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Product Licensing

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

By Stephen Key - July 12, 2016

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.

Stephen Key

Stephen Key is a lifelong product artist who has licensed dozens of his ideas. His bestselling book "One Simple Idea: Turn Your Dreams Into a Licensing Goldmine" has been translated into five other languages. He speaks, writes, and vlogs extensively about licensing, entrepreneurship, and intellectual property strategy.

13 Comments

Anand Chordia

2 years ago

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Sir:
First of all, congratulations and salute to your achievements. I actually have an idea and ever since I got this email on $65 to license a product idea, I got tons of ideas but am not sure how do I go about the entire procedure to lock them. Can you please help??

Anand
9376605859

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Tristan Baranov

2 years ago

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This was good timing for me. Where would you suggest reading more info on well worded applications? I see an article is planned for Core77 but could use some reading info soon. thank you

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- Stephen Key
  
  Tristan Baranov
  
  2 years ago
  
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  Reply
  
  Glad you found the article useful! I will be revisiting more intellectual property strategies later on. In the meantime, I wrote a book on how to write PPAs that have value, which you can find on Amazon under the title "Sell Your Ideas With or Without a Patent," if you are interested. Thanks for reading.
  
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Timothy Fang

2 years ago

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Thank you so much for the articles :)
I Would like to know if PPA can protect the idea internationally ?
Since the idea can spread worldwide in a few hours, it's hard not to worry and frustrated ....

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- Stephen Key
  
  Timothy Fang
  
  2 years ago
  
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  Hi Timothy. Please understand a PPA doesn't technically protect you — it's a method of extending the application process and beneficial because it enables you to test the market with patent pending status. If you decide to turn your PPA into a non-provisional application, and the patent issues, you can apply for for protection in other countries with it. For more information on filing internationally please look up "PCT" and "WIPO." I recommend consulting an attorney for further perspective. Please note I am not a lawyer and this is not legal advice. If you know you want to file in other countries, a PPA is still a good first step, because it's 'first to file' these days that matters. Thank you for reading!
  
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  - Timothy Fang
    
    Stephen Key
    
    2 years ago
    
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    Hi Stephen, thank you for clarifying my concern, so glad to know that the right of "first to file" of PPA will also valid for other countries. I was worried that I need a PPA in other countries like Japan, China ....etc. Sounds like a PPA all I need right now. Thanks again !!
    
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Salmon Nortje

2 years ago

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Hi thanks for the great articles, I am a industrial designer by trade and until recently I have focused on designing and developing products for client. Licensing one of my own products however has always been a dream of mine but frankly I had no idea where to start. I would just like to thank you for the guidance you provide with these articles and your book.

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Munjen Ng

2 years ago

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I loved both your books. As a professional product designer your information was exactly what I needed to go forward with an idea I had. It inspired me to come up with my own product and file the provisional patent just like you said. Now I'm going to explore licenses as well. Thank you !
Sirscrubbington.com

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- Stephen Key
  
  Munjen Ng
  
  2 years ago
  
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  Reply
  
  Munjen, thank you! You have no idea how happy that makes me. Stay tuned for more here.
  
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Mikko Zitting

2 years ago

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Very interesting story, I like. Could we get more of these, please.

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- Stephen Key
  
  Mikko Zitting
  
  2 years ago
  
  Z
  
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  Reply
  
  Yes!
  
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Corey Vaughan

2 years ago

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It's great to see this side of things, keep the articles coming!

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- Stephen Key
  
  Corey Vaughan
  
  2 years ago
  
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  Z
  
  Reply
  
  Thank you! Will do.
  
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