Patent Licensing

Overview on Patent Licensing

A patent licence is a contract formed between the owner of the patent (the "licensor") and the organisation or individual who wishes to utilise and benefit from the licensee. The product, technique, or design covered by the patent may be manufactured or sold by the licensee. Then, throughout the duration of the Patent Licensing period, the Patent generates cash for both the Licensee and the Licensor in the form of royalties & returns.

A patent owner or holder may assign or transfer their ownership interest to another person or entity. In exchange for a mutually agreed-upon amount of time, the licensor transfers their ownership of any invented or patentable intellectual property. The licensee has rights to the interest in the patent during this time and is able to benefit from it.

What kinds of licensing are available for Patents?

The many forms of patent licencing are as follows:

Exclusive Licensing

With this type of licensing, the licensee receives complete ownership of the patent. With the exception of giving the patent to someone else, the licensee in this situation enjoys the same rights as the patent holder. This restriction exists because, even when all other rights have been transferred under a similar licence, the patent owner still retains ownership of the title. It has been completely granted to one party and cannot be transferred again. Because the licensee has a stranglehold on the market and the patent rights aren't being heavily utilised, the likelihood of a patent being violated is extremely low under this sort of patent licensing.

Non-Exclusive Licensing

This licensing involves granting licences to multiple businesses. As a result, while one licensee may profit from the innovation, others who have received licences for the same Patent may also be eligible for an equal share of the profits. The licensor is still free to use the same intellectual property (Intellectual Property).

Sub-Licensing

This is a kind of licence that the licensee grants to several businesses or organisations so they can produce the goods. This licence can be thought of as the licensee granting specific licenced rights on a product to a third party.

Compulsory Licence

It is referred to as a "compulsory licence" when the government grants authorization to anybody or any organisation to sell, create, or use a patented design or product for the public good, regardless of the wishes of the patent owner. Typically, this licence is given for medicinal items and products that meet the requirements outlined in Section 84 of the Patents Act of 1970.

Cross-licensing

This is a procedure where different creators and organisations might exchange licences. This is necessary when an innovation needs the backing of other goods to get traction on the market.

Voluntary Licensing

Pharmaceutical patents are also subject to this licence. Voluntary licences are granted as a gesture of goodwill towards society. In this situation, patent owners have the option to grant non-exclusive or exclusive licences to third parties for the importation, production, and/or distribution of pharmaceutical products. Depending on the licence terms, the licensee may be free to determine the terms of distribution and sale within a specified market or markets, contingent royalty payment, or the licence may act wholly or effectively as the patent owner's agent. Price savings of this magnitude would be possible with either choice or any arrangements in between.

Carrot Licensing

This Patent Licensing strategy is suitable when the prospective licensee is not using the patented innovation and is not required to obtain a licence. With this kind of licence, the patent holder uses marketing to show the licensee what could be accomplished by purchasing a licence for their patent.

Stick Licensing

In stark contrast to Carrot Licensing, this Patent Licensing approach. When a potential licensee is currently using your patented technology against your patent, this licensing option may be used. The value proposition warns, "Get the licence or else... One must be careful not to mistake the Carrot License for a Stick License in the cover-up.

Advantages from Patent Licensing

A few benefits of patent licencing are as follows:

International Market

It gets challenging for many businesses to produce a product in large quantities independently. The solution to this problem is patent licensing, which enables other businesses or organisations to create the patented goods and contribute to their mass manufacturing. An invention can be introduced to the global market with the help of patent licensing.

Advantage over Other Patents

If the Patent is licensed to a well-established business with a sizable customer base, the product or service will have a larger market to grab than other Patents, providing it a reasonable advantage over other Patents.

Transfer of Risks

There are numerous risks associated in producing and manufacturing designs and goods. The patent holder can shift these risks associated with the creation of a patent design or product to the licensee through patent licensing.

Limited Period: Because the licensing is only granted for a short time, the patent holder regains ownership of their innovation as soon as the licence ends.

Patent Licensing's drawbacks

The following are a few drawbacks to patent licencing:

Loss of Control

For the duration of the licence, the patent holder cedes control to the licensee. The result is that they lose some or all of their ability to govern their original innovation.

