In the Patent Game, Materials Are Usually Immaterial

Question: I recently came across a product that I think has great marketing potential. I’ve found lower-cost materials and believe I can produce this item for 75% less than it is currently being sold for. However, the item is patented and I wonder if there are design requirements that I must meet to get my lower-cost version of the product on the market.

--A. Phillip Rutledge,

Fountain Valley

* Answer: First off, from a patent standpoint, material is immaterial--unless it’s critical to the function of the product and that’s usually not the case.

Secondly, it is most unlikely that an existing patent will cover exactly what you’re trying to do. If you want to make sure you’re not infringing the patent, however, you can get the patent number off the product or packaging and go to the Los Angeles Public Library, where you should be able to get a copy of the patent. If you can’t find the patent number, you can do a library search for it either by subject matter, patent holder or the company that makes the product.

Once you get the patent, go through the claims, which are the numbered items at the end of the patent. Compare it word for word with your product and as long as it doesn’t describe exactly what you’re doing you won’t be infringing.

If you have any doubts about it, it’s not a bad idea to take the patent and your product to a patent attorney and ask him or her to look it over.

--Robert M. Sperry,

Patent attorney, Woodland Hills

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Q: I own a sub-chapter S corporation in California that distributes products to the hotel industry nationwide. I’ll be relocating to Washington, D.C., in a couple of months. Should I close this corporation and start a new one that operates from my new location?

--Al Niski, Redondo Beach

A: Having a sub-chapter S election means that your corporation is taxed under the federal tax code whether you operate your company in Washington, D.C., or California--or any other state for that matter. Whether you choose to reincorporate in the D.C. area depends on where you do the bulk of your business.

If you continue to do business within the state of California, you will still be taxed here regardless of where your business is incorporated. There are three factors to consider in making the decision: property, payroll and sales. If you maintain an office, employees and sales in California, there may not be much benefit for you to reincorporate after your move.

However, if you’ll be operating your business mainly out of your new location and will only have sales in California, it’s probably better to file for reincorporation there, which you can do tax-free under the federal tax code.

--Jeffrey A. Unger, business and real estate attorney, Beverly Hills

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Q: My friend and I have what we think is a great idea for a mail-order catalog, but unfortunately we know very little about direct marketing and the time and cost involved in starting up such a venture. Can you direct us to some meaningful help?

--Bebe Emerman, Los Angeles

A: You are smart to look for some help before you venture into business. As many people have learned the hard way, trying to start a company without doing their homework can be a very expensive way to get an education.

With catalogs, you must focus on your audience and how to reach it effectively. You think you have a product that people will buy, but you should do some testing to see if you are correct before you go to the trouble of creating a catalog. The important thing is to send the catalog to people who want it and will order from it. That means you have to clearly know who your audience is and then find a really good list broker who will narrow down the list for you.

These days, if you have desktop publishing capability and a local copy shop, you can create a catalog very cheaply. Or, you can go the other route and publish a very expensive, slick catalog with full color and photographs. Deciding what kind of catalog you want to produce will depend on what customers you are trying to reach.

A few things you’ll need for a catalog are a good copywriter with experience in catalogs, a graphics/layout person who can help you design the catalog and a photographer if you’re going to include pictures of your products. You’ll also need to find a good list broker and a printer. Frequently, catalog printers are also mailing houses and you can get a really good price on your printing if the printer also does the mailing for you.

I advise you, before you spend a penny, to read everything you can find on catalogs and direct marketing. There are resource books and periodicals on these topics in libraries and bookstores. Find a catalog you really like and call its headquarters. Some of the national catalogs are good at answering questions from entrepreneurs who do not represent direct competition for them. If you try several places, you just might find someone who will be friendly and will talk to you about what does and doesn’t work.

I’d also recommend the Direct Marketing Club of Southern California, at 627 Aviation Way, Manhattan Beach 90266. It has a subdivision called the Southern California Catalog Council and can be reached at (310) 374-7499. The club emphasizes networking and education and offers twice-annual “schools” of direct marketing where you can learn a lot about the industry. Membership is $75 and the school fees range from $55 to $230, depending on how many of the eight-week sessions you wish to attend.

Keep in mind, also, that you can get free help in starting a business from the Small Business Development Center nearest you and from SCORE, an organization of retired executives who volunteer to counsel small-business persons.

--Sylvia Rose, marketing consultant, Client/Member Services, Santa Monica

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If you have a question about how to start or operate a small business, mail it to Karen E. Klein, Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, Calif. 91016, or e-mail kklein6349@aol.com. Include your name, address and telephone number. This column is designed to answer questions of general interest. It should not be construed as legal advice.