Overview
The U.S. defense drone market is at an inflection point. Chinese-manufactured drones, such as those made by DJI,[1] are increasingly restricted in the U.S. market through FCC covered list designations and national security limitations on federal procurement. The gap they leave is significant, and companies entering the defense and dual-use market, from startups to mid-size firms (often falling within the category of “nontraditional defense contractors”), are racing to fill it. At the same time, the Department of War (DOW) is sitting on hundreds of patented drone and defense technologies, developed in its own laboratories, that have never been commercialized. The Defense Patent Holiday, launched in January 2026, is the DOW’s attempt to connect those two realities. Under the program, qualified companies may apply for no-fee, two-year commercial evaluation licenses (CEL) to prototype and test DOW-developed technology, with a July 22 application deadline.[2]
The program’s stakes are not abstract. China controls roughly 80% of global commercial drone component production,[3] and by October 2025 had cut off not only direct exports to Ukraine but also intermediary supply routes through the Baltic states and Poland.[4] Just recently, Ukraine reached a milestone: producing its first drones with zero Chinese-sourced components.[5] But Ukrainian officials acknowledge that scaling that capability remains years away. Treasury Secretary Scott Bessent has stated that China provides “nearly 80 percent” of the sanctioned dual-use items Russia uses to sustain its war effort.[6] The U.S. policy response includes both restrictions on Chinese drones in the U.S. market and programs like the patent holiday designed to build domestic capacity in dual-use technology.
For startups, small and mid-size companies, and aspiring nontraditional defense contractors looking to enter or expand in the drone and dual-use space, the program is a genuine opportunity, and a potential IP trap. Understanding both is essential before applying.
I. What’s Available
The patent holiday portfolio now exceeds 500 patents and is growing, administered through TechLink, the DOW’s official national technology transfer partner.[7] The CEL is non-exclusive and limited to internal research and development. Commercial sales are not permitted during the evaluation period. If the technology proves viable, the licensee can pursue a paid license or a follow-on procurement contract. If not, they walk away.
The portfolio includes technologies directly relevant to the drone and autonomous systems space. Among the available drone-specific patents: a system enabling in-flight release of unmanned aerial vehicles (UAVs) from larger UAVs mid-mission (U.S. Patent Nos. 11,834,179; 11,753,163; and 11,027,842, Naval Air Warfare Center Weapons Division), and a passive RF and video drone detection and tracking system (U.S. Patent No. 10,938,102, Naval Surface Warfare Center Crane Division).[8] For a company trying to build an American-made drone in the post-DJI market, free access to government-funded R&D could represent a significant head start.
These are not theoretical technologies. RF detection, autonomous drone coordination, and AI-guided navigation are being developed and battle-tested in real time on the battlefields of Ukraine. Embedded engineers and private-sector developers iterate under combat conditions at a pace the traditional defense procurement cycle cannot match.[9] For U.S. companies entering the defense drone market, the patent holiday may offer a rare chance to close that gap.
The patent holiday program is particularly well-suited to dual-use companies. That includes companies developing technology with both commercial and defense applications, as well as companies crossing from the commercial market into defense for the first time. They occupy exactly the space the patent holiday is designed to fill: sophisticated enough to develop and commercialize DOW technology, but often without the contracting relationships, compliance infrastructure, or R&D access that traditional defense contractors take for granted.
II. The IP Catch
The program’s appeal is real, but so is the IP complexity. Companies that enter without understanding the implications may find that the most valuable thing they build during the evaluation period is not entirely theirs to keep, sell, or protect.
The government data rights problem. The CEL will contain specific terms governing government rights to data and improvements developed during the license term. Those terms will warrant careful review. Defense CELs will differ in effect from standard federal evaluation licenses in an important respect. For example, the Defense Federal Acquisition Regulation Supplement (DFARS) governs DOW contracts and contains data rights provisions, particularly DFARS 252.227-7013, that give the government automatic rights to technical data developed with government funding. As a result, improvements developed under a DOW CEL will be subject to government data rights in ways a civilian agency license would not.
The DOW also has an independent national security interest in improvements to its own patented technology that civilian agencies lack. This directly implicates trade secret protection. Trade secret law requires that information be kept confidential and derive value from that confidentiality. If the government holds rights to improvements developed under the license, the confidentiality element may be compromised before the company realizes it. Document pre-existing know-how before the evaluation period begins. Negotiate data rights and improvement clauses before signing, not after building.
The third-party patent problem. A government license to use a patented technology does not create a license to use other patents necessary to fully exploiting the patented technology. Third parties may hold patents covering specific components, methods, or improvements. Companies that invest significant resources without conducting a freedom-to-operate analysis may face an infringement claim just as they are ready to commercialize. There is also a subtler risk. Improvements developed during the evaluation period may themselves be patentable. But if they are sufficiently defense-sensitive, the USPTO may impose a secrecy order on the licensee’s own patent application, restricting disclosure and commercialization in ways the company did not anticipate.[10]
The Section 1498 limitation. Companies that develop and patent improvements during the evaluation period should understand that if those patents are later practiced by or for the government, their enforcement options may be limited. Under 28 U.S.C. § 1498, when a patented invention is used or manufactured for the United States with government authorization or consent, the patent owner’s remedy is a suit for compensation in the Court of Federal Claims, not the injunctive relief available in district court. For a startup building commercial value around improvements to DOW technology, that is a meaningful constraint on what those patents are ultimately worth. The Federal Circuit recently affirmed the breadth of § 1498 immunity in the UAV context, shielding an autonomous aerial vehicle contractor from patent infringement liability in district court even for marketing demonstrations at industry conferences, including AUVSI.[11]
The export control flag. Many technologies in the patent holiday portfolio are subject to the International Traffic in Arms Regulations or the Export Administration Regulations. The export control exemption for published patents is narrow. It covers only what is disclosed in the patent itself. Unpublished improvements or implementation details developed during the evaluation period are not protected. Nontraditional defense contractors often lack the compliance infrastructure to navigate these requirements, and the consequences of violations can be severe. Assess the export control classification of any patent holiday technology before beginning development. Engage counsel accordingly.
