In this article you will find :
- How do you define the potential of your invention?
- Rapid patent filing vs. prior art search.
- Adding value to an invention through licensing.
- Strategy of registering a patent while finding a licensee.
- How do you identify a potential license?
- How to prepare a license negotiation.
How to define the potential of your invention
Defining the invention’s potential
Two main types of inventors and CEOs coexist in the world of innovation: the overly modest who believe that their invention is obvious and that anyone could have made it, and those (more numerous) who, on the contrary, consider that they have revolutionized their sector, that nothing approaching it exists and that their invention is worth millions. For the latter, as for their investors, our advice is to keep your cool. All that glitters is not gold!
A valuable invention is defined by 2 criteria:
- patentable features
- providing added value that is clearly perceived by the future customer compared to existing products or solutions, so that they decide to buy.
As a result, the potential market has more to do with satisfying unfulfilled needs than with the underlying technological leap. The sophistication of the technical solution is not enough.
Two questions need to be asked:
“What’s the best application for this invention?”
“Who am I going to offer it to?”
The answers to these questions will need to be discussed and substantiated with multidisciplinary experts, in order to choose the one that is most feasible or most in line with the company’s strategy and financial resources.
At this stage, the decision-maker must be cautious, ensuring that the main grey areas have been cleared up, and not underestimating the difficulties involved in developing, manufacturing and marketing the invention. The newer the market, the more important it is to surround yourself with the right people.
If the invention seems new and inventive, is feasible, and meets a real need, it has value. In this case, you’ll need a consulting firm like YesMyPatent, able to determine the best combination of all available intellectual property protection tools (patent, trademark, design, copyright…). An invention must be very well protected if it is to be serenely exploited and valorized, notably through licensing.
This is a major step.
Rapid patent filing versus prior art search
There are two possible strategies for filing patent applications in the context of an invention development project:
– Rapid drafting and filing of the patent application with the information available to the company, followed by waiting for the search report and the written opinion of the examiner from theINPI,EPO and other patent offices.
– Preliminary patentability study with prior art search before drafting and filing a patent application: a YesMyPatent research engineer, specialized in the technical field, will conduct a worldwide bibliographical study of literature, patent and commercial product databases, with the aim of identifying inventions with similar functionalities. In the most complex cases, it is possible to ask for a cartography (also known as a patent panorama or “staff map”) to precisely position competing inventions.
The “fast” deposit is recommended for :
– companies that know how to analyze and identify relevant prior art (scientific publications, products on the market, and French and international patents);
– companies operating in sectors such as electronics and information technology, because the number of filings is so high that every day counts;
– when it is known that many competitors are working in similar fields and there is an urgent need to patent;
– when communication to the public is planned in less than 3 weeks.
Fast” filing is not recommended for companies with imperfect knowledge of their international competitive environment, particularly in terms of patents. To date, 130 million patents have been filed in all languages, including Chinese, and 3 to 4 million more are filed every year!
A poorly documented patent application is likely to be rejected for lack of novelty or inventive step, or to have its scope severely reduced by the INPI, EPO and other patent offices.
A preliminary patentability study, with more precise identification of the prior art, enables the subsequent drafting of a better-documented patent application, more likely to lead to a rapid grant of the patent.
It takes a fortnight to compile and analyze the bibliography. The cost is particularly reasonable, given the advantages it offers. If the competitive environment is overwhelming, the company may decide not to file. It will then save the cost of drafting and filing the patent application initially planned, and avoid having its patent application published in the databases. However, its R&D investment will be lost.
The sooner you start looking for prior art, the more secure your R&D investment will be. Avoid investing in R&D without first ensuring that there are competing patented inventions.
Given the exponential proliferation of patent filings worldwide, no industry expert can guarantee his company that an invention is new and free to exploit without having a complete vision of the technical environment in competition with the invention. This is a study that needs to be carried out in close collaboration with your industrial property attorney.
Summary
Any operation to develop an invention requires checking that there is an accessible market, that the invention can be patented, that it is feasible to develop, and that there is freedom of exploitation in the countries where it could be marketed. On average, this analysis only takes a fortnight. It needs to be as objective as possible, and carried out as early as possible, so that R&D investments can only be made with a reasonable view of the international competitive environment.
