DIMWIT - Glossary of Invention Terms
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Abstract - A description in a patent that gives a brief (one paragraph) overview of the patent's subject matter. In applications it's located in the back, in issued patents it's on the title page.

Aftermarket - Refers to products and accessories sold for use after the original equipment was sold. (Example: When a battery comes with an automobile, it is part of the original equipment. However, when you replace a battery, then it is referred to as the after-market because you are making a change in the equipment after it was originally sold by the dealership. See, "OEM.")

Assignment - Used with intellectual property to denote the sale of an invention. To ‘assign' is to basically sell your patent or other intellectual property rights. You would be the ‘assignor' and the recipient would be the ‘assignee'.

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Buyer - In this context, buyer refers to that person in a company who is responsible for purchasing goods for that company. (Example: One buyer at Wal-Mart may be responsible for purchasing only automotive accessories while another buyer may be responsible for purchasing batteries and tires.) The term "buyer" in this context does not refer to consumers who purchase items from stores for their personal consumption. Buyers are also referred to as purchasing agents.

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Capital - The financial resources and property owned by, or required by a company. (The company needs $10,000,000 to purchase the equipment necessary to ‘capitalize' the project.)

Cash flow - An accounting term referring to the flow of money both in and out of a given entity.  (Example:  A positive cash flow means you have more money coming in than going out.)

Chain stores - Basically retail stores with a whole lot of locations, like a mass merchandiser, but they could be a chain of niche market stores. (Example: JoAnn Fabrics has a chain of stores.) See also Mass merchandisers.

Champion - A person within a company who likes you and your invention and helps you along with your commercialization endeavors.  Also known as an angel.  

Claims - That part of a patent where you claim what it is that your invention is, or does.  Refer to the Appendix on patenting for greater detail.

Class - Used by the USPTO, it describes any one of over 450 categories of invention that distinguishes one type of invention from another.  (Example:  Class 359 is for Optics)

Co-licensing - When you combine two or more proprietary technologies or patents, and package this grouping of intellectual property into one deal or offering. You and another inventor may join forces to provide an enhanced invention with several patented attributes.

Commercialize - To transform something into a profitable enterprise.  To manufacture items, distribute and sell them to the consumer.

Confidential Disclosure Agreement (CDA) -
An agreement between parties whereby at least one of the parties agrees to keep something confidential, such as the invention you intend to ‘disclose' to the signing company. CDA's are sometimes referred to as ‘non disclosure' agreements. See ‘Non Disclosure Agreements'

Copyright - A fighting chance in a law suit to keep others from plagiarizing your literary, dramatic, musical or artistic works.

Cross-license - Used when company A wants to uses company B's invention while Company B wants to simultaneously utilize company A's invention. For example, you may want to incorporate your patented technology into theirs, and get back product that the manufacturer has enhanced with their own patented technology. This is done more commonly between companies

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Deal - To make a business arrangement, agreement or enter into a contract.  Although it does not refer to the persons handing out cards in a guts poker game, the risk for inventors is very similar.

Delegated Function - When different companies are responsible for specific tasks.  (Example:  Company M is responsible for manufacturing, Company S is responsible for sales and marketing, etc.)

Demographics - The measure of a population of people differentiated by their physical factors such as age, sex, education, income, etc.  Also see psychographics.

Design Patent - See ‘Patent'

Distribution Channel - Refers to the route that a product takes from raw good or manufacturer to marketplace. (Example: After a product is manufactured it may be sold to a wholesaler who in turns sells it to a retailer who in turns sells it to a consumer. In this case, you will have a three-tier channel of distribution through a wholesaler. Sometimes large retailers such as Wal-Mart will purchase directly from manufacturers and bypass wholesalers. This channel is referred to as “manufacturer direct”.)

Distribution Share - Similar to market share. The distribution of one company is compared to another in any given market. (Example: If Company A sells a product to 2,000 variety stores throughout the United States and Company B also sells items to those same stores, then their distribution share is equal, regardless of how many products either company places in those stores.)

