Patent License Agreement: Everything You Need to Know
A patent license agreement is simply a contract between two or more people who sign the doc and enter right into a legally-binding relationship.7 min read updated on January 01, 2024
What Is a Patent License Agreement?
A patent license agreement incorporates different sections. The first section will comprise details about the efficient date of the agreement, the identity of the licensor, and the licensee. The background section consists of the identity of the invention, the date the patent was issued, and the patent quantity.
How to Draft a Licensing Agreement
Having a legal professional create a licensing agreement or having a licensing professional help negotiate from the very beginning stages is clearly one of the best ways to proceed. Nonetheless, there may be those who wish to create their own patent licensing agreement. Drafting your own licensing agreement can actually be dangerous. Whether or not you represent yourself or work with a legal professional to draft a licensing agreement, when beginning down the licensing path, it's very important that you simply stop thinking when it comes to a template for a license and start thinking when it comes to clauses for a license.
A license is simply a contract between two or more people who sign the doc and enter right into a legally-binding relationship. The license must observe what the parties have or will comply with moving forward. When legal professionals create a patent licensing agreement, they start with sections from different agreements and adjust them to suit the actual scenario and wishes of all parties. Because you have a customized contract that truly fits the agreement you’ve reached does not necessarily mean that you cannot begin with fundamental provisions and adjust them if needed. One of the best places to begin to find example agreements is at a legal library.
Helpful resources that lawyers utilize are also extraordinarily costly to buy, typically as much as $1,000. Many courtrooms contain a small library, and all regulation colleges have intensive libraries, which is a requirement for American Bar Association (ABA) approval. ABA approval is the standard for certifications in regulation colleges, so if you may get entry to a regulation faculty library, you're on a good path. Even a smaller library could be enough in the quest for example licensing agreements, but it's best to search to find if they have what you want. Regulation colleges will certainly contain what you want for patent licensing forms, but it's best to name them first.
When looking for an example agreement, you'll need a variety of forms. Should you discover a library that has an excellent IP section (this is easier to find given the expansion of this discipline of concern), there will probably be a number of smaller encyclopedias devoted to patent licensing. Form books will probably be in a single area and the IP resources in another, so remember to search each area. There are additionally some respectable resources on licensing agreements you may find in your local retailer, but these resources may not have the data that a form encyclopedia has.
You can even find some form agreements online through several universities. Form agreements from a college website are probably not fitting for every scenario. Universities are increasingly licensing technology in its beginning stages, typically even before securing a patent and often before a patent is issued. A variety of locations online at which you possibly can receive form agreements and even draft a somewhat-original agreement yourself exist.
When you draft your patent license, you don’t usually need to copy every form. If you're going to draft a license, you need to seek the advice of as many resources as you can. Undergo the license agreement samples you possibly can get and choose certain sections that appear to suit your wants and needs. The more license agreement samples, the better off you’ll be. Even when you're drafting your individual patent licensing agreement, you should get a legal professional who focuses on contracts, specifically form agreements, to review it just to ensure you haven’t made any obvious errors.
Considerations for Payment-Related Licensing Agreements
Regarding what must be included in a licensing agreement, make sure to notice how royalties will probably be paid. Royalties is the first motive parties desire to create such an association in the first place. If necessary, you should consider some sort of up-front cost. Up-front guaranteed funds is the job of any legal professional negotiating or creating a license to imagine that issues will go poorly. The agreement can by no means consider every little thing, but when talking about cost, you want to ensure safety.
You may not be able to get the licensee to comply with a minimal or up-front cost. The primary and most essential factor you should negotiate is understanding the situation. Should you actually need to forge a deal, and the general deal is sufficient, you shouldn’t let a one-time period here or there make you not want to sign. If the general deal will not be good, then you definitely shouldn’t sign it. Deciding may be difficult and can be even more difficult when you're the inventor. The inventor will regularly have a disproportionate view of what the invention must cost.