Adding value to an invention through licensing
Why value an invention through licensing?
The investment required to discover, develop, industrialize and market an invention is constantly increasing, particularly in the healthcare and deeptech sectors, and inventions with significant market potential are becoming increasingly rare. It is therefore particularly advisable to exploit such inventions and/or have them exploited by third-party licensees if the company is unable to develop, industrialize and market them worldwide on its own.
Licensing revenues vary from one sector to another and from one invention to another. The minimum objective is to rapidly cover research and patent costs, and to obtain a substantial share of the licensee’s marketing revenues. Licensing revenues enable the company to finance new R&D projects, build an international reputation, gain access to partnerships or unexpected opportunities to significantly increase revenues from the invention and improve its net margin. This approach is particularly appreciated by shareholders, as it demonstrates the company’s determination to enhance the value of its intangible assets.
While this is an attractive approach, it requires a thorough understanding of the technology transfer process and licensing agreements, as there are many pitfalls. A number of consulting firms, such as YesMyPatent, have acquired considerable experience in the valorization of patented technologies from a wide variety of sectors. The expert who advises the company must be available and capable of accompanying it through every phase of the life of a licensing contract, from its negotiation to its termination, in order to ensure that the licensee complies with all its clauses and pays the sums actually due.
Strategy of patenting while you find a licensee
How can you add value to your invention?
A unique strategy for filing patent applications
If the patent analysis of the competition and the potential market for the invention is positive, the process of commercializing the invention should be started as soon as possible after filing the patent application.
The greater the number of countries to be protected, the higher the cost of extending the patent application internationally. The choice of countries depends on the invention’s commercial potential and the company’s financial resources. It is imperative to evaluate the overall cost of such a strategy, including filing fees, extension fees, taxes and costs of various procedures, and the payment schedule, at the very outset, in order to make an informed and reasonable commitment. YesMyPatent has developed a free simulator to help you estimate these costs according to the countries you choose.
This overall cost could prompt the company to abandon its plans for international expansion or even value enhancement. This would be a pity, because there is a solution. It consists in delaying the highest financial commitments (those of international extensions) as long as possible, so as to give yourself time to find a licensee whose initial payment will compensate for all or part of the patent costs, before they have been paid by the company. The solution? The PCT.
So, instead of extending your patent country by country in France and abroad via the classic national route, you opt for a first filing in France, then after 12 months for an extension via the PCT route, which allows you to take an option for almost all the countries in the world, and to have a further 18 months in which to choose the countries. This means a total of 30 months to find licensees and the funds to protect your invention abroad.
Potential licensees can be contacted as soon as the patent application has been filed in France. Contrary to certain beliefs, the majority of licensing agreements are signed on the basis of a filed patent application, and not on the basis of a granted patent, as the patent granting process can be lengthy, taking between 3 and 5 years.
These 30 months are generally sufficient to contact companies interested in licensing the rights to exploit the invention, and to convince them to set up either a fee-based evaluation agreement, or a more global licensing agreement in key markets. The initial payment requested from the licensee is intended to cover at least the cost of international patent extensions.
How do you identify a potential license?
A method for identifying potential licensees
– A minimum of internal preparation is essential to identify potential licensees:
– A maximum 2-page document should summarize in English the new functionalities brought about by the invention, the target markets, its stage of development and the type of agreement sought, as well as the name of the contact in the company or the firm in charge, such as YesMyPatent. This document must be precise, concise, factual and sincere. No overselling, no grey areas. It’s a document that should contain only public information, so that it can be distributed widely, especially via the Internet. Leading universities excel in this kind of exercise, and their websites are full of inspiring examples.
– The text of the patent application can only be distributed once it has been published by the patent office. Before this date, it must be considered as confidential and may only be distributed after a secrecy agreement has been signed.
– A confidential file of all studies carried out by the company must be prepared. This is an opportunity to check that each study is complete and of professional quality. Proof of what has been claimed in the 2-page non-confidential document must be included.