Distributor - A company whose purpose it is to receive goods from manufacturers and sell them to retailers or others.  Manufacturers may also fill the role of distributor if they perform such a function

Divided territory - When a geographic area is divided so that different companies will cover different regions. (Example: Manufacturer distributes east of the Mississippi, and another to the west.)

Doctrine of Exhaustion of Rights - A law that limits the sources from which you can collect royalties or other fees for you invention.  Also applies to collection of infringement damages.  Putting it simply, you may generally only collect remuneration from one level of the distribution channel.

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End User - The final person(s) to purchase or use a product or technology. Customers of a retail store would be the end users if they use, rather than re-sale the products that they have purchased. The end user of an industrial product may be another manufacturing company.

Entrepreneur - That person who starts and/or operates a business, usually the founder, president or owner. Entrepreneurs maintain greater control, ownership and risk, than would a hired manager or executive. Basically, the person in a company who ‘hired' themselves is the Entrepreneur. You may attract an entrepreneur to commercialize your invention, as long as you understand that they will be running the show.

Equity - The value, or total worth of a business, or of property. If you have a 10% interest in a company worth $1,000,000, your equity interest is $100,000.

Exclusive License -
A license offered by an inventor to only one company to manufacture and/or sell in any given market or sector.

Expediter - A company that distributes a product to a retail store, different from a distributor because an expediter will send a person into the retail store to take inventory and reorder the product.  In this respect, they are more hands-on and have greater control over the merchandising of the product than a distributor.

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Field of Use - When markets and/or territories are segregated, this term in a license can limited the scope of activity. (Example:  Company R can sell only to retail outlets and Company O can sell only to organic farmers, and so forth.)

Focus group - A group of people gathered together for the purpose of being interviewed or observed for their opinions or responses about their preferences for a given product.  Used in test-marketing.

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Grace period - A period of time you are allotted to make foreign patent applications and perform certain patent office actions and procedures before you become time barred at the end of such grace period.

Grant -  This term is used in two different ways in this book. First, it can mean the award of funds paid to you to develop your invention, such as a federal grant. Grants, unlike loans, usually do not need to be paid back. The second use refers to the transfer or right to use intellectual property. The patent office awards or ‘grants' you the rights conveyed with a patent. Likewise, when you license your invention to a company, you ‘grant' them the right to manufacture, sell and/or use your invention.

Gross profit margin - The difference between the cost of a product or service and the revenue you receive from it.  (Example:  It costs a manufacturer 50 cents to produce each item and they sell it to distributors for 75 cents each.  Their gross profit margin would be 25 cents, or 33 percent.)

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Head fake - To look right and go left, to wear elevator shoes, to say it is this big when it is really only that big.  A deception or disappointment. 

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Independent inventor - An inventor working on their own.  Not inventing for an employer or for hire.

Infringe or infringement - To plagiarize or illegally duplicate another's invention.  To make, use, sell or import something that is claimed by another's patent rights.

Initial payment - The first payment you would receive for your invention or other intellectual property.  Also referred to as up-front payment, advance and initial lump sum.

Intellectual Property - The legal ownership of patents, trademarks, servicemarks, copyrights, know-how, trade secrets, and the like.

Interference -
When two inventors are claiming the exact same aspect of any given invention.  A conflict between two inventors who file the same thing with the USPTO at the same time. (It happens with 1 to 2 percent of all applications)

Intrapreneurship - A derivative of entrepreneurship except that you take initiative to create and manage a profit center, or separate business, for the company for which you are employed.  Instead of forming a company on your own, you would be doing it as an employee. 

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Job shops - Manufacturing facilities that produce products for others on a subcontract basis.  (Example: A manufacturer that temporarily ran out of production space may hire or “job out” another manufacturer to take up the slack.)

Jobber - Like a distributor or wholesaler, a company that provides special distribution services.  

