Introduction To Patent Licensing - Explaining The 2 Types

A license is a contract between two or more parties in a written form

. It contains provisions the parties agree to perform, and includes payment of fees which are either paid at a time, or in the form of royalties over time. Licenses can be revoked as they contain contractual obligations. Performance failure on part of the licensee can result in termination of the license. The exclusive patent rights bestowed to the licensee revert back to the licensor.

Many renowned companies including IBM and Microsoft as well as Universities around the world earn substantial revenue through patent licensing.

The Two Types of Licenses

Licenses can be categorized into two basic forms.

*In License (getting a license for the patent)

*Out License (granting of the license for the patent).

Incidentally, a company, before opting for licensing, ought to do some strategic planning. The business will need to identify the available opportunities, maintain relationship with prospective partners, and will also need to supervise the deal once it has been closed.

*In the "In License" form, a party is allowed to hold rights to use the patent. It also permits a corporation to hold IP rights without the cost and risk. There are many benefits of "In Licensing". It extends the company's IP portfolio, improves the research facilities, the business is able to think of new processes and products, get protection against infringement action, and the business can also get rights in platform technologies for supporting in-house R&D activities. It is also fiscally gratifying since the cost of obtaining a license could be much less as compared to the expenses incurred in maintaining a complete in-house R&D facility.

*"Out License" is also a form of agreement. Here, the patent holder gives a person or corporation the right to use a patent. Inventors use this to license out their inventions that are already patented. These inventions are licensed out to corporations that show interest, and have the capability to turn the invention into a technology and use it for profit.

There are many benefits of an "Out License". This agreement is safe, simple, and hassle-free royalty income. Moreover, it paves the way for revenue generation from patents acquired from the original inventor. It can happen that the original inventor is a person with a brilliant mind and scientific acumen, but he or she is somebody who does not have the financial resources to apply the patent profitably. "Out License" gives the right to the corporation to apply it in industry and make the benefits profitable.

Patent licenses can be of several types. It could be an exclusive license, non-exclusive license, sole license and cross license. Each of them has their own merits and demerits.

by: Kevin Wolfe

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