So you filed a patent application, or maybe you just have an idea or an invention and haven’t yet filed. But you’re asking yourself this very simple question: How can I start making money now?
A lot of people ask their patent attorney this question when they’re going through the process of thinking how they might want to set up their patent strategy, or after they file their patent application but don’t yet have a patent. So, if they don’t have a patent, can they license their pending patent application or can they license their invention?
So today, we’re going to walk you through how you can monetize your invention while it’s still patent pending, meaning you filed a patent application but haven’t yet received a patent. We’re also going to explain why this phase is so important, and some of the challenges that you might face as an inventor or product creator looking to license your invention or monetize your invention as you move through the process of patent pending and receiving an issued patent.
Understanding Patent Pending Status
First, let’s talk about what it means when your invention is patent pending. When you file a patent application, whether it’s a provisional patent application or non-provisional patent application, you gain the legal right to label your invention “patent pending.” This status tells the world that you’ve taken the initial steps to protect your invention, but keep in mind it doesn’t mean that you actually have a patent granted protecting your invention just yet.
During the time after you file a patent application but before you’ve received a patent, your application will be examined by a patent examiner. The patent examiner will determine whether your patent application meets all of the requirements for patentability and whether the invention that you’ve described in the patent application is of a subject matter that is eligible for patent protection. The problem with patent pending status when you’re trying to monetize your invention is that this process takes months and even years before your patent is actually granted.
While you’re waiting for that patent grant, you’re in a bit of legal limbo. So that begs the question: Is patent pending even important? The short answer is yes, patent pending gives you some immediate benefits.
First, it signals to potential investors, partners, and even customers that your invention is serious and that you are taking serious steps to protect it. For investors in particular the term patent pending is important because it signifies that you as an inventor or a product creator have taken important steps to safeguard future revenue streams. It reduces the risk of investing in your product because an investor knows that once a patent is granted you will have exclusive rights to your invention. This clearly is an important selling point when you’re trying to raise capital or attract business partners.
Challenges of Monetizing a Patent Pending Invention
But here’s where things get tricky. Patent pending status is hypothetical – we don’t know what the scope of the claims in an issued patent would be with certainty. So, monetizing an invention under patent pending status is often more difficult than doing so once you have an issued patent. This is because we just don’t know what the scope of the final issued patent might be. When your patent is still pending, there’s still uncertainty around which of the patent claims will be granted and which of the patent claims might need to be changed before they’re granted.
If you’re not familiar with patent claims, patent claims define what your patent actually protects. So if your claims are narrowed during the process of patent examination, usually by a patent examiner (and this happens quite often), it could impact how valuable your patent actually is and how able you are to actually monetize your underlying invention that the patent is supposed to cover.
And so, this uncertainty during the patent pending phase makes potential licensees more hesitant to give you money for a patent pending invention as opposed to a patented invention. Companies are generally more willing to pay for an issued patent or to license an issued patent than just a filed patent application with patent pending status because they know exactly what they’re getting with regard to the claims. They’re getting clear protection as defined by those issued claims over specific aspects of your invention and any product that arises therefrom.
With an issued patent in hand you can more confidently negotiate deals or even sell the invention rights outright. But with only patent pending status, many companies and licensees hesitate because they don’t want to invest in something that might not have strong enough legal protection to encompass the products that they foresee advancing from your patented invention.
Ways to Monetize Your Patent Pending Invention
That’s why it’s more difficult generally to monetize something that is only patent pending as opposed to something that is patented. That said, there are still some ways to monetize your product ideas and your invention while your patent is only pending.
For example, you can still pursue a licensing agreement pertaining to a pending patent application even though the patent hasn’t been issued. Even with patent pending status, you can license your invention to others. The terms might be a bit different and it might be more difficult for you to secure top dollar for your inventions, but you can still technically license a pending patent application. As always make sure that you work with a qualified patent attorney to help draft an agreement that safeguards your interests.
Typically when pending patent applications have been licensed, there’s something more important than just the patent application itself that is impacting the negotiation. Maybe it’s because of market dynamics or maybe it’s because their interest in hiring you as the inventor that helps drive them to actually want to take the heightened risk of licensing a pending patent application as opposed to an issued patent, or more specifically the inventions that are described in each of those pending patent applications and license patents.
