A patent is a statutory grant provided by the Government for novel, inventive and industrially useful inventions, including both products and processes. Getting a patent for an invention is an exciting time for an inventor, however, it is important to commercialise the patent so that the patented product becomes a source of revenue for the inventor and is able to see the market.
Most patents don’t generate money in their existence due to various reasons, such as:
- The patent might be too early to the market, thereby, it is hard for the inventor to find potential buyers.
- If the prototype or proof-of-concept is not ready, it becomes difficult to convince buyers because buyers would be interested in looking into scaling up the patented technology of the inventor.
- The patented technology may be complex and manufacturing the patented product might not be possible without seeking permission from other patent owners.
- If the patent is poorly drafted and claims of the patent specification are not strong, enforcement of the patent becomes difficult even if the buyer replicates the technology after seeking the permission of the patent holder.
Having a patent granted or registered imparts a set of right to the owner of the patent (also called patentee), opening up various options that a patentee can use in order to make money from the patent, such as:
- Patentees can manufacture and sell their patented product themselves or through joint ventures by partnering up with other companies.
- Patentees can license their patented products or technologies to companies for an exchange in lumpsum payments, royalties, or both, by