How does patent licensing work

Those who license the invention can collect royalties or sell the rights outright for a lump sum. In addition to considering the financial aspects of this decision and the risk of manufacturing, you may also need to make your decision based on whether the invention lends itself to licensing and whether you want to spend your time manufacturing and marketing, or whether you care more about innovating.

If you prefer to work on inventions, licensing your inventions is a strong option. A license is an agreement that allows someone else to commercially use or develop your invention for a specified period. The owner of the invention is the licensor, and the person who is receiving the license is the licensee.

You will receive payment in return that may be structured as a single-time payment or as continuing payments called royalties.

You can start the process of licensing your patented invention by making a list of manufacturers with strong distribution channels. You can find manufacturers by attending trade shows, searching an online manufacturer database for companies making similar products to yours, and finding manufacturers in stores and magazines that cover similar products.

In general, you should have your licensing agreement negotiated and drafted by an intellectual property lawyer. The agreement will spell out any upfront payments, amount of royalties, and potential infringement issues.

You can exclusively license the invention to a particular entity or grant a non-exclusive license to more than one entity or individual. With an exclusive license, the patent owner transfers ownership to the licensee but keeps the title to the patented invention. Among other things, he or she transfers the right to sue for infringement as well as the right to license.

An exclusive license can be limited if the licensor promises that the patented invention will not be licensed to another individual or entity in a specific field of use. A licensor who grants a non-exclusive license basically promises not to sue a licensee for patent infringement. License agreements should also specify any time limit on the license that is negotiated.

By the time you read the last sentence of this article, you will have an understanding of the following topics:. In other terms licensing a patent is a mutual agreement between individual or companies or a company which you choose to make, use, and sell your product in the market. As you are the patent holder, your ownership retains in the invention and you enjoy royalty payment on the product. This is a safety practice that you should undertake because if by any chance your relationship with the licensee gets spoiled, you can take further necessary steps with their help.

Before you decide to license your patent, it is a good practice to ask oneself the following questions:. Once these questions are answered, you would have a clear framework and could go ahead with further steps. A lot of companies have made a ton of money by merely strategically licensing their patents. NuCurrent, a wireless charging startup, for instance, earns millions of dollars by licensing its patents to the likes of Apple and Motorola that use their patents in their products.

They even recently sued Samsung for infringing their patents related to wireless charging. We conducted a preliminary analysis to assess the strength of their patent which you can read from here. Another innovative giant, the big blue, known to the world like IBM, is one of the largest patent licensors in the world, reportedly earning billions in-licensing and sale of its patent portfolio. Speaking of it, the royalty rate of a patent can vary from five percent to twenty percent depending on the licensee.

The company designs a series of inter-related intellectual property IP , including microprocessors, Physical IP, and supporting software and tools. In an Exclusive License, there is the transfer of ownership by the patent holder.

The only thing which the owner has is the title. This is just like stepping into the shoes of the patent owner and acquiring all the responsibility of it. In this contract, the license for the patent can be granted to more than one party, and all of them can maintain control over it and bring it to the market.

This is a process where the licensee has the right to issue a license to different organizations for the making of the product. In other words, the licensee has the right to giving the license further to a third party who has the advantage to create the product. However, the profits will be dependent on the contract between the primary licensee and third party.

This is a process when there could be an exchange of licenses between different organizations and creators. This is required when the invention requires the support of other products to make its place in the market. A little complicated, and usually reserved for pharmaceutical patents, compulsory licensing is when the government allows someone else to practice your patented invention — even against the will of the patent owner — for a set amount of money.

For a detailed explanation, click here. Also applicable for pharmaceutical patents, voluntary licenses are an act of goodwill towards the society. Depending on the terms of the license, the licensee may act entirely or effectively as an agent of the patent holder; or the licensee may be free to set the terms of sale and distribution within a prescribed market or markets, contingent on payment of a royalty.

Either option or arrangements in between would allow for substantial price reductions. This licensing approach is suitable when the potential licensee is not in the practice of the patented invention and does not fall under any obligation to take a license. This kind of license is a marketing tactic where the patent owner gives the licensee a glimpse of what could be achieved by acquiring a license for their patent.

In other words, it is simply a market practice in which you convince a prospective licensee to take a license. Stick licensing is the complete contrast of carrot licensing. This approach of licensing can be used when the prospective licensee is already in use of your patented technology and, thereby, infringing your patent. After all, if there were no threat of litigation why would someone ever license a patent? Now that we have an idea of the kind of licenses that exist, let us find out the pros and cons of licensing.

Though there are many companies from China, Japan and Germany who are producing e-vehicles but they are very costly and not affordable by people to use on day to day basis.

So, by free licensing these patents he is giving a chance to all the car manufacturers to use his technology more efficiently to create affordable e-vehicles which has more driving range and can be used by mass people. If we consider the scenario in India, companies like Tata, Mahindra are trying to produce e-vehicles but they are not able to capture the mass market.

However, some companies such as Ether a Bengaluru based start-up has come up with a proper e-scooter though the price of it is on the high-end side which is inaccessible by most of the people. Even the Government of India has declared that all vehicles on Indian roads to be e-vehicles. Recently, the Kerela Government had declared that all its Government vehicles and mass transport buses will also be e-vehicles.

Thus, it is need of hour to convert our transport medium through e-vehicles and abandon the internal combustion engines. So, this free license of the Tesla will serve the public at large and help them improving the e-vehicles more and more. We can say that if any invention which will help the world to be a better place and improve the life-quality of people then it should be free licensed for more development condition it should be done in good faith having no malice intention to infringe the patent.

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Rohan Dalbehera. Rajagopala Ayyangar. During this time, the licensee can make or sell the invention or design. The licensee can also profit from the intellectual property during the license period. Not all inventors want to make or sell products or designs. Patent licensing lets you profit from the rights to your invention. You can collect royalties from sales. Manufacturing a product or design can be expensive. It can also have a high level of risk. Patent licensing lets you transfer the risk to another party.

Not all inventors can produce a product or design on a large scale. Patent licensing can introduce your invention to a bigger market. It can also lead to distribution around the world. This tactic is popular for entrepreneurs and startup companies. You don't have to sign away the rights to your intellectual property forever. You can include a time period in the license. When the period expires, you regain the exclusive rights.

If someone infringes your patent, you can sue. Suing can get expensive, and it might not provide the results you want, either. Instead of suing, consider patent licensing. This option gives a competitor the right to your intellectual property, and it gives you the right to profit at the same time. As a patent owner, you might want to profit from the rights to your intellectual property.

Patent licensing might be part of your business plan. You have to find a licensee or a manufacturer first, though. Finding an interested licensee isn't easy. Negotiating a license agreement that will help you make money is also hard, and many inventors who want to license their patents are unsuccessful. The patent owner transfers rights temporarily.