Finding the Right Licensed Is Difficult

Finding the right licensee for an innovation takes a lot of time and work. In order to maximise your chances of success, you must find a possible licensee and have a well-structured agreement.

Licensee Ability Risk

The ability and effectiveness of the licensee to successfully market the patent product is dependent upon the patent holder. risk of inadequate management and strategy over which they lose full or partial control in its original creation.

Typical Errors Made During Patent Licensing

The following are some frequent errors made when obtaining a patent licence:

• Because of the industry's rapid expansion, some inventors fail to identify the best licensee for their idea and wind up granting a licence to an incompetent party. This leads to the failure of the invention, which would have been increased on the global market had the owner chosen a capable licensee.
• Before signing the patent licence agreement, the licensee frequently uses the copyrighted design or product, which constitutes patent infringement. Before using or selling the design or product that has been so patented, the licensee should make sure they have signed the licence agreement.
• The licensee also suffers damage due to the owner's liability not being understood. Even during the term of the licence, the licensor retains ownership of the patented design or item. As a result, they may still be held liable for their idea after receiving a licence.
• Many patent owners want a minimum annual fee as well as an advance in royalties.
• It is challenging to submit a patent registration application. Much more difficult can be patent licensing. Employ a patent attorney to conduct due diligence so that you can protect your rights and, as a bonus, improve your revenues.

What Does Patent Licensing Royalty Rate Mean?

When an inventor licences their patent to a third party, they both engage into a licence agreement wherein the licensee acquires the rights to the patent in exchange for a specified fee that is paid by the licensor each time the good or service is sold. The royalty is a set sum of money paid to the inventor or licensor, and the patent licence royalty rate is the proportion of gross or net profit that is chosen to represent the royalty. Typically, the royalty rate for licensing patents ranges from 0.1% to 25%, depending on the sector and type of invention.

What Makes Patent Assignment Different from Patent Licensing?

The act of assigning a patent involves the patent owner permanently transferring the patent's exclusive rights. A transfer of this nature is recorded in the official Patent record. In a patent assignment, the assignee must make an initial payment to the assignor and is then eligible to earn future revenues from the patented invention.

As opposed to this, a patent holder who licence a patent gives a third party permission to use the patent's benefits and interest for a set period of time. This interim transfer of patent rights is in no way permanent. In a licence, the licensee is obligated to pay the licensor's royalty for the whole licence period.

Patent Licensing Risks and Limitations

Depending on the expertise of the licensee Your capacity to depend on the licensee when you licence your patent depends on the licensee's resources, expertise, and efforts in putting your product or item on the market. Consequently, it is crucial to pick the right licensee in order to promote your idea.

Patent licensing may be less profitable than other forms of licensing because you can make much more money if you sell your idea or innovation directly to consumers. Although there is risk involved in investing money, the rewards will exceed your expectations.

A licensing agreement may have drawbacks: If business operations are successful and the agreement doesn't specify how royalties will be shared and processed further, the inventor will suffer a loss. So, while creating an agreement, all terms and clauses should be clearly stated, and a second reading should be performed to allow for changes or deletions.

The additional stipulation by the licensee- When you issue a licence to a patent, the licensee may initially make no demands; nevertheless, as time goes on, they may ask for contributions or additional information, which could cost you time or money. This will be an expensive transaction that will impede innovation. Therefore, it is essential that the agreement spells out all the acts in detail and that the licensee asks nothing of the licensor. These clauses ought to be made clear.

Procedure for Registering a Patent: A Step-by-Step Guide

At the patent office, you must submit the required forms in order to register a design in India. You can easily submit a Class 3 digital certificate online if you have one.

The patent office will add 10% more to the charge for applications submitted online. Here are the detailed instructions on how to patent your idea, invention, or other intellectual property:

• Step 1: Patent Search
• Step 2: Apply for design patent
• Step 3: Preparation of a Patentability Report
• Step 4: Publication of Patent Application
• Step 5: Patent Examination
• Step 6: Patent Objections
• Step 7: Grant of Patent