Patenting for Inventors Ep. 158 - The Pre-Patent Power Play: Can I License My Invention While It’s Still Patent Pending?

Illustration by @max_gps

The Pre-Patent Power Play: Can I License My Invention While It’s Still Patent Pending?

Podcast Transcript:

Hello and welcome to the Patenting for Inventors podcast. I’m your host, Adam Diament, patent attorney and partner at the law firm of Nolan Heimann in Los Angeles, California. This episode is “The Pre-Patent Power Play: Can I License My Invention While It’s Still Patent Pending?”

Today we’re digging into something that sounds simple at first but can get real murky, real fast:
Can you license your invention before your patent actually gets granted?

And maybe the bigger, more uncomfortable question—what is the company even paying for if you don’t actually have the official rights yet? Couldn’t they just go make it themselves and worry about your patent later—if it ever issues?

If you’ve ever wondered how that works—or you’re in that situation right now—stick around. We’re going to walk through it together, with a few real-life strategies and even some sample contract language to give you a sense of how this actually plays out.

Let’s Set the Scene

So let’s say you’ve just filed a patent application for a brilliant new product. Maybe it’s a hoverboard, because you figured out how to make the real thing after watching Back to the Future Part II. You’ve got a prototype that works, a slick pitch deck, and people are starting to notice. Then one day, a company calls you up and says, “Hey, we think your invention is awesome. We want to license it now.”

And your first instinct might be, “Amazing, let’s do this.” But your second thought—hopefully before any ink hits paper—is, “Wait a minute… I don’t have a granted patent yet. What exactly am I licensing? What are they actually buying?”

And that’s the heart of today’s episode.

What Are They Actually Paying For?

Here’s the surprising thing: even if your patent hasn’t issued, there’s still a lot of value you bring to the table. The license isn’t just about a legal right to sue someone—at least not yet. It’s about giving that company access to your invention, your knowledge, and a potential competitive edge, all while managing future risk.

When a company licenses your invention before your patent is granted, they’re paying to tap into everything you’ve built so far. That might include your working prototype, your CAD drawings, your testing data, the manufacturing tricks you figured out after five failed attempts, and maybe even your supplier relationships. A lot of that isn’t in your patent application—and it may never be. It’s know-how. It’s trade secrets. It’s the stuff that gets the product market-ready, not just patent-ready.

They’re also paying to avoid future headaches. Once your application publishes—and that usually happens about 18 months after you file—anyone who uses your invention and knows about the application might owe you back royalties if the patent eventually issues with similar claims. That’s a big “if,” but for a company investing time and money, they’d rather get in early, structure a deal with you now, and avoid a potential lawsuit down the line.

And of course, a license can include exclusivity, so they know they’ll have a first-mover advantage if the patent comes through. It’s like buying an early boarding pass—they don’t know when the flight is taking off, but they’re locking in the window seat. Licensing early also gives them a chance to work with you on the final patent claims. They might want to help shape the language to better align with their commercial plans—something they can’t do if they’re sitting on the sidelines waiting.

But one of the biggest reasons companies do this is speed. They don’t want to spend the next year building a competing product from scratch when they could just partner with you and hit the market sooner. It’s faster, cheaper, and frankly, less risky.

So… Why Not Just Rip It Off?

Now, I know what some inventors are thinking—what stops a company from just copying your idea, launching it, and waiting to see if your patent ever gets granted? Couldn’t they just deal with you later if it becomes a problem?

Well, they could. But for smart companies, that’s usually not worth the risk. For one, once your application publishes and they’ve been made aware of it, they could be on the hook for back royalties if the patent is later granted. It’s like a ticking meter they’d rather not trigger. Then there’s the PR nightmare—no company wants to be in the headlines for stealing tech from an independent inventor. That’s not a good look, especially if they’re public or trying to woo investors.

