tremendous amount of investment by her and her family. Of course she personally guaranteed all of the loans and all of the company’s debt.

Firstly she would’ve been much better off if she had designed her business with more consideration what would happen if it failed. Secondly when the business did fail she was completely emotionally unable to help herself on any level.

One way that I was able to help her was that I helped her negotiate the return of everything she purchased for the business to the suppliers that she had purchased them from.

Since she of course assumed her business would be successful she had purchased a huge amount of new business equipment tables packaging materials stationery and other items which in most instances could be returned in satisfaction of the claims in satisfaction of the debts that were owed on those things.  It’s an easy sell, “Do you want your equipment back or do you want nothing?”

One particular item was molded confection made out of chocolate. She even managed to return the molded chocolate items to the company she ordered them from who then were them able to remarket them.

The preprinted packaging materials she had created were also returned. The packaging company apparently could also remarket those for some uses.

You’ve worked hands-on with requirement contracts with pharmaceutical buyers, how do you go about getting the absolute best price while making sure everybody is happy with the deal?

To be effective at completing RFQ’s you need to be an expert in the market that you’re dealing with. As an administrator intrapreneur I pioneered the creation and maintenance of a competitive intelligence database which encompassed almost 1100 line items.  As contracts were let out we would carefully review the pricing and terms in contracts that were let and add that information to our database. Any time a company released a pricelist we would enter that information in our database.  Any time we heard a rumor or we were asked to make a price concession we would enter that information in our database .

We also carefully scanned industry information for news about our competitors.  For example if our competitor was either sold out on a product or had a factory for certain product closed for compliance reasons we would know that the overall supply for that item was that much smaller and we could possibly raise prices accordingly.

When we prepared our RFQ’s we would then have the market intelligence necessary to win Business profitably.

Of course happiness is not really part of the equation since the people we sold to would be perfectly happy if we sold everything at a huge loss and they got the lowest possible price.

Winning requirements contracts is of course a great way to make a ton of money if you’re an entrepreneur.

8- Anything else you’d like to add?

I’m very idealistic and very optimistic I believe that innovation especially innovation which keeps in mind social issues and environmental issues can go on to make this world a much better place.

Of course innovation entrepreneurship and inventorship can all be learned and I certainly would like to help teach people how to do all these things

Thank You!