Joint venture - Two or more people or entities who form an alliance to reach a common goal.  Entities that benefit from a synergistic effort.

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Key word - A word you use to perform a search on the Internet or other database that helps you to narrow down the field and find what it is you are looking for.

Know-how - Knowledge and/or valuable experience that would be of some value to another. In his case, what you know could mean more than who you know, for once. Can be part of your intellectual property package.

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Least cost manufacturing - When you choose a manufacturer who will produce your product for the least cost.  The combining of orders from several sources in order to get the highest volume discount from one manufacturer. 

Letters Patent - Another term that describes a patent. See ‘Patent'

Leverage - When you create incentive for another to provide resources and information to you to achieve your goal.  To achieve more with less.  (Example:  An executive provides you with information about an industry for which you have little knowledge.  You are leveraging their vast experience with minimal cost to you to obtain such knowledge.)

License - A contractual relationship between two or more parties whereby rights to intellectual property are conveyed. (Example:  An inventor gives a manufacturer the right to produce and/or sell (license) his/her invention in return for cash, royalties or other remuneration.)

Licenseability - The degree to which your invention may be a candidate for licensing to another entity. 

Licensee - The person or company to whom intellectual property rights have been conveyed. (Example:  A manufacturer who acquired rights an invention would be the licensee.)

Licensor - The person or company who has conveyed their intellectual property rights to another. (Example:  An inventor who licensed an invention to another would be the licensor.)

Litigate - The process of participating in a lawsuit against another.

Looks-like Model - A model that looks like it's suppose to, but doesn't necessarily work like it's suppose to. Opposite of a ‘works-like' model, which works properly, but doesn't look like a finished version.

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Mail-order markets - Any arena where one may order a product and have it mailed to them, including ordering from catalogues, websites, direct mail fliers, newspaper advertising, etc.

Manufacturer Direct - See 'Distribution Channel'

Manufacturing cost - The amount it costs you to have your product or technology produced by a manufacturer.  As an inventor, your cost would be what you paid for it, not the manufacturer's cost for producing the item. 

Market - Also referred to as marketplace.  Not the type of market where one may purchase fruits and vegetables; rather those venues where one may sell any given product or service. (Example: Markets where one could market or sell solar collectors would include homeowners, industries, utility companies, and billboard companies.)

Marketability - A measure of how well your product or service is perceived or purchased by the consumers. 

Marketing - The process of getting your invention from your hands to theirs.  (Example:  When you are trying to pedal your intellectual property rights to a manufacturer, or selling a finished product to a consumer, the process of distributing and offering your product for sale is the marketing process.)

Marketplace - Unlike the type of market where one may purchase fruits and vegetables, marketplace in this context refers to those venues where one may sell any given product or service. (Example: places where one may market or sell solar collectors would include homes, industries, utility companies, billboard companies, etc. These places where one may sell such a product would be its marketplace.)

Marketshare - Refers to that portion of the market that one controls through the sales of any given product or service. (Example: if the total sales for wadgets is $100 million, and ACE Manufacturing's wadget sales total $50 million, then ACE would command a 50% market share for wadgets.)

Market positioning - The image created in the minds of consumers.  Manufacturers develop reputations from their advertising, the types of products and services they offer, and how and where they present them to the public.  (Example: think inexpensive chocolate, think Hershey's, and food store, anywhere.  Think tape, think 3M, etc.)

Market value - The amount something is worth to the end-users or consumers who would eventually purchase it.  (Example:  The market value for your invention is, in the case of licensing, the amount a manufacturer will pay for your intellectual property rights.  The market value for the finished product is the amount of worth perceived by the consumers. 

Mass-Merchandisers - These are typical retail stores, which carry common and moderately priced items affordable by the greater mass of the population. (Example: K-Mart, Wal-Mart, Meijers, and other major retail outlets are considered mass-merchandisers.)

Merchandising - A form a marketing, however, merchandising gets into the fine points of how you offer your product for sale, and in what form.  How you choose to display your product on a store shelf, and in what combination with other products, the color of the package, and so forth, are functions of merchandising.

