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.