– Know-how must not be disclosed at this stage, even confidentially. This transfer will take place later, when the risk of the licensee leaving has been minimized, ideally just after the license agreement has been signed.
– Identifying potential partners is easier today than it was 20 years ago. Large companies keep a close eye on the release of all new patented inventions in their sector of interest. They won’t hesitate to initiate contact. Experience of the invention’s application sector is a plus, as potentially interested partners are easy to identify. Ideally, however, a literature survey should be carried out to identify the main players in the sector and their preferred geographical areas. It is also possible to request the creation of a world map of patented inventions, which will enable you to visualize potential licensees, country by country. Such an approach often makes it possible to identify companies operating in sectors other than that of the company behind the invention, enabling more complete valorization and optimization of return on investment.
The best licensee is easier to choose than most people think. The licensee’s management team needs to show commitment and enthusiasm for the idea of commercializing the invention, and of course translate this into a solid, reasonable and convincing commercialization plan.
It is essential to conduct parallel discussions with all interested partners. This competition forces them to take a position more quickly, and to commit to an exclusive valuation, the amount of which will enable you to meet the financial commitments associated with patent applications with peace of mind.
How to prepare for license negotiations
Preparing for license negotiations
It’s imperative that you think carefully about what you want from a business partnership with a third party before you contact them, and of course before you start negotiating a contract. It’s crucial to anticipate the potential partner’s questions, so as not to improvise and come up with inadequate answers. The whole process (from 1st contact to signature) will take between 6 and 12 months, depending on the company’s level of preparation.
What are the key points to specify?
– Evaluation exclusivity: Its advantage is the rapid payment of a sum intended to compensate for the temporary putting on hold of other potential partners. The longer it lasts, the higher the amount paid.
– Commercial exclusivity. Multinationals will demand this, while smaller partners will be more willing to accept non-exclusivity. Exclusive exploitation will entail a large number of constraints for the partner to ensure that he exploits the invention to the full. A single licensee is easier to manage than several, but a failure on his part will have a greater impact on the company behind the invention than in the case of non-exclusivity. Exclusivity can be limited geographically, temporally, by distribution channel or by application of the invention.
– Income schedule and amounts A license is generally made up of an initial payment on signature (also known as lump sum), payments based on product-related events (known as milestones, e.g. 1st launch in a geographical area) and royalties based on sales (also known as royalties). If the company needs fast revenues, it will look for a guaranteed high upfront payment. The right agreement should motivate the licensee to maximize sales. Licensing experts are familiar with industry standards and know how to analyze in depth the business plan provided by the future partner, in order to build a proposal acceptable to both parties.
– Improvement of the invention by the licensee : This happens very frequently and is good news, provided that you have planned how the licensor will be able to access it in his own territories. In fact, an improvement can turn the market on its side and render the initial invention obsolete.
– Classic legal protections Common sense must prevail. The company granting a license must have the means to quickly recover its invention if the licensee does not respect the terms of the contract, at the lowest legal cost, and according to the law of its country. In a contract, every comma counts. It is therefore essential to explain the company’s objectives and expectations to the lawyer in charge of drafting the contract. The lawyer must present the available options in clear language, and have them arbitrated by the company’s director. No grey areas should remain.
Summary
Getting an invention off the ground requires preparation and expert advice, so that the key steps can be taken smoothly. While the cost of international patent extension may seem high for an SME, this can be overcome by filing under the PCT procedure. The company then has 30 months to find at least one partner and sign an evaluation or licensing agreement, enabling it to finance its patent costs. As soon as the patent application has been filed, the company will need to clarify its short- and long-term financial expectations and define the licensing strategy (one or more partners) that will enable it to maximize the return on its investment in the invention. The next step is to work with an experienced lawyer to determine the best way to supervise the partner, so that he maximizes his sales and behaves loyally.
Adding value to an invention is an addictive and rewarding experience, enabling the company to accelerate its growth by opening up to the outside world, and to increase its R&D investments. Internally, a commercialization project is highly motivating and unifying for the teams involved. .