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Niche Market - This refers to a specialty market or one with limited scope. Very expensive, and unusual items  usually have niche markets. (Example: An expensive diamond studded piece of lingerie would not typically be found at mass merchandisers such as Wal-Mart and Sears. You would find them in a small number of very exclusive shops in only certain areas.)

Non Disclosure Agreement (NDA) - This is a term often used to describe a confidentiality agreement. Instead of saying ‘confidential', you are simply stipulating that the party will not disclose, hence, ‘non' disclosure. See ‘Confidential Disclosure Agreement (CDA).

Non-Exclusive License - A license offered by an inventor that is not limited to only one company. (Example: an inventor may license two or three companies to sell in any one given market, in which case these companies may compete against each other for the same products.)

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OEM - Refers to original equipment manufacturers. (Example: General Motors is the original manufacturer of equipment such as automobiles, trucks, etc. This is different from those companies who produce products for use on motor vehicles after the vehicle leaves the dealership.)

On-line sales - A form of mail order sales specific to orders placed over the Internet

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Patent - The rights to your invention, granted by the government, to exclude others from making, using, selling, and importing your invention without your permission. Specific patent terms are further described in detail in the chapter on patenting and in the appendix.

Patentability opinion - An opinion rendered by a patent attorney or agent, usually in the form of a written letter, describing your odds of receiving a patent, listing prior art, suggesting the possible scope of your patent, and noting the type of patent you may receive. 

Patent agent -
A professional registered with the USPTO to file and prosecute patent applications.  A patent agent cannot give legal advice nor can they litigate.  They can render patentability opinions.

Patent attorney - A lawyer registered with the USPTO to file and prosecute patent applications.  They may offer legal opinions and litigate. 

Perceived value - What others think about what you have.  How others perceive your product or invention.  What it is about your invention that others like and how much they like it.

Player - A person actively involved in an industry or company, who is especially influential, knowledgeable and/or keenly interested in championing you.

Positioning - The art of carving out a specific market niche that identifies you with a particular recognizable market ‘position' such as, low price leader, best values, superior service provider, or specific to a product line, such as, mufflers (Midas), chocolate (Hershey's), internet sales (Amazon), etc.

Practitioner - Someone registered to practice a professional. Patent attorneys and agents licensed to practice in the USPTO are patent practitioners.

Prior art - Documentation of other inventions or ideas in existence that are similar to, or offer features related to your invention.  (Example:  Prior art may include other patents, publications, trade journal articles and any other form of knowledge either published or otherwise documented.) 

Prior art searches - The process of finding prior art in a field, patent searches are included as a part of this.  Prior art searches are broader than a patent search only.

Priority date - (Not going to dinner with the Fed Ex driver.)  A formal date in which your invention was properly documented, either date of conception or the date of filing a patent application.  Priority dates are different depending on who's considering it and why.  (Example: An earlier conception date will give you priority over another person who is seeking to patent a similar invention.)

Product life cycle - The length of time between when a product is introduced to the market and when sales drop off to negligible.

Product Line - When several products of a similar nature are sold or offered together it is considered a product line. (Example: When an inventor expands to offer several different products rather than a single product.)

Profit center - An area of sales for a product or invention, which is particularly profitable.  (Example:  Instead of dividing the potential sales for your invention by territory, you may look at sales to different markets and identify those that have distinct potential for profitability.)

Proforma - Used in business planning, a projection of anticipated revenues and expenses.  May also be a projection of sales and profit centers.

Proprietary Property - Intellectual property that is confidential or exclusively owned. (Example: Used when inventors claim private ownership to their inventions, or want their ideas to be confidential information.) Simply attaching  the ‘proprietary' name alone, however, does not necessarily denote a legal interest.

Prototype - A first of a kind working model or facsimile of an invention that begins to do at least some of what you want it to.

