Practical Pointers for Patentees

by Franklin Allison Cresee

In recent years many inventors have been quite successful in organizing stock companies on the basis of their patents. This is considered one of the best ways for handling patents for large and promising inventions, and it is a method that any patentee, with ordinary business ability, should be able to carry out successfully, providing his invention is of sufficient merit and importance to form a suitable basis for a successful stock company.

Many stock companies are incorporated under[p. 69] the laws of New Jersey, but it is believed the State of West Virginia is also very favorable to corporations. The entire expense for incorporating a company under the laws of the latter State should not exceed $150. The company can be incorporated for any amount; large or small, one hundred dollars or five millions, cost and fees being the same. The incorporators need not be residents of the State. No annual statements required. The meetings of the directors can be held at any place, and need not be held in the State where the charter is granted.

Before applying for a charter for a corporation or stock company, the patentee should mention his plan to some of his friends and get five persons who will promise to subscribe for one or more shares of the stock and act as incorporators of the company.

Next he should secure the services of a reliable attorney, familiar with corporation laws, to prepare the necessary articles of incorporation and legal papers. The attorney will advise the patentee how to proceed properly in organizing his company, and as to the securing of the stock certificates, subscription blanks, seal, etc. These, including the attorney's fee, should not cost the patentee more than $50.

It is well to have some stationery printed with the proposed name of the company and business[p. 70] displayed thereon; and also a prospectus published, setting forth the invention and the plans of the company for introducing it, etc.

Quite often the patentee can find enough idle capital in his immediate neighborhood to float a good portion of the stock. Capital is more easily secured by the formation of a stock company than by any other means, as people can subscribe for small or large amounts, and they often prove good investments.

In soliciting subscriptions for stock, it is desirable to get as many prominent and influential men to buy one or more shares at first to head the list—their names will be a great aid in making further sales. Ordinarily the promoter only collects ten per cent, of the amount subscribed, the balance being subject to the call of the board of directors.

After it is ascertained that the shares or stock are being rapidly subscribed for and selling fully up to expectation, the patentee can have the incorporators sign the charter application and have the attorney file it with the proper State authorities. This will cost the patentee about $100 more, for State tax, attorney fees, etc.

When sufficient stock has been subscribed for, a meeting of the stockholders should be called to elect directors, and to transact such other business as may be deemed necessary in regard to[p. 71] locating and building the plant and getting the company in shape.

The patentee should receive about one-half the capital stock in consideration of his transferring his rights and franchises to the corporation, the remainder of the stock is sold for the benefit of the company to create a working capital. The patentee may sell a portion of his stock, if he desires, but should also retain a good portion of it to show his own confidence in the business.