Patent Licensing

It can be challenging to manufacture and sell an invention. It requires a business plan, financing, and in some cases product liability insurance. You will also need to collaborate with others and work to become a vendor to larger retailers, which can be difficult. If you have a patent pending or you receive a patent, you will need to decide whether to manufacture and sell your invention, or license your rights to a third party. More financing is needed to manufacture than to license your invention.

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 your 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.

How to License Your Patent

You can start the process of licensing your patent 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. For a fee, the United States Patent and Trademark Office (USPTO) can publish a notice regarding the availability of your patent for license in its official gazette.

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 patent 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 patent. 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 the patent will not be licensed to another individual or entity, only 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.

As an alternative to licensing your invention, you can also assign all your patent rights to somebody else. An assignment is a permanent transfer or sale of ownership rights. You will be the assignor in the transaction, and the purchaser is the assignee. Once the assignment is made, you will no longer retain rights to control the patent.