Provisional Patent - This is a misleading term because there is no such thing as a ‘provisional patent'. When you file for a ‘provisional' in the patent office, you are basically reserving the right to later convert your application into a regular utility patent application, for example. It buys you some time and allows you to state, ‘patent pending' for a fraction of the cost of a full patent application.

Psychographics - The measure of a population differentiated by attitudes, behaviors, buying patterns, interests and other none physical elements.  Related to, but different than demographics.  Used to determine the commonality of those who may purchase your product.  (Example:  You find that people who have strong religious beliefs and prefer watching comedies on television are the perfect target for your product.)

Pull-through sales - The process of creating demand for a product or service.  (Example: Rather than simply having a listing in a catalog or having your product sit passively on a store shelf, you can create enthusiasm for your product that causes the consumer to seek it out.  When I do book signings, I am pulling through sales for my publisher.)

Purchasing Agent - See “Buyer.”

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Ramp-up time - The time it takes to get your invention from inception to working model, or from working model to finished manufactured product, or both.  Generally refers to the development time necessary prior to commercialization or sales of a product.

Raw Material - The materials used to form a product. In an injected molded plastic product, the raw material is the plastic pellets that go into the molding machine. In a lawnmower housing, the raw material may be sheets of steel.

Reduced to practice - Used in determining priority date, refers to offering our invention for sale, disclosed it publicly, using it for your own benefit, etc. From time to time court decisions change the interpretation of what qualifies your invention to be reduced to practice.

Remuneration - Being paid or reimbursed.  What it is you received in the form of payments or other value.  Salaries, royalties, consulting fees, product samples, and a warm and cuddly feeling are all forms of remuneration.

Royalty - A payment made to an inventor based on a commission from sales of the invention or other similar form of remuneration.

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Sales velocity - How quickly and aggressively your product sells.  If your product is a great seller compared to other related items, and it provides sufficient profit for those involved, it would be said to have good velocity.  The opposite of stagnant sales. 

Sales volume - A measure of sales, either in terms of the number of units sold, or a dollar amount. 

Scope - The scope of the market may be its breath, and the amount of territory or potential for sales.  In patent terms, scope refers to the breath or how far reaching the claims are in your patent.  (Example:  A patent with a broad scope may include all light bulbs utilizing electricity as a power source.  A patent that limits a light bulb to use only with tungsten filaments would be more limiting in scope than the former.)

SEC 10-K reports -
Securities and Exchange Commission reports available for pubic inspection.  Publicly held corporations must file information with the SEC on an annual basis describing the nature of their business, risks and potential for sales.  Meant to be used by potential investors.  10-Q's are quarterly reports.

Seed Capital - Early stage, or initial investment in a new project.

Shoe string - A tiny rope inventors use to hold up their confidence, or, what their egos hang on.  Also refers to the tiny budget most inventors have to develop their invention.

SIC codes - Standard Industrial Classification, a three to six digit code assigned by the U.S. Government to all categories of products and services, over 1,000.  Recently replaced by the North American Industry Classification System (NAICS).

SKU/Stock Keeping Unit - Each different product on a store shelf, or hung on a hook, has an identifying number used for stocking and reordering. (Example: If you can get three colors or sizes of your product placed in a store, you'll have three SKU's there.)

Subclass - The demographic makeup of most inventors, artists and writers. Just kidding, I think.  A classification used by U.S. and foreign patent offices to separate inventions based on their form or function.  (Example:  A mirror for vehicles may be class 359, optics and subclass 864, includes adjacent plane and curved mirrors.) There are over 150,000 subclasses in the USPTO.

Subcontract - When the entity that is charged to do work hires someone else to do all or a portion of that work.  (Example: You may license a manufacturer to produce your invention, and they may in turn hire another company to build it, or supply parts.  They would be “subbing out” the work.)

Sweat Equity - A form of ‘capital' used to fund a company or project. In this case, the principle, or inventor, invests his/her time on the invention project without pay. Instead, the reward will be to have an invention, or company, that is worth more as a result of the effort. You are basically deferring payment, and taking some financial risk in doing so.

