Generally defined, a patent license is an agreement between the owner of a patent and a licensee to transfer interest in a patent for the licensee to benefit from and enforce all intellectual property rights.
The patent owner will be able to license or transfer all interest involving a patent, while the licensor gives up the right to all intellectual property. (Usually, the rights only last which for a certain amount of time.) While this goes on, the licensee will be able to make or sell the design or invention, and profit from the intellectual property while the licensing period is taking place.
The two different types of patent licenses are as follows:
- Exclusive license
- Non-exclusive license
Some of the advantages of patent licensing include the following:
- Limited risk
- Global distribution
- Limited time period
- Eliminating patent infringement
Additionally, there are also a couple of disadvantages of patent licensing, which include the following:
- Soliciting manufacturers
- Low success rate
Whenever someone files a patent license, the owner of the actual patent temporarily transfers all rights to the patent itself. Many licenses include a specific time period, and when this expires, the patent owner will then regain all exclusive rights to the patent. Licensees, however, can oftentimes assign or license the rights that they themselves have; however, this specific process will make ownership over the intellectual property even more complex should that step be taken.
If a patent assignment is filed, however, the owner of the patent will transfer exclusive rights on a permanent basis, and the transfer will become part of the official record. While some patent owners charge a one-time fee for this, there are some who simply give away their rights of ownership. Other times, an assignee typically pays this lump sum up front. From there, the assignee will receive future profits from intellectual property rights.
Some of the most common mistakes involving patent licenses include the following:
- Taking action before actually filing a license agreement.
- Licensing a patent to the wrong company.
- Never asking for the right amount of royalties.
- Never requiring a performance obligation.
- Not obtaining insurance coverage.
- Never taking full advantage of the grant clause.
- Never hiring a patent attorney.
When it comes to filing a patent license, the following steps must always be taken:
- Identify any and all potential licensees.
- Request that potential licensees sign a confidentiality agreement, which will protect all rights to your intellectual property.
- Agree to work with the licensee regarding any and all licensing terms and conditions.
- Complete a patent license agreement, which can be either exclusive or non-exclusive. This will help to outline all conditions, time periods, and royalties involving the patent license itself. The document must be signed by both the licensor and licensee in order for it to be considered legally binding in any way, shape, or form.
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