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The United States Patent and Trademark Office (USPTO) reports that 200,850 applicants received patent rights in 2020. After obtaining a patent, an inventor may give others the right to make, use, or sell their patented technology or design under specific terms. For legal help with patent licensing and how to structure a license agreement that protects your legal and financial rights, consider contacting our experienced patent attorneys at Loop IP Law.
One of the many benefits of having patent rights is the ability of an inventor to exclude others from making, using, or selling a patented design, utility, or plant. A patent license is an agreement where someone with rights in a patent gives another person or entity permission to use their patent rights under specified terms.
Acquiring or selling a patent license affords many benefits to the licensee (the person obtaining the license) and the licensor (the person selling the license). Accordingly, it is an attractive option for many individuals and businesses to generate income and fund further research and development to create more patentable products.
By entering into a licensing contract, the licensee benefits from the reduced cost of business by not having to perform research and development to generate products on their own. Instead, they can begin marketing and selling the product or design and incorporating it into their brand. Operating in this way streamlines internal procedures and reduces the hefty overhead often associated with funding research and organically acquiring patents.
The licensor also reaps benefits from patent licensing agreements, while retaining their legal right to restrict when and how others use their products. Licensors can use the proceeds from the licensing deal to fund the development of more patentable technology and designs. Additionally, it can provide them with an excellent source of passive income, by receiving royalty payments on the individual or bulk sale of their products by the licensee.
Licensing and selling patent rights are not synonymous arrangements. By licensing out their patent, an inventor gives another individual or entity permission to use their invention within set terms. For example, they may restrict how and when the licensee can use the patented technology or exclude them from permitting others to use it. In contrast, when someone sells a patent outright, they typically relinquish all of their rights in the technology.
There are multiple ways to structure a patent licensing agreement and how a licensee will compensate a licensor for the right to use their product or technology. They may agree to pay an upfront lump sum, make periodic payments, or send the licensor a royalty payment based on a percentage received from the individual or bulk sales.
There are many ways that people choose to structure patent licensing deals to fit their needs and preferences. The experienced patent licensing attorneys at Loop IP Law routinely help clients negotiate and structure appropriate licensing agreements to ensure legal and financial rights remain protected.
Under an exclusive licensing agreement, the licensee has exclusive rights to use the technology or invention. The patent holder retains the ownership rights in the design and reclaims the right to use the technology once the contract ends naturally or by terminating the agreement based on its terms. The licensee can use the technology within the bounds of the contract, which usually includes a provision excluding them from licensing or disclosing the patented information to others.
One of the benefits of issuing an exclusive license is that due to the fact that only one individual or entity has the right to use it, the value is more than it would be under another structure. A licensor can use these increased funds to fuel additional research and development on other projects or further iterations of the technology. Further, an exclusive licensing deal limits the opportunity for negligent or intentional misuse of the patent by others, potentially making it easier for the licensor to trace back problems to the source.
Non-exclusive licensing deals are those where the individual with the patent rights licenses out the technology or design to multiple licensees. Similar to exclusive licensing contracts, the licensee cannot usually sub-license the patent to others without permission from the licensor (and, in most cases, this would not be allowed). Because the use is non-exclusive, the value is not as high as it would be under an exclusive licensing arrangement. The licensor may have to issue more licenses to generate a profit.
In this arrangement, the licensee has permission to license the patent to others within the bounds of the contract. A sublicensing agreement can be exclusive or non-exclusive, allowing the parties to tailor an agreement to fit the purpose and preference of the deal and those involved
Entering a patent licensing agreement is a unique legal arrangement that should be entered into with due diligence. Properly structuring a patent licensing agreement ensures that all parties receive their intended benefits, while honoring all legal limitations and boundaries. For the licensor, the end result will be that they retain the rights they wish to reserve but provisionally give away other rights. Similarly, the licensee should receive the legal rights they expect in exchange for a fair sum, enabling them to profit from the use of the technology under the contract.
A dedicated patent licensing attorney can help licensors and licensees by ensuring that they understand their legal rights when drafting and negotiating an agreement. Further, a patent licensing agreement represents a licensee or licensor in court if filing a lawsuit is necessary to enforce the terms of the contract.
Patent law is a complex and nuanced area, often dealing with equally technical designs and utilities that form the basis of the underlying patent. Visiting with an experienced patent attorney that has extensive experience negotiating and reviewing these challenging areas can help ensure that all intellectual property and financial rights remain protected within the licensing agreement.
The careful wording of the final contract is essential when dealing with such a technical area of the law where intangible rights are being licensed to another. A patent licensing attorney can help the parties craft an agreement that properly enshrines the rights and responsibilities of each party.
When misunderstandings or breaches of contract occur, it is crucial to take swift action to enforce the terms of the patent licensing agreement and prevent further damage. A patent attorney can communicate with the breaching party to reach an agreement. Patent attorneys can also file a patent licensing lawsuit and fight for your legal interests in court if necessary.
Patent licensing is an often mutually beneficial way for patent holders to allow others to use their patent rights while reaping the rewards from the hard work it takes to secure a patent. Loop IP Law focuses exclusively on patent, trademark, and other intellectual property matters and regularly helps clients draft and secure patent licensing agreements. For legal help, consider contacting a patent licensing attorney on our team today.