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Teachings - Everything your mom didn't teach you is contained in the USPTO, in the form of patents that is.  Patents are meant to teach others how to make or accomplish something.  The text and drawings in your patent are the teachings.

Technology Transfer - The act of transferring the rights to your invention to another. This can be achieved by assigning or licensing your rights, for example.

Test-market - The process of determining whether you have a marketable invention, product or service.  The scope of this definition can be very narrow or very broad, from simply asking people what they think about a product to national sales.  The scope of a test-market is limited only by its budget.

Tiered risk - The various levels and amount of risk one encounters at various stages of development.  An incremental risk.  As development progresses, stakes are higher, investments greater and risks compounded. Managing by taking the least risks first. 

Time bar - A time limit or deadline.  Inventors are faced with various time limits for which to file their patent applications and other (patent) office actions, or lose their potential for patent rights.  Time bars vary by country and by the type of patent for which you apply.

Trademark and Service mark - A is a word, name, symbol or device which is used in trade with goods and services to indicate their source and to distinguish them from the goods and services of others.

Trade Secrets - Intellectual property of value to some, and not readily known by others. An elusive critter with its own set of laws governing how you can deal it.

Trade Show - A convention of manufacturers, distributors, buyers, salespeople, press and other individuals and companies in a specific trade, such as, automotive, hardware, housewares, consumer electronics, and so forth.

Turn - Not right or left, rather over and over, on a store shelf that is.  A product turn is when a store sells all the products it ordered and orders more, that's one turn.

Turnover rate - (aka, shelf turnover) The frequency in which products are reordered by retailers and distributors.  (Example:  If a store reorders a dozen of your products five times per year, this rate of turnover is greater than another store that reorders only three times.)

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Undivided interest - In the absence of an agreement otherwise, when two or more people are listed as inventors on a patent, they have an undivided interest. All parties have equivalent rights; so one party can sell all or part of the invention to a third party without the consent or knowledge of the other patent owners. (Example: God made lawyers to write these rules, and guess who has to straighten it out? Also known as a self-fulfilling prophecy.)

URL - The address for a website. The characters you must type to access a website.

USPTO - United States Patent and Trademark Office, located in the Washington, D.C. area, specifically Arlington or Crystal City, Virginia.  More about the USPTO is found in the Appendix, General Information Concerning Patents.

Utility Patent - See ‘Patent'

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Validity - A determination as to whether your patent is valid. Patent attorneys offer validity opinions.  Ultimately the Court makes the final judgment as to whether your patent is valid; the Patent Office does not. The USPTO issues the patent, but it doesn't guarantee its validity!

Vendor - The entity, such as a manufacturer, who supply's products or services to another. If you sell a product to Wal Mart, you are their ‘vendor'.

Venture Capital - Capital invested by an institutional ‘finance' company that specializes in new or higher risk business ventures. VC's usually prefer to participate in the new venture's management and share in its equity.

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Wadget - A cross-breed between gadget and a widget.  Originated in Borneo when a cross-licensing deal went south.

Web site - A location on the Internet where companies and individuals display information of use to others, such as company profiles, product information, ordering information, databases and just about everything imaginable, and then some.

Wholesaler - Very comparable to distributor by definition.  A company that sells or distributes products to retailers or directly to the consumer in higher volume or for a price less than what would be found on the retail level.

Working Model - No runways here. A prototype that actually works, or the next generation of product development after the prototype that works like its suppose to.

Works-like Model - A working model that works like it's suppose to, but doesn't necessarily look like it's suppose to. Opposite of a ‘looks-like' model, which doesn't work properly, but it looks about right.

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Excerpted from, The Inventor’s Bible: How to Market and License Your Brilliant Ideas, Copyright 2001, 2004, Ten Speed Press, a Crown Publishing imprint of Random House, All Rights Reserved.
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