With the pending patent application, another strategy that you might explore is a strategic partnership. As an inventor or product creator, you can form a partnership with a company that has complimentary resources. This might be a company with manufacturing capabilities or some sort of market access that you as a smaller inventor or smaller company might not have.
If you can work with a strategic partner to leverage their manufacturing capabilities and help you actually build the invention, maybe under a profit sharing deal, or leverage a strategic partner by bringing the invention that you have created as a complement to what they already have in market and thereby access their sales team, for example, or distribution channels, then it could be a fruitful relationship. And those are the kind of things that might make a strategic partner more interested in working with you while you only have a pending patent application as opposed to an issued patent.
Another strategy to explore to monetize your invention while you are only under patent pending status is crowdfunding. Platforms like Kickstarter and many others allow you to raise funds from early adopters while showcasing that your product is patent pending.
Crowdfunding platforms like Kickstarter can be great because they not only generate revenue for your invention to help you monetize your product early on, but more importantly it validates the demand for your invention that you have filed a patent application for. This validation of demand is something that you can certainly leverage when you’re talking to investors or trying to build strategic partnerships to help you advance your invention at later phases in the future, especially after ultimately you do get an issued patent.
Then finally, another strategy that you might consider is selling prototypes or early versions of your product while the product is under patent pending. If you’re able to produce prototypes yourself or maybe manufacture prototypes at small quantity runs you can help build market awareness for your product and your invention, and also generate a little bit of cash flow while you’re waiting for the final patent to issue.
Protecting Your Invention During Negotiations
Let’s talk about protecting yourself during negotiations, especially while your patent is pending. Everyone has this mindset that they want to monetize their invention as soon as they possibly can. But it is important to stress that you should always be careful when discussing your patent pending invention and the products related to it with anyone else.
Generally, patent pending status is more valuable and generally more important for innovative ideas than NDAs (non-disclosure agreements) for a variety of reasons, it’s still important to always use NDAs or non-disclosure agreements when sharing details with potential partners. A venture capitalist, for example, likely wouldn’t sign an NDA if they were evaluating a new product idea to potentially invest in, so that’s where patents pending is a really important strategy to consider.
One of the drawbacks to using NDAs is that most investors won’t actually sign an NDA when evaluating your pitch. If you can just imagine how many VCs or how many inventions that VCs are pitched with it becomes extraordinarily burdensome for a venture capitalist to actually review the terms of each individual NDA – they just won’t do it. So that’s where patent pending is really important.
If you’re pitching you definitely want to have a filed patent application, but if you are working with third party manufacturers or third party engineers to help you advance your core invention, it is important to try to get an NDA in place whenever possible because then you could potentially bring a patent infringement lawsuit and a breach of contract lawsuit if there is an infringement or if someone does misuse your invention. So you want to just make sure that you have all of your bases covered.
Key Takeaways for Maximizing Your Invention’s Value
To summarize, monetizing an invention while it’s only under patent pending status is challenging, and frankly more challenging than trying to monetize a patent while it’s issued, but it’s not impossible. One key is understanding how much protection patent pending actually gives you. Also, you need to be strategic about how you approach potential partners and investors while you’re under patent pending as opposed to having an issued patent.
Remember, once your patent is issued the value of the invention and any products related to the invention increases significantly. This is because the legal rights that arise from those issued claims are clearer and more certain than they would be if your patent was merely pending. So until you have an issued patent, you can opportunistically pursue strategies to try to license or monetize a patent pending invention, but we recommend focusing on building relationships and proving market demand to maximize the value in your invention, and to take whatever steps you possibly can to protect yourself legally.
Jeff Schell is a patent lawyer in Denver, Colorado and Boulder, Colorado. At Schell IP, we help entrepreneurs, early stage startups, and big companies do whatever they can to maximize the legal protections with the use of the patent system in their products and inventions. If you have a concern or a question about how the patent process might apply to you or your products, book a free consultation today.
