DOE’s New Option to License Program – Not an Express License, but Still Valuable

Interesting news in the world of technology licensing: the Department of Energy recently announced ‘America’s Next Top Energy Innovator Challenge’—a licensing program offering special terms to startup companies on a set of patent licenses from national labs with the goal of spurring startup growth and encouraging technology commercialization. At first blush, DOE’s program (which is part of President Obama’s Startup America initiative) appears to be very similar to the Carolina Express License program aimed at startups. In actuality, the two programs are quite different.

The initial communication about DOE’s new program may be a bit confusing to some would-be entrepreneurs who hope to obtain a patent license from a government lab on the cheap. So I want to briefly demystify what the program is about, who it’s aimed at, and why you should care.

While the DOE announcement of the program mentions that startups can receive up to three patents from the department’s 17 labs for a mere $1,000, the details and application explain that the $1K offer is for startups to obtain an option on a patent license (reduced from $10K). An option, as you probably know, essentially takes the patent “off the market” (similar to a house under contract) while the startup company conducts further evaluation to see if the technology’s a good fit for its business. So no, DOE isn’t giving away patents for $1K apiece. But this is a good deal on options to license, and that could be a very good thing for the right companies.

An option on a license isn’t for everyone. $1K out of pocket for an option is too much to pay for those who aren’t serious about actual commercial prospects, yet it’s affordable enough for most legitimate startup companies with small budgets. An option is an especially good idea for startups that already have some interest in the patented technology but don’t have the resources to take on the risk of further testing and evaluating it only to have it licensed out from under them to someone else. These businesses need some assurance that the time and resources they invest in further testing and evaluating a technology will be for their exclusive benefit (assuming they choose to license the patent).

In fact, it’s very common for government labs and universities to gain plenty of interest from startups and small businesses, but it’s very difficult to get them to commit to negotiating a license if there is any further testing or market evaluation needed. That’s because it’s too risky for the business, so they push back on the lab for further testing or proof of concept.

But DOE’s program gives both startups and government labs a win-win. By offering low-cost license options, the program lowers risk for startups to take the next step of testing or proof of concept, thus bringing them farther into negotiations than they otherwise would have been. It also shifts the burden of additional testing from the lab to the company. This is especially beneficial to the commercialization process because often it is not feasible for the lab to conduct these proof-of-concept steps. (It’s not in their mission or budget.)

DOE’s licensing option program certainly is not perfect. (One shortcoming in my opinion is the exclusion of small businesses in favor of the “newly formed startup,” which is DOE’s rather nebulous definition of the types of businesses qualified for the program.) Nor is it a holy grail that will bring a flood of start-ups to the negotiating table. But I do think it’s a big step in the right direction—one that government labs can expect to bring an increase in patent interest. And that’s definitely a good thing.

Do you have thoughts about DOE’s program, or experience with it? Feel free to leave a comment below, or contact us to let us know what you think.

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Posted by Laura Schoppe

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