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Patent Pending Made Simple is a podcast for inventors who are looking to learn more about the patent process
Samar Shah: Hello and welcome to this
episode of Patent Pending Made Simple.
I'm your host, Samar Shah,
and with me is Jamie Brophy.
Jamie, how are you?
Jamie Brophy: how are you?
Hey, Samar.
I am good.
Looking forward to
recording another episode.
How are you doing?
Samar Shah: I am doing well.
The sun is out, so I can't complain.
Jamie Brophy: Nice.
Sunny day in
February.
Can't beat that.
Samar Shah: Yes, that's right.
Today's episode is about the differences
between a patent and a license.
A lot of our listeners think
of them as synonyms, right?
Or the same thing because ultimately
their goal is to license their invention.
But they are in fact two separate things.
So I'm happy to be able to talk
about this with you, Jamie.
Jamie Brophy: Yeah, I think
this is going to be great.
As we've discussed in previous
episodes I'm a patent agent, so I deal
pretty much exclusively with patents.
I think I'm going to be asking
you a bunch of questions today,
Samar, because I admittedly
don't know a ton about licensing.
It's not really my department,
since I'm not an attorney.
You handle all the licensing stuff.
I think this is going to be
a great topic.
Samar Shah: Yes, I am going
to do my best not to confuse.
Jamie Brophy: So yeah, like you said, the
ultimate goal is to license your patent.
So when you get a patent, that's one of
the ways to monetize it is to license it.
So Samar, do you have to have a, an
issued patent in order to get a licensing
deal?
Samar Shah: No that's a good question.
And that question comes up all the time
from inventors who call us and talk to us.
In fact you don't need an issued
patent to get a licensing deal done.
In fact, we encourage our
clients to try to get a deal
done during the pendency phase.
Just because it's a lot more.
I want to say cost effective,
but generally the patent
process, as we've talked about
in the past is quite expensive.
And oftentimes you don't know
you're operating in the dark as
to whether it's worth it to spend
money on protecting some piece of
invention or intellectual property.
Having a deal done during the pendency
phase is a great idea because then you
know What your return on investment
is going to be and you can you know
make educated or rational decisions?
about you know Whether you should spend
money on the patent process and how much
you should spend on the patent process
so I would encourage people to get
deals done during the pendency phase In
fact, if you can, a lot of our clients
will file a provisional application.
I think it's a great idea to try to get
a deal done during the provisional phase,
because then you have spent very little
money on the patent side of things,
or relatively less amount of money.
And you still have a high degree of
clarity and confidence about whether you
should continue with that process and
spend more money on the patent front.
Jamie Brophy: Yeah, I think
that's a great piece of advice.
I think a lot of times people submit
their patent applications and then
just wait around for their patent to
issue before they do something with it.
And I think, we've discussed this
several times on past episodes, but
while your application is pending is a
great time to do some of these things
like, try to look for a licensing deal.
Maybe we should
take, sorry, go ahead.
Samar Shah: yeah, sorry just one
more kind of mindset thing on this
front Like I suffer from this.
I'm sure a lot of our clients
do and listeners do like
imposter syndrome, right?
Where you feel like Maybe you haven't
done enough right or like your invention
is not Worthy or there are all sorts of
mental barriers to putting yourself out
there right and trying to monetize your
invention So there's you know real and
perceived Fears about people taking your
invention right during the pendency phase.
You don't have the ability to
enforce those rights and There is
the imposter syndrome where it's I
don't know if I've actually invented
something until the patent office
tells me that I have a patent right?
I'm a patent rights holder So I think
there's some mindset and fear associated
with this where people Actually, ask
me all the time, I'm just going to wait
or they tell me I'm going to wait until
my patent issues and then I'm going to
monetize it or then I'm going to start
calling people for a licensing deal and
I tell them, nope, get out of your own
way and try to get the deal done now
because there's nothing stopping you.
It takes three, four years
to get a patent issued.
You should definitely not
wait that long, right?
You should try to get this out
in the marketplace as quickly
as possible and don't let.
Your own fears hold you back.
Jamie Brophy: Yeah, oh,
that's a great point.
Yeah, I like that.
Maybe we should take a step back
and talk about what a license is.
Is it just selling your
patent to somebody?