Everybody should make money in the deal. Understanding the proportion of gross sales is essential when contemplating funds. Take into account whether or not the royalty is to be paid on the income or total proceeds. Total proceeds are sometimes calculated as the whole quantity of a sale, much less transaction prices are related to the sale, but you should learn the contents of any agreement you enter in to. Many times you'll be better off just accepting a smaller royalty on total proceeds than a greater royalty on income.
It's also a recommended suggestion to incorporate a clause in your license agreement that permits some type of accounting, which can mean you can access the monetary data to confirm agreement with royalty necessities.
Considerations for Non-Payment Licensing Agreements
As a result of 35 U.S.C. 287(a), you cannot obtain damages in a patent infringement motion until the product is “marked” with the U.S. Patent No. The 35 U.S.C. 287(a) statute explains: “No damages shall be recovered by the patentee in any motion for infringement, except for proof that the infringer was notified of the infringement and continued to infringe thereafter, wherein incident damages could also be recovered just for infringement occurring after such discover.” It is best to make certain of any requirement that the licensee marked the product with the patent number.
An Exclusive License is what you principally trade all the rights to create, use, promote, and import to someone. A non-exclusive license enables you to create, promote, use, and import but additionally reserve the correct to license others.
This type of license is regularly recognized as consent or a promise to not sue. A sole license sometimes permits both parties to use a patented invention, so it can go under both an exclusive license and a non-exclusive license when it comes to the rights offered. Usually, the extra rights give the licensee a big indicator to anticipate your funds. For a lot of inventors, there may be minimal negotiating rights, mostly in order for a giant retailer or producer to license your patent. When pondering how long the license will last, consider the chance that gross sales may not reach you goals, which imply that your funds could be fairly smaller than you hoped.
The fact is that a patent has a brief length, and for a lot of merchandise, the half-life will probably be effectively shorter than the whole patent time period. For some merchandise like toys, product life might last only up to two years. You'll be able to have the license last for a preliminary interval and be renewable, or have it eliminated if gross sales don't attain a selected standard or they refuse. Previously, it was harder to acquire a license with no patent, and a few corporations nonetheless adhere to the rule that a patent be awarded previously to licensing. There are corporations that may contemplate licensing a pending patent utility.
Should you receive a patent, you've nonetheless supplied the other party with one thing of worth, as indicated by them paying a royalty. The knowledge you provided that you didn’t need to was doubtlessly protected as a secret, which may be fairly invaluable. You must make certain that any agreement pertains to each patent and commerce secrets and techniques. When you can't obtain a patent license after it expires, you may nonetheless reserve increase on a secret license through the correct factual state of affairs. If you find yourself licensing a patent utility, it may be uncertain whether or not a patent will ever remain.
Since they like your invention, many corporations are prepared to negotiate license contracts with solely a patent utility pending, typically even with only a provisional patent utility pending. Royalty is probably not the same, should you solely have a patent utility pending. Without understanding whether or not any unique rights will be granted or whether or not exclusive rights that expire will probably be commercially helpful to guard the invention, a licensee will doubtlessly need to pay much less when you only have a pending patent. There may be nothing improper with having the royalty price rise if a patent does get issued. Now you can speed up a patent utility on the patent workplace for the cost of a charge, which may very well effectively price the additional cost depending on the construction of the licensing agreement.
Should you provide someone with a license, they are usually granted the right to offer others access to make use of your patent. With the correct procedures in place, the sub-license shouldn’t be problematic within an exclusive license. Sub-licensing and licensing subsidiaries within the case of a non-exclusive or sole license may be concerning.
If you're getting right into a sole license and anticipate only you and another firm entering the agreement, you may not need sub-licensees to cannibalize the market value even should you do receive a commission. A dispute decision is probably becoming common in most contracts or licenses, but you need to contemplate what occurs if everything gets risky and there's a disagreement about what the phrases of the agreement dictate. Arbitration may be a lot faster and a lot cheaper, but it largely doesn’t provide you with any right to elicit an aggressive choice.
If you need help with your patent license agreement, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.