Do you have an idea and want to make money by selling the idea to someone else by filing a provisional patent application? You’re not alone, many people wonder about this. Truth is, it’s unlikely but there are better ways of selling an “idea.”
Can you sell a provisional patent application? The quick answer is yes, it is possible. But it rarely happens. Selling a provisional patent application is the same as selling just an idea without proven market demand. It would need to be an extremely innovative idea to convince buyers to take a chance and invest before it is patented.
If you’re positive that your idea is innovative enough to sell, then let’s go over everything you need to know about provisional patent applications and how to approach buyers.
What Is A Provisional Patent Application?
First things first, what is a provisional patent application (PPA)? In short, it’s a placeholder application. It secures a filing date and allows people to avoid any further significant costs associated with getting a patent for up to one year. The downside is that you would never get a patent by just filing a provisional patent application.
This is part one of the patent process where we describe how your innovation works on paper and explain all of its benefits. It never goes into the queue for examination.
Then, the nonprovisional patent application (NPA) is the second part of the patent process, where the patent application is finalized and submitted for examination.
To get a provisional patent application started, you would have to file a description of your invention with the US Patent and Trademark Office. It costs between $70-280, depending on your entity size. Most likely, you would need the assistance of a patent attorney. But, costs would rise to the thousands of dollars range. After you file the PPA, you can label your invention as “patent pending” for up to one year.
During that year, it’s a good time frame to build your business and test the market:
- Ask manufacturers for quotes
- Approach vendors for their perspective
- Contact marketing consultants
- Build and test prototypes
- Do surveys
Priority Date
When a provisional patent application (PPA) is filed, it secures a priority date, even if the nonprovisional patent application (NPA) is submitted a year later. The NPA is treated as if it was filed a year earlier. This comes in handy if there is another patent application pending on the same invention and was filed between the filing of the PPA and the NPA. You would be awarded the patent because your patent application has priority.
Imagine two people racing to the finish line, having a provisional patent application in place first would secure a place at the finish line for one of them, even though the race is still underway.
There are some rare instances where two people filed for the same invention at the same time. In these situations, the Board of Patent Appeals and Interferences may investigate the priority of the inventions. A final judgement is awarded to one party over the other.
Selling a Provisional Patent Application
Some people consider it impossible to sell a provisional patent application because it rarely happens. Why? It’s perceived as risky for buyers to invest in a product without any proven market demand. You’re pretty much asking them to take your word for it that your invention will be successful.
Selling a provisional patent application would be like trying to sell a pending idea before market demand is proven. It would need to be an extremely innovative idea to convince buyers to take a leap of faith and invest before it is patented. After all, a provisional patent application doesn’t mean that you’ve proven that people want to buy the invention in the real world.
If you want to sell them on the idea described in the PPA and ask for equity to help with manufacturing costs, then we recommend developing a professional presentation with plenty of data to back up your statements. It is better to have more data on why consumers will buy the invention. You will need to convince potential investors that it’s a great invention that is commercially viable. The best way to do this is with data. Either you will have a business that sells the invention. You could give the investor that information. Or, you could try to extrapolate sales of the invention based on other similar products or inventions.
Here are some elements buyers may look for:
- High demand
- Manufacturing costs
- Material costs
- Design
- Testing results
- Return on investment (ROI) data
When you approach a buyer, provide plenty of data. This would be the best. If you have any surveys showing that your invention would be in high demand, show them that as well. Investors love information, especially ROI data and statistics.
Nonprovisional Patent Application
Filing a nonprovisional patent application is the second step in obtaining a patent if you already filed the provisional patent application. If you want, you can go straight into filing the NPA and skip the PPA altogether. If you first filed the provisional patent application, by now, you should have tested the market and worked out the kinks in your invention. If not, that is fine. After you file the NPA, you still have another 18 months before it is examined.
The NPA enters the queue for examination. It is the one that can lead you to an issued patent (if it’s approved). It’ll be placed in a queue, where it will be examined by a Patent Examiner. If they decide that your application meets all the requirements, then it will be approved.
To get a patent application approved for a patent, you will need to show that your invention is:
- Eligible for patent protection
- Novel or new
- Nonobvious
Once it has been approved by an examiner, then it is easier to sell an idea because it will become a patented idea. You could try and approach potential buyers or companies during the pending period. However, many or most will ask you to come back after you get a patent since they have no motivation to pay you money for your idea when it is not patented.
With a patent, they can evaluate the scope of the patent rights and determine whether the patent rights are sufficient for their purposes. Even with a patent in hand, it is better to have market data regarding the demand for your invention.
Trade Secret
It’d be easier to sell your product after you get a patent, not before. However, if you want to sell your idea before you even file a patent application to get patent pending status, you could sell your idea as a trade secret. Now, keep in mind that trade secret law is different from patent law – think of them as two separate units.
Selling it as a trade secret means approaching potential buyers under a nondisclosure agreement. If they tried to commercialize your idea, then you could sue them for breach of the nondisclosure agreement.
Since you don’t have a PPA or NPA on file, you’d have to convince them to enter a nondisclosure agreement before telling them the idea. Buyers are often leery about signing one, so it’d be a good idea to practice your presentation (without revealing the secret).
One of the best things to do is to have plenty of data to show the buyer that there is a demand for the invention. However, selling it as a trade secret also means that real-life market data won’t be available to show the buyer. You would only have extrapolations of what market demand might look like if the invention is manufactured and sold to consumers.
If you decide that you want to sell your idea as a trade secrets, you should do the following:
- Define the trade secret- Document your idea
- Find potential buyers/companies– Make a list of buyers and companies that may be interested in your invention
- Prepare a trade secret license– Establish a license agreement draft
- Present the trade secret– Pitch your idea to potential buyers
- Negotiate terms– If they are interested, then negotiate royalties and licensing rights
- Maintain confidentiality– Establish and maintain a nondisclosure agreement (NDA)
Nondisclosure Agreement
A nondisclosure agreement (NDA) is a contract saying you promise to never share the information with anyone else. While selling trade secrets, it would be ideal to have the NDA in place. This will make confidentiality a top priority and prevent others from sharing your secrets publicly.
Coke-cola is a good example. It is well known that they have a secret formula. The NDA prevents anyone from sharing that information. Even if a buyer was to buy the secret formula for Coke-cola and learn its secret formula, the previous owners would still be bound by a confidentiality agreement and wouldn’t be able to reveal any information about the trade secret.
The bottom line is that the best way to sell an idea is to have lots of data proving market demand. You can do that through surveys and studies but nothing beats having a profitable business based on the invention.