Licensing of Intellectual Property is known as the process wherein you transfer an interestin your right to another person. As an IP right holder, you can license your rights to more than one person or company and is quite a profitable method of earning money and expanding your invention. When you license your IP right, you get a lump sum amount to invest in your business and then you keep getting royalty as agreed by the licensee in the license agreement.
In case of patents, the general rule of patents are followed except that patent rights are generally licensed in the form of collaboration and consortium arrangements, sponsored research agreements, and manufacture and supply agreements. Patent licenses are also often used in spin-off or joint venture strategic alliances. A Patent license is limited to a term that has been agreed upon mutually between the parties in the license agreement. Patent license is classified into three types basically: exclusive license, sole license and non-exclusive license. Under exclusive license, the patent owner surrenders all rights under the patent (including the right to sue for infringement and the right to license) to the licensee. A sole licence permits both the patent holder and a licensee to exploit a patented invention. Lastly, a non-exclusive licence allows the patent holder to license some or all of the rights under a patent to an unlimited number of third parties, and also to retain the right to exploit the patented invention itself.
Developing a successful business from patents requires an apt expertise to manufacture and process the patented technology but if you lack the know-how and the proficiency to start up a business then you can use your patent to earn revenue from it. There are various methods of commercializing your patent rights such as licensing or assignment. Assignment extensively differs from licensing and therefore you are advised to choose the type of commercialization suitable to your requirements. Assignments are irrevocable and permanent transfer of ownership of the patent compared to licensing where the licensor retains the ownership until the expiration of the licensing Agreement.
A major distinction between assignments and licenses is that the assignments have to be filed with the USPTO as it involves complete transfer of ownership, whereas licenses on the other hand can be agreed upon both orally and in writing. Most of the times, a license agreement is expressed in the form of written contract also adding the scope of the license.Another consideration that you should pay heed to while choosing between assignment and license is the bigger lump sum amount in assignments and the royalties in case of licensing. It is the main consideration as an option of royalties gives you the chance to revoke the contract if the royalties are not paid or the contract is breached but in assignments, you will receive the amount at a time before the assignee starts using your patent.
Nonetheless, as an inventor, if you wish to see your inventions doing wonders, licensing would suit you the most as you can add ‘performance obligations’ clause in the agreement advertently ensuring that the licensee abides by all the performance requirements of the licensed invention and keeps up to the expectations.
Lately, a quality control mechanism has surfaced in the licensing of intellectual property rights field where courts have found non- inclusion of quality control provisions in licenses as Naked Licensing. It encourages productive interference of the licensor and gives the licensee a defense claim against infringement if the licensor has abandoned the license agreement, as held by 9th Circuit (U.S.) in the case of Barcamerica International USA Trust v. Tyfield Importers Inc.
For all the reasons given, you are advised to hire a professional if you decide to license your rights, a professional will not only help you drafting the most suitable agreement but will solicit you in avoiding all unnecessary risks and litigation’s. Moreover, a professional advantage will add up to your patented technology to make the best of it.
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