Patent Licensing

A license is a permit to use something. For example, an adult can get a driver’s license, which permits him/her to drive a vehicle. But this does not give him/her ownership of the vehicle.

What Is Patent License?

A patent license is an agreement that lets someone else commercially make, use, and sell your invention for a specified period. The owner of the invention (patent) is the ‘licensor,’ and the person who is receiving the license is the ‘licensee.’ Licensing deals involve payment for the license. The licensor will either receive a single-time payment or as continuing payments known as royalty, depending upon what is agreed between the licensor and the licensee.

Usually, license agreement comes with some terms and conditions agreed by both parties, which have a binding effect on them. The agreement consists definition of the product, mode of payment between parties, the purpose of the license, and many more.

How to License a Patent

Start the process of licensing a patent by making a list of manufacturers with reliable distribution channels. Prepare a list of companies that make similar products to yours, by attending trade shows or searching an online manufacturer database and from magazines that cover similar products. By paying a small fee, the United States Patent and Trademark Office (USPTO) can publish a notice regarding the availability of your patent for the license in its official gazette.

Licensing agreement should be negotiated and drafted by an attorney or intellectual property lawyer. The agreement will mention any upfront payments, amount of royalties, and any future potential infringement issues. You can license the patent to a particular entity in three ways depending on the requirement.

1. Exclusive Licensing:

Contents [show]

In an Exclusive License, there is the transfer of ownership by the patent holder. It is exclusively granted to him, and he cannot further license it to anybody else. Upon grant of the exclusive license, even the licensor is also excluded from exploiting the intellectual property rights and cannot sell the goods in the territory where the licensee has acquired an exclusive license. In this type of licensing, the risk of infringement is less as it is less exploited and the licensee will have a monopoly over the market, so the cost of the product will be higher than the usual price, and the revenue will also be higher, and licensor will also receive a higher royalty payment.

But if the patented product is with the reasonable requirements of the public and it is in huge demand and the price is too high. In this case, if the licensee is unable to produce the needed demand and the price is not affordable by many people, then without the permission of the patent owner, the government can issue ‘Compulsory Licensing. In a ‘compulsory license,’ a patent holder’s intellectual property rights as patents are granted subject to compulsory licensing, and the government uses rights against payment either set by law or determined through some form of adjudication or arbitration.

2. Non-exclusive Licensing:

This involves giving license to more than one entity. It means that one licensee may exploit the invention, but along with him, others who have been given the license for the same patent may be eligible for equal exploitation. The licensor also remains free to exploit the same intellectual property.

3. Co-exclusive Licensing:

A license that takes a middle-ground between exclusive and non-exclusive. Such a license is sometimes known as a “co-exclusive” license and is one in which the licensor grants a license to more than one licensee but agrees that it will only grant licenses to a limited group of other licensees. The group of licensees may be identified by name, description (a license will only be granted to licensees who meet specific criteria), or only by number (the licensor will grant a limited number of licenses).

How Patent Licensing differ from the Patent Transfer/assignment?

Patent licensing is a revocable agreement between a patent owner and a licensee; the patent owner gives another entity (the “licensee”) permission to use the patented technology, while the patent owner retains ownership.

In the patent assignment, the original owner permanently transfers its ownership to another entity. The original patent owner will be the assignor in the transaction, and the purchaser is the assignee. Once the assignment is made, the assignor will no longer retain the rights to control the patent.

A survey

On an average, 53.05% of patented inventions are used commercially, 5.47% of patents are sold to independent owners, 4.57 % of patents have been used to find a new company, and about 8% of patents are licensed (Gambardella, 2011).

Resource: Patent Licensing in Selected European Countries


Patent, patent licensing, compulsory licensing, intellectual property commercialization,IP,