#HTE

Why a $65 Patent Application is All You Need to License a Product Idea

When it comes to protecting your creativity, my first piece of advice is to focus on working with companies that embrace independent product developers. I wrote about which industries and what kinds of companies are most likely to embrace you here. 

Step 1: Look for Red Flags

For starters, make a habit of investigating potential licensees before submitting any of your concepts. Doing so is easy: Simply Google the company’s name and the words ‘lawsuits’ and 'complaints.’ Are there any red flags? When you can, seek out referrals. There are thousands of companies that want to partner with you and will treat you fairly. These companies will be the easiest to work with by far, especially when it comes to negotiating a contract.

What are some other red flags you should be aware of? If a company states it only looks at patented ideas, it hasn’t truly embraced open innovation. Many companies have begun using online submission forms to better manage the ideas they receive. If you’re asked to sign something, read it very, very closely. Just because a company says it’s open to ideas doesn’t mean it’s genuinely interested in working with independent product developers. I’ve come across forms that essentially commit the signee to giving up all of their rights to their idea, which is ludicrous.

Step 2: File a Provisional Patent Application

A couple of weeks ago, I explained why I believe in the value of perceived ownership. Emphasis on perceived. The idea that you can truly own something, that it’s yours, is an illusion. The reality is most products on the market today are not patented. Because consumer products circle in and out of the market so quickly, speed to market is far more critical. And if you are copied, I say, congratulations! You’re doing something right.

Gesture-sensing hardware patent drawing filed by Apple, January 2015.

The most efficient way of establishing perceived ownership if you want to license your ideas is by filing a provisional patent application, or PPA. The United States Patent and Trademark Office introduced the option of filing a PPA in 1995 with the specific intent of providing a “lower-cost first patent filing.” Ninety-nine percent of the concepts my students license are protected with just a PPA. 

PPAs are incredibly useful. For one, they’re affordable to file — just $65 if you’re classified as a 'small entity.’ More importantly, they enable you to test the market with perceived ownership. After you file a PPA, you have the ensuing 12 months to decide whether you’d like to file a non-provisional application. During that period, you’re legally able to describe your innovation as “patent pending.” If you decide to file a non-provisional application, you retain your early filing date. Which is also beneficial, because when the America Invents Act was signed into law in 2011, the United States’ system became “first-to-file,” no longer “first-to-invent.”

Note: relying on a provisional patent application to establish perceived ownership is not the right strategy for every idea. Some industries — like medical, automotive, packaging, and consumables — require patents. Patents are particularly important when dealing with Fortune 500 companies. If you want to protect a big idea, an idea you envision selling in the marketplace for many years, you’re going to need to file more than one patent to establish your ownership over it. You’ll need an entire intellectual property strategy, including multiple patents, in that case.

Step 3: Test the Market

One year is more than enough time to shop your innovation around to potential licensees, if you hit the ground running. Are they intrigued? Do you need to modify your innovation in some way? This is your opportunity to gather critical feedback about your concept. Investing too much time, energy and money into an idea before you’ve tested it doesn’t make sense. You need to know that it’s an idea companies are interested in before committing yourself to developing it any further.

* * *

A well-written provisional patent application — an application that stops workarounds and copycats — is all you need to license an idea. PPAs establish enough perceived ownership for a potential licensee to sign an agreement with you. I know because I witness it happen week in and week out.

This perspective upsets a lot of people. Patent attorneys and other professionals believe you have to own something in order to get paid for it. In my experience, that’s simply not true.

A well-written provisional patent application is all you need to license an idea.

Why are companies willing to license concepts that aren’t patented? Because of what I refer to as a “gray area.” If you decide to file a non-provisional patent application, will it issue? You don’t know. And crucially, neither do they. No one knows for sure. If your PPA is thorough and written defensively, the company in question doesn’t have very many options. It could walk away from a great idea, which doesn’t make a lot of sense. Or it could decide to go forward with just patent-pending status.

This strategy works because what’s truly important is selling, not protection.

Better still, you can and should get your licensee to pay for a non-provisional patent application to be filed in your name, because doing so benefits you both. (More on that strategy later.)

Next: How to File A PPA That Actually Has Value.