Unlike copyrights on creative literary works, patents do not arise automatically under U.S. law. Instead, the inventor must apply to the PTO for a patent. The patent application is formal and highly technical. Generally, the applicant must prove to the PTO that the invention is original, authentic, distinguished, and useful. The PTO will review the application and decide whether to issue a patent certificate. The application process can take several years from start to finish.
Once an inventor has submitted a patent application, the inventor can use the idea under the designation "patent pending." The phrase "patent pending" means the idea is part of a patent application that has not yet been approved by the PTO. After reviewing the application, if the PTO approves the application by issuing a patent certificate, the inventor has a monopoly on the use, production, and distribution of the patented idea.
Licensing is a common practice in the U.S. economy. For example, many government agencies and universities will patent the ideas and technologies developed in their research labs and then license those patents to third party businesses. In exchange for the right to use the patent, the license holder typically pays the patent holder a license signing fee and royalties. The license allows the patent holder to share the patent monopoly in a controlled and lucrative manner.
An inventor need not wait until a patent is approved to issue a license to a third party. The inventor can give a patent license while the patent application is pending, as long as the inventor discloses to the license holder that the patent has not yet been approved. This is a risk because if the PTO denies the patent application, the license holder will essentially possess a valueless license.