III. Before You Apply: Practical Considerations
Beyond the IP catches above, a few additional practical points warrant attention before applying:
Check whether the patent is already licensed. Some patents in the portfolio have existing nonexclusive licenses. A patent already licensed to multiple companies offers little competitive advantage as a starting point. FedInvent tracks license status in its patent holiday database. Check before investing time in an application.
Understand the bundle structure. Some patents appear in TechLink “bundles” grouped with related patents. The UAV release system cited above, for example, is a bundle of three patents. It is not publicly clear whether TechLink requires licensing all patents in a bundle or permits licensing a single patent from a group. Clarify this before applying.
Check the remaining patent term. Some patents in the portfolio are 10 to 15 years old. With a 20-year patent term, a 15-year-old patent has only five years of remaining life, potentially shorter than the commercialization runway a licensee needs. Check expiration dates before committing to development.[12]
Request the CEL template before applying. The specific terms of the commercial evaluation license, including government data rights, improvement clauses, reporting requirements, publication restrictions, and field-of-use limitations, are not publicly available. We contacted TechLink to obtain the template and seek clarification on several key provisions; as of publication, we had not received a response. (We will update this post with any information we receive.) Companies should request and carefully review the specific license terms before applying.
IV. The Bottom Line
The Defense Patent Holiday is a time-sensitive opportunity. Companies in the drone space, including dual-use and autonomous systems companies, can access government-funded innovation at no upfront cost and position themselves as American-made alternatives in a market that urgently needs them. The companies that benefit most will be those that treat the IP implications as seriously as the technology itself: understanding what they own, what the government owns, and what third parties may own before they build. The DOW has signaled that the current portfolio may be only a starting point: additional patents and expanded licensing opportunities may follow. Companies that engage now establish relationships with DOW laboratories that can open doors well beyond the July 22 deadline.
The application window closes July 22, 2026. Move quickly, but carefully.
[1] DJI (Da-Jiang Innovations), a Chinese company founded in 2006, became the dominant global manufacturer of consumer and commercial drones, controlling roughly 70-80% of the global consumer drone market at its peak. DJI has been effectively barred from introducing new products in the U.S. market following FCC action in December 2025 adding foreign-manufactured drones to its national security Covered List. See FCC, Covered List, https://www.fcc.gov/supplychain/coveredlist. The FY2026 NDAA, § 914, simultaneously directed DOW to establish programs to bolster the domestic industrial base for small unmanned aircraft systems (UAS) to fill the resulting capability gap.
[2] U.S. Dep’t of War, Office of the Under Secretary of War for Research and Engineering, Defense Patent Holiday, https://www.cto.mil/no-fee-cel/.
[3] CSIS, Why China’s UAV Supply Chain Restrictions Weaken Ukraine’s Negotiating Power (Mar. 7, 2025), https://www.csis.org/analysis/why-chinas-uav-supply-chain-restrictions-weaken-ukraines-negotiating-power.
[4] Defense Mirror, China Restricts Drone Parts to Ukraine after U.S. Pressure to Block Them for Russia (Oct. 29, 2025), https://defensemirror.com/news/40447/China_Restricts_Drone_Parts_to_Ukraine_after_U_S__Pressure_to_Block_Them_for_Russia.
[5] Maria Varenikova, Ukraine Reaches a Milestone: Making ‘China-Free’ Drones, N.Y. Times (Mar. 11, 2026), https://www.nytimes.com/2026/03/11/world/europe/ukraine-drones-china.html.
[6] Atlantic Council, US Voices Concern over Chinese Support for Russia’s Ukraine Invasion (Oct. 27, 2025), https://www.atlanticcouncil.org/blogs/ukrainealert/us-voices-concern-over-chinese-support-for-russias-ukraine-invasion/.
[7] TechLink, Defense Patent Holiday Portfolio, https://info.techlinkcenter.org/defense-patent-holiday. Patent count per FedInvent, The Pentagon Patent Holiday Doorbuster (Mar. 12, 2026), https://fedinvent.substack.com/p/the-pentagon-patent-holiday-doorbuster (identifying 518 patents as of March 9, 2026).
[8] Patent details verified via USPTO and FedInvent Pentagon Patent Holiday database, https://wayfinder.digital/fedinvent/resources/pentagon-patent-holiday-assets.html.
[9] See, e.g., GIS Reports, Ukraine’s DIY Drones Defy Russian Jamming (May 7, 2026), https://www.gisreportsonline.com/r/ukraine-diy-drones/; IEEE Spectrum, How Autonomous Drone Warfare Is Emerging in Ukraine (Mar. 30, 2026), https://spectrum.ieee.org/autonomous-drone-warfare.
[10] 35 U.S.C. §§ 181-188 (authorizing secrecy orders on patent applications for inventions that may be detrimental to national security).
[11] Arlton v. AeroVironment, Inc., No. 2021-2049, 2026 WL 294827, *4-*6 (Fed. Cir. Feb. 4, 2026) (nonprecedential); 28 U.S.C. § 1498(a).
[12] FedInvent identified 22 patents that are 15 years old or older, and 135 patents between 10 and 14 years old, in the patent holiday portfolio. FedInvent, The Pentagon Patent Holiday Doorbuster (Mar. 12, 2026), https://fedinvent.substack.com/p/the-pentagon-patent-holiday-doorbuster.
