Licencing of Patent Applications - Pre-Grant Royalty Earning

Abstract

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.