Licencing of Patent Applications - Pre-Grant Royalty Earning

Madelein Kleyn, General Manager, Legal and Intellectual Property, Oro Agri International Ltd

Research and development is costly. International patent portfolios even more so. The business strategy of most corporations, when filing a patent application, is to seek some return on R&D investment, mostly through self-exploitation of the products of R&D, or through royalty earnings from intellectual Property (IP). The time frame between filing a patent application to grant can take many years. Patent offices’ backlogs often result in a three year (or longer) delay before any office actions are issued or an application is reviewed. Opportunities for licensing revenue for a pending patent application are limited and it depends on the specific circumstances (i.e. independent licensing, as part of Merger and Acquisition), the type of invention, technology transfer possibilities, additional know-how underlying to the invention. Legislation provides for the licensing of pending applications in certain countries provided the patent application has been published. The risk of refunding a paid royalty, or forfeiting future royalties for the licensor remains if the patent is not granted, or not granted in a form reading onto the licence granting provisions. What is there to be gained by a licensee by paying a royalty before a patent issues? Attractive alternatives include: • Access to know-how and confidential information (or trade secrets) not disclosed on the patent application but essential to the exploitation of the invention • Access to improvements to technology (whether patentable or not) This paper will consider the provisions of some key countries with regards to pending-patent-licences, the risks for licensors and licensees in acquiring licences for pending patents and alternative options for licensing intellectual property ancillary to the pending patent licence.