Or selling your patent to a few different
people or companies, or what exactly is a
license?
Samar Shah: Yeah.
The best way to think about a
license is as a contract, right?
It's a contract between you, the patent
rights holder, and somebody else who
wants to use your patent or invention.
And.
Oftentimes it's good to think
of it as a lease, right?
You are leasing your invention to
somebody else So they can use it and
incorporate it into their products
or build a product around it and sell
it and so on and so forth in exchange
for the Rights to use your invention.
They're usually going to
pay you, something right?
And that payment could be a one time
payment like a lump sum to use the
invention for x number of years It
could be a royalty rate where they
say, we're going to pay you, X amount
of money for the first 100 items sold.
And then X amount of money for the
next 200 and so on and so forth.
But generally most licensing deals
are for some kind of royalty and
usually peg to number of units sold.
And, almost like a profit sharing
where they will pay you, A dollar or
10%, whatever it is per unit sold or
X percentage of profits that they make
from each unit sold, something like that.
But the best way to think about a
royalty is like a lease agreement.
You're leasing your invention to somebody
and in exchange, they're going to pay
you something on some payment schedule.
Jamie Brophy: Okay, got it.
So the patent owner gets to negotiate
the terms of that, contract essentially.
And then can you license it to
multiple different licensees?
Samar Shah: Yes, so there are you
can, as in any contract you can write
up the contract a hundred different
ways, maybe 500 different ways, right?
There's just so many terms and
you can be so creative about how
you negotiate all of these terms.
So most often if somebody is going to
pay you a lot of money to lease your
invention, they want to know that you're
not going to turn around and lease.
The invention to their top
competitor as well, right?
So most licensees or people who are trying
to purchase a license will negotiate
what's called an exclusive license.
So they'll say, thank you.
No, like we'll pay you money to lease your
invention, but in exchange, you had to
agree not to lease it to somebody else.
Or you have to agree not to lease
it to one of our competitors
who are in markets X, Y, or Z.
So most licensing deals are exclusive
but you can, and I've seen it negotiate
a non exclusive license, which
means that you can go ahead and sell
it to as many people as you want.
It just really depends on what
the two parties want in that case.
Jamie Brophy: Okay, great.
And then you can license your
pending application or you can
license your issued patent.
Do you have to have?
Do you have to have a
patent or a patent pending?
Or are there other, are there different
types of intellectual property
that you can license in a similar
way?
Assets that are
Samar Shah: That's right.
There's no requirement that you license.
Jamie Brophy: It's
Samar Shah: Theoretically you can lease or
license any idea or intellectual property
that you have, whether that intellectual
property is embodied in a patent or not.
I've seen licensing deals done where.
licenses their know how, right?
For example, we were recently working
with a professor at a university and
he figured out a chemical process for
separating oil from something else.
And he didn't have any patents
on it, but this company.
Wanted to do it and wanted
to do it on scale, right?
So they just had a licensing deal with
him where he would agree to, teach them
how to do the separation process and
they paid him a lot of money for it.
Even though there was no
patent involved there.
So it is possible, a lot of times
it just depends on what the other
party wants from you, right?
Do they want to know the practical
know how of how you're gonna do a
process XYZ or do they want you know
If you invented a product do they
just want to make the product as well?
so So yeah, there's no restrictions
there, but the most usual case, 90 percent
of all licensing deals, I imagine are
about a patent just because patents are
IP assets that are enforceable by the
full weight of the federal government.
So if somebody.
Were to just take your invention
and do it on their own, they
would be a stop from it, right?
A licensing deal is often desirable
by licensees in those cases.
Know how is tricky, right?
Because they could potentially just learn
your know how and then terminate the deal,
so there's not a lot of
enforcement mechanism
That's why most licensing deals
are about a patent or some kind of
other IP asset, like a copyright or
a trademark or something like that.
Jamie Brophy: Okay, good to know.
Samar Shah: Oh, and one more point on that
sorry but yeah, most licensing agreements
will have a clause for everything, right?
So they will want a license to the
patent, but if they will also want a
license to your know how, and any special
or secret sauce that you know about
making the thing work, they'll want
to try to purchase everything, all the
bundles of right in that one agreement.
Jamie Brophy: Okay, got it.
So yeah, the general process is to
at least have a patent pending before
you try to get a licensing deal.
So I guess the next question, and maybe
we want to save this for a future episode,
but how do you find potential licensees.
Samar Shah: Yeah, this is
a great question, Jamie.
And maybe a preview of our next episode.
We have a interview podcast
coming up with Stephen Key.
He's a licensing expert or somebody who's
licensed his invention and helps many
other inventors license their inventions.
But yeah, there is a process.
There's lots of different
processes for this,
and I think Steven has figured out a
way that is effective and repeatable.
So I am sure we'll be talking
to him very soon here about what
the licensing process looks like.
Jamie Brophy: Yeah, great.
I'm looking forward to that
episode, and I think it'll be
really helpful for our listeners.
And this is a precursor,
some basic, information about
licensing versus patents to, as an
introduction to that future episode.
I think that's going to be great.
Samar, is there anything else that
we should know about licenses?
Samar Shah: Yes.
Sometimes I get this question posed
to me is, inventors who are like
should I license my invention or
should I try to sell it on my own?
And in my mind, there's.
Nothing stopping you from doing both.
In fact, if you're in the
early stages of your inventing
journey, I would explore both.
I would try to start calling
people to see if you can get
a licensing deal done, right?
A lot of companies will have Invention
submission form or an idea evaluation
unit in the corporation so it might be a
good idea to start getting those feelers
out As soon as you're patent pending,
but it's also a good idea to mock up your
product and put a Amazon or Shopify e
commerce page together right to see if
there's any interest in people buying this
thing direct to consumer There's nothing
that's stopping you from doing both.
Don't let I Guess fear and
uncertainty around it stop you,
I have also seen licensing deals
where once you know a licensee
will want to Do a test run, right?
So they'll pay you some amount of
money for the first thousand units
sold or something like that and if
the product does well, then they
will up your royalty rate, right?
So they'll pay you more money once
they there's some kind of commercial
success around the product and then
they'll pay you sometimes even more
money once the patent issues, right?
So they'll maybe try to squeeze
some leverage from you during
the pendency process, but still,
I think that shouldn't stop you.
It shouldn't cause you to wait
until a patent is issued, but
you can always negotiate a higher
rate once the patent does issue.
Jamie Brophy: think that's
all the Sorry, go ahead.
Samar Shah: Yeah.
Oh, yeah, sorry, one last thing on this.
The other thing is, I think it's a
good idea for you to talk to your
attorney if they're going to write
your patent application, that your
goal is to license your invention.
One of the things that we do, Jamie
I like to know who, Are the potential
licensees of a particular patent
or intellectual property that we're
working on because it can help us
write a better patent application.
So sometimes let's say our client wants to
license their invention in Graco, right?
Then we can look up Graco's patents
and we can get a feel for how they're
writing up their patent applications.
What is important to them?
How are they claiming things?
How many things are they cross
referencing or citing in an IDS?
And we can try to make our patent
look more like Graco's patents, right?
So when their business executives
are evaluating your idea, it's all
familiar and similar to them, right?
It doesn't feel so foreign.
And it plugs into their
portfolio very easily.
We also will try to, we'll sometimes do
analysis, a landscape analysis of whether,
certain patent rights fit into a portfolio
holder's portfolio, and we'll try to
make the patent more attractive to them.
So there's little tweaks
you can do here and there.
If you have a handful of ideal licensee
or licensing partners, then we can
try to make the patents a little
bit more attractive to those folks.
Jamie Brophy: Yes, absolutely.
Those are great ideas, great points.
Yeah, I don't think I have any
other questions about licenses.
Unless there's anything else you have to
add,
Samar Shah: No, I think
I have confused everyone
Jamie Brophy: everyone,
Samar Shah: today.
Jamie Brophy: I don't think so.
I think this was a lot
of great information.
So thanks for teaching us
today.
Samar Shah: Anytime, I'm happy to do so.
Jamie Brophy: All right.
Talk to you next time.
Samar Shah: Yes.
Thanks, Jamie.
Jamie Brophy: Thanks.
Samar Shah: Thank you for joining us on
the Patent Pending Made Simple podcast.
I hope you enjoyed our show.
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The content of this podcast should
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