Patent Licensing
Innovators select patent licensing as one of the preferred modes to bring patents to market. Patent licensing includes transferring of patent rights with certain limitations. The patent licensing decisions are derived after conducting a thorough patent licensing search. In use, patent license agreements allow one party to exploit the IP rights of another party against the payment of royalty. In these kinds of agreements, the ownership of the patent even after licensing belongs to the patentee. The Patentee only gives rights to the licensee on the mutually agreed terms and conditions. Licensing is seen as one of the most important and popular IP commercialisation techniques.
Before Licensing your patent you should always be aware of certain know how and questions that will confirm your decision of getting a patent. Licensing as a form of IP commercialization is sought by those who are low on capital. Before going for licensing one should always ask if he has the capital requirements, know-how and the desired skill set to bring the patent into the market. If not , licensing is the key to your competitive advantage. Licensing the patent in such a situation will not only help to bring the invention into the market but also will help gain competitive advantage over the others.
Before licensing the patent one must always think if the technology or patent that is up for licensing, is desired by the potential licensees. If the patent does not attract the licensees, there will be difficulty in obtaining a licensee in the first place and therefore licensing will not make a big financial gain to the patentee. The valuation of the IP needs to be done by using the appropriate methods. Identify the marketability of the invention or the patent. Understand whether that product will be unique enough to attract customers. Once you have determined the value of the patent and its feasibility in the current market, you need to look for potential customers (licensees).
The process of patent licensing can be a tough and extremely lengthy process. Therefore, looking out for potential licensees should commence right after the filing of the patent application. While approaching the potential licensees it is extremely important to have a crucial strategy to demonstrate to the potential licensees that your patent will be extremely relevant and useful to them. The potential licensee will instantly feel engaged when told about the history of the patents and the problems associated with them along with how the current patent solves those problems and looks into the future aspect of the technological rise. The legal status of the invention also plays a crucial role in determining who the licensee would be. Presenting a clear and accurate representation of the market and the contribution of the patent to the current market will help in attracting licensees. After a patent licensing agreement has been made it is very important to ensure the quality and the functioning of the patent is maintained. A monetary sum of certain mutually decided amounts should be paid regularly. Non-payment of this mutually agreed sum or royalty or fees could lead to the termination of the licensing agreement.
Patents are sold in market similar to physical products after obtaining the correct patent valuation. In case of patents covering digital innovations, the valuation depends upon the strength of patent claims enlisting unique data analytics related features. Patents protect inventive ideas themselves. The Patent and Trademark Office issues patents to inventors who can demonstrate their inventions are new and useful. Patents provide the inventor 20 years of exclusive control over the idea, preventing anyone else from making, using, selling, or importing the invention into the designated country. Patent holders can recover their lost profits or a reasonable royalty from anyone who infringes their patent and up to triple damages from anyone who infringes wilfully. Patent holders can also obtain a court order preventing infringers from making, using, selling, or importing any products based on their patents.
Patent’s rights are territorial, which means you can protect your invention in the geography where you filed the patent application. An international patent protection also can be obtained by directly filing a patent application in the country where you wish to get a patent. Patents are of three types – utility patents, design patents and plant patents. A utility patent is a patent that covers anyone who invents a new and useful process, the machine, article of manufacture, or a composition of matter. Design patents include an original and ornamental design of product for a manufactured product. A plant patent is a patent related to a kind of plant which is capable of reproduction.
A patent application usually consists of four main parts. These are specification, abstract, drawing, and claim. The specification is the detailed description of an invention. The abstract is the concise summary of an invention. The third is the drawing which is an image that shows how the invention works. Fourth is the claim which, is the part of the application which defines the scopes of the invention.
When any person sells a patent, he is guaranteed a quick payoff for his idea. When any person sells a patent outright, then he at least gains some financial reward for his invention. By selling the patent, the inventor can generate income that assists him to pay the bills or financing other ideas. By selling a patent outright, the huge financial outlay is eliminated required to start up a business based on a new product. The money earned from selling a patent may not be enough unless the product has been on the market for a long time. The patent buyer does not habitually spend a lot of money on an unproven product, which does not generate a big profit.
The patent holder tends to retain the ownership of the invention and earn a huge amount of royalty payments on future sales of the product. A patent holder can grant an exclusive license to one company or many other companies. Licensing usage right has no guarantee of financial riches like selling a patent. Royalty rates have the tendency to run from 5% to 20% so the product can be sold for the patent holder to earn a large amount of money.
There is a condition that if the patent holder makes and market his invention himself, then all the profit will go to his bank account. There is also a possibility that those profits may be taken by legal and accounting fees, business start-up costs, etc.
If the inventor wants to sell or license his invention, he should make a list of manufacturers and potential users of his invention. Thomas Register has contact information for thousands of companies, and this register is available in libraries and online. Before making contact with a firm, an inventor should remember that he should present himself as a Product Developer when he contacts any firm. If he successfully wants to sell or license his invention, he should do face to face meeting with the Sales or Product manager in the company.
There must be a new product announcement in trade publications and investor’s magazines so that potential patent buyers generate. An inventor should go to the invention shows so that he can tell about the benefit of his products to the companies or any person who is interested in his product. The inventor should finance his invention by soliciting partners so that capital can be used to launch the product. Many companies have sites on the internet, so the inventor can take advantage of that for advertising their patent for sale.
An inventor’s invention is marketed by a contingent fee broker to the manufacturer, and he receives payment for services if the product is sold in the form of a percentage of royalties or cut of the sale. Inventor has the responsibility that he should never pay a broker in advance for his service. Any agent who has a good reputation will only charge if they sell his invention.
There should be the identification of parties to make the offer of patent product. When an inventor negotiates a patent sale or patent license, and if he is the individual inventor and he is sitting across the table from another individual who is looking to acquire the rights, it is very straightforward. But things get complicated if there is a company.
If any particular company has any other moving parts then an inventor wants to know who has the right to make, use, sell or import his invention and how much of its be licensed or sold. Suppose there is a party A which one giving up their patent rights and party B which one is receiving them in then that should get to lay out in the contract. It is a transaction that is the party giving up its patent right needs to say exactly what is being granted. In a patent an individual gets the ability to grant, the ability to make it, to use it, to sell it and import it.
Now, let us know the actual rights themselves. What is it that you own? In the contract, an inventor will not specify the whole list of claims that are listed at the bottom of the patent. Tell them about Exhibit A or C. The Exhibit down at the bottom of the contract will identify the patent number, the patent applications that may be pending, and the whole portfolio that is being conveyed. Each party will want to know, to inspect each of those identified to make sure that those are indeed the patent’s publication numbers, serial numbers, and dates that are associated with the conveyance.
The next step is to purchase. An individual should talk about a prior or existing license. These are conveyances and transactions at the party A end who is giving uprights which may be under obligations. If an individual license his right to party B, then It’s party B job that they are receiving the amount of right. If an individual licensed his invention out to someone else in the past or he is under obligation to assign his patent to another company that needs to be cleared up right in front. If party B is going to be a Non-Exclusive Licensee that needs to be cleared upfront as well in the contract that means they are not going to be the only that gets to make use or sell the invention. They going to have competitors built in.
The next step is the price. In contract, everyone asks about how much the price is. It is probably the most important part of the negotiation process. Here, we talk about the money in terms of lump sum what’s received upfront and what’s potentially received overtime or including contingency payment. Contingency payments are when an individual receives through royalty if and when a product is sold. These are terms that get negotiated. Patents can be sold out for a lump sum payment through, there is no license at all. It’s being sold or the purchase price can be one that’s paid for over several quarters or years or contingent upon certain activity up to an including a sale.