And finally, the business disruption. If they copy you and your patent issues, they might have to pull products off shelves, scrap marketing campaigns, or redesign major components. That’s a logistical and financial headache that’s way more expensive than just licensing it from you in the first place.

What’s in It for You, the Inventor?

So what’s the upside for you? Well, for starters, early licensing means early cash. That might come as an up-front payment, a minimum royalty, or a milestone bonus if they hit certain sales goals. That money can help you finish development, scale production, or even just survive long enough to get to the next big step.

It also brings validation. Having a real company license your invention before the patent even issues is a strong signal to investors, partners, and future licensees. It tells the world: “This is legit.” And let’s be real—teaming up with a company that already has manufacturing, marketing, and distribution channels is usually faster and more effective than doing it all yourself out of your garage.

But of course, there are risks. If your patent never issues, or only some parts are granted, the value of the license could drop. And if the company does a poor job launching your product, your reputation could take a hit too. That’s why the license agreement needs to be rock solid.

The Company’s Side of the Deal

Now, from the company’s perspective, licensing a pending patent is often just smart strategy. It’s not about locking in something that’s legally bulletproof today—it’s about investing in a strong possibility that’s still in motion.

By licensing now, they can start integrating your invention into their product line, marketing strategy, and development pipeline without waiting two years for the patent office to stamp its approval. They’re not buying certainty—they’re buying time. And a well-drafted license gives them options. If the patent doesn’t issue, or gets narrowed, the agreement can adjust accordingly.

Think of it like buying an airline ticket with a flexible cancellation policy. It’s worth it to secure the seat now, especially if demand is about to take off.

What Should Your Agreement Say?

So what should your license agreement actually include? Well, this is where a good lawyer earns their keep. But here’s the gist of what tends to show up in these deals.

You’ll want to have a clause that explains what happens if the patent issues. It might say something like:
“If the patent is granted with claims substantially similar to the ones currently pending, the license becomes exclusive and enforceable for the life of the patent.”
That’s great for both sides—it creates certainty and structure once the patent is real.

But you also need to plan for the downside. If the patent is rejected or the application goes abandoned, the agreement might say:
“If no claims are allowed within 36 months, or if the application is finally rejected, the license converts to a non-exclusive, royalty-free license for the underlying know-how, and the licensor retains the right to terminate with notice.”
That way, the company doesn’t feel like they’ve paid for nothing, but you still keep some control over your intellectual property.

Sometimes the license includes an early access fee—think of it like a down payment—and a reduced royalty while the patent is pending, which then increases if and when the patent is granted. That reflects the change in risk.

You’ll also want a clause about minimum performance. Maybe the company needs to hit a certain sales target or launch within a year—or else the exclusivity ends. That protects you from a licensee who just wants to sit on your idea and keep it from competitors.

And then there’s the confidentiality clause—super important. You want anything that isn’t public in your patent application to stay locked down, even if the patent never issues. That includes your technical data, testing results, manufacturing secrets, and anything else that gives the invention its edge.

You might also include provisions about cooperating on the patent process, giving the licensee some visibility and limited input on how claims are shaped, and language that allows for royalties to be adjusted based on the final scope of the claims.

Final Thoughts

So if a company wants to license your invention before your patent is granted, don’t panic—and don’t just sign the dotted line out of excitement, either. With the right strategy, this can be a huge win for both sides.

Just make sure the deal is clear about what happens if the patent is granted, narrowed, or never makes it at all. Protect your trade secrets. Get paid fairly. And structure the deal so everyone knows where they stand if the patent office throws you a curveball.

This kind of licensing isn’t just about selling your idea—it’s about managing risk, building momentum, and turning a possibility into a partnership.

Thanks for listening to the Patenting for Inventors podcast. If today’s episode helped clear things up for you, send it to a friend or fellow founder who’s swimming in patent paperwork. And if you need help navigating intellectual property such as patents, trademarks, copyrights, or business matters, give me a call at 424-281-0162.

Until next time, I’m Adam Diament—and keep on inventing.