Key Takeaways

  • You can license a patent or even a pending application, but the attractiveness of your invention to potential licensees depends on industry, market value, and enforceability.
  • Common licensing structures include exclusive, non-exclusive, and sole licenses, each with different levels of control and revenue potential.
  • The licensing process typically involves preparing a strong patent application, identifying suitable licensees, negotiating royalties, and drafting a detailed agreement.
  • Royalties can be structured as lump-sum payments, running royalties (percentage of sales), or milestone-based payments.
  • A well-drafted license should address scope, term, territory, improvements, sublicensing, and dispute resolution.
  • Universities and established inventors often have more leverage in licensing deals, but small inventors can benefit by carefully structuring agreements.
  • Hiring an experienced patent attorney is critical to ensure your rights are protected and to maximize the value of your invention.

Need to understand the license patent application? The process for acquiring a patent from start to finish can be quite lengthy, with some taking up to three years or longer. Longer delays should especially be expected when the application involves patenting anything with a technological aspect, such as software, biotechnology, and communications.

Can You License an Invention Before a Patent Is Granted?

It is most often impossible to license an invention before the patent is granted, although many single, mostly small, inventors will seek advice on how to acquire such a license. Ideally, they want to get their invention licensed as quickly as possible to protect their invention. Usually, a patent protection is a waste of time and money, but there are alternative options to explore, which may help protect an inventor's new invention.

Understanding Patent Licensing Basics

Patent licensing is the process of granting another party permission to use your patented invention in exchange for compensation. This allows inventors to monetize their intellectual property without manufacturing or marketing products themselves. Licensing agreements can be tailored in several ways:

  • Exclusive license – only the licensee can use the patent, often in exchange for higher royalties.
  • Non-exclusive license – multiple parties can license the same invention.
  • Sole license – the inventor and the licensee both retain rights to use the patent.

The choice depends on the inventor’s business goals and the nature of the technology.

Who Is Likely to Receive a Patent License?

An inventor with multiple successful inventions or a university is far more likely to be successful in receiving a patent license before small inventors or small and medium-sized enterprises (SMEs) are. Technology transfer offices at universities license pending applications repeatedly while requiring the licensee to pay all future patent prosecution costs. Take universities, for example, the small fees are basically just insurance to cover the risk involved.

Regrettably, the only chance small inventors have in developing or safeguarding their invention is to acquire a patent application and/or to find a company who is interested in supporting or investing in the invention. A well-drafted patent application can provide provisional protection and simplify ownership rights and possible future exclusivity. It is somewhat used as a collateral for a loan.

Inventors can license to only one company and the invention license includes any technical support/knowledge involved. Often, many small inventors are unsure of where to even go when looking for interested companies and many mistakenly believe that if they find someone who is interested in the patent application, it is worth a sizeable amount of money.

Steps to Licensing a Patent

If you are asking “how do I license my patent,” the process generally follows these steps:

  1. Evaluate your patent’s marketability – Determine whether your invention has strong commercial potential.
  2. Identify potential licensees – These may include manufacturers, distributors, universities, or startups in your field.
  3. Decide on licensing type – Exclusive, non-exclusive, or sole agreements should align with your goals.
  4. Negotiate royalty structures – Options include lump-sum payments, running royalties based on sales, or milestone-based compensation.
  5. Draft and sign a license agreement – The contract should cover scope, field of use, geographic territory, duration, improvements, confidentiality, and dispute resolution.

This process ensures both parties benefit while reducing the risk of disputes.

Convincing the Licensee to Pay a Royalty

If the patent application has not been published, it may be easier to convince the licensee to pay a royalty to obtain confidential information. If the application does not include useful know how-to information, the applicant may convince the licensee to pay for access to acquire this information. This is really more than just a patent license; it is a license to use secret information. Another way to convince a licensee to pay a royalty is to offer a reduced long-term royalty or some exclusivity while the application is pending.

For instance, let's say the invention is related to a patent-pending technology, which will require training. The applicant could agree to train the licensee while binding the trainee to an obligation of confidentiality and then require the trainee to pay a royalty anytime that the trainee uses the patented technology for profitable gain.

Common Royalty Structures

Royalties are central to patent licensing. Depending on the invention and market, the agreement may involve:

  • Lump-sum royalties – A one-time upfront payment for use of the invention.
  • Running royalties – Ongoing payments tied to product sales or usage.
  • Milestone payments – Payments triggered by specific achievements, such as regulatory approval or hitting sales targets.
  • Hybrid models – Combinations of upfront and ongoing payments.

Carefully negotiating royalty structures helps balance risk and reward for both parties.

How Should Inventions Be Patented?

Many inventors are unsure of the process or the possibility of licensing a pending patent application. Many believe that they should patent the invention before licensing. Not only is it possible to license a patent application while pending, it is also a good way to obtain value for your invention before the application issues.

Key Provisions in a Patent License Agreement

A strong license agreement protects the inventor while giving the licensee enough rights to commercialize the invention. Essential provisions include:

  • Scope of license – Define whether the rights are exclusive, non-exclusive, or limited by industry.
  • Territory – Specify geographic coverage (domestic or international).
  • Duration – Clarify how long the license will last.
  • Improvements and modifications – Decide whether future developments fall under the license.
  • Sublicensing rights – Address whether the licensee can grant rights to others.
  • Termination clauses – Provide exit options for breach or non-performance.
  • Dispute resolution – Include arbitration or mediation terms to avoid costly litigation.

What Does a Good Patent Application Look Like?

A good patent application requires general knowledge of inventions and improvements relating to the product or idea. Unfortunately, inexperienced inventors often botch their patent papers and ultimately seek professional advice and assistance. If you are new to patent applications, it is wise to seek professional help in the beginning to avoid unnecessary cost and wasted time. Knowing how to draft a solid patent applicant is not a simple task.

While one might think that describing the invention is all it involves, it is not as straightforward as it sounds. The description has to be thorough and explain the use and limits of the invention. If there is a governmental interest in the invention, you must include the government agency and a contact number along with a statement that describes the field to which the claimed invention pertains.

Importance of Hiring a Patent Attorney

There are numerous tasks that a patent attorney can help with, including:

  • Filing the patent application
  • Providing background information and appropriate details
  • Creating an abstract
  • Acquiring drawings

Frequently Asked Questions

1. Can I license my patent before it is granted?

Yes, in some industries, you can license a pending application. However, most licensees prefer issued patents because they offer stronger legal protection.

2. How much can I earn from licensing my patent?

It depends on market demand, the strength of your patent, and the royalty structure. Payments may be lump-sum, ongoing, or milestone-based.

3. What is the difference between an exclusive and non-exclusive license?

An exclusive license grants rights to a single licensee, while a non-exclusive license allows multiple licensees to use the same patent.

4. Do I need a lawyer to license my patent?

Yes, hiring a patent attorney ensures your agreement protects your rights, avoids loopholes, and maximizes value.

5. What happens if a licensee breaches the agreement?

Most agreements include termination and dispute resolution clauses. The patent owner can revoke the license and may seek damages.

If you need help with understanding the license patent application, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.