The time period from filing a patent application to receiving a patent can last many years. In technologies such as software, biotechnology and communications, patent offices’ backlogs often result in a three year (or longer) delay for an application is even reviewed. Many single, mostly small, inventors who file a patent application would like to license their invention before the patent grants. In many cases this turns out to be impossible. Where they seek professional advice they are more often than not counseled to give up their attempts. So, basically filing for patent protection for small inventors is a waste of time and money? Actually, in many cases it is. Alternative ways to protect what has been invented and to subsequently put in use by third parties are often more attractive to explore.
Does this mean there are no opportunities for licensing revenue for a pending patent application? It depends on the circumstances, the type of invention, especially the number of patent applications, whether some sort of technology transfer comes along with the patent filing and, sadly enough, how big the inventor is. Small inventors and SMES are far less likely to successfully license a patent that has not been granted than a big company, an inventor with multiple inventions in his name or universities. University technology transfer offices license pending patent applications all the time, and they even require the licensee to pay for future patent prosecution costs. In the example of universities, companies seek basically an insurance for a small fee. If anything comes out eventually (rare if not also a form of cooperation is involved), they are covered.
Small inventors have really only chance to exploit their invention (and patent application for that matter) if he is able to raise interest at a company that is interested in the invention. The a good patent application provides provisional protection . Also companies like to see that (it determines who owns what , makes NDAs less critical and indicates possible future exclusivity). It is somewhat dubious as the patent application has to be used as a kind of collateral for a loan.
The practice is that you can only license to one company that is interested in the invention and if the licensing coincides with a technology transfer, so if there is some technical support/knowledge that comes along with the patent application. Many single inventors try to get someone interested just for their patent application and expects huge sums of money for it as well. Ort the inventors that have no idea what industry or company might be interested in his product or invention. Those are the most likely to get seriously disappointed. Where some sort of technology transfer is part of the deal might be luckier as they provide new technology as well as a right under a future patent. Payments to the inventor however are possible but in most cases limited for the period until patent grant (potentially only payable only until after grant).
The key is to convince a licensee that it has something to gain by paying a royalty before the patent issues. Some situations in which a royalty may be easier to get include:
- where the patent application has not yet published, and the licensee is also paying a royalty for the ability to obtain confidential information;
- where the patent applicant has useful know-how that is not included in the patent application, the licensee may also pay a royalty to gain access to that know-how. However this is more than just a patent license per se, it’s more a license to use (secret) know how
- where the applicant is willing to offer the licensee a reduced long-term royalty, some level of exclusivity, or another benefit in exchange for royalties while the application is still pending.
For example, if a licensee also desires to be trained in a process that is related to patent-pending technology, the applicant could train the licensee in the method, bind the trainee to a confidentiality obligation for trade secret aspects of the method, and establish that the trainee must pay a royalty any time that the trainee uses the technology for commercial gain. Again this is not so much a patent license but rather a license to use secret know how.
In summary: licensing patent applications is only feasible in rather special circumstances and certainly not a common practice for small individual inventors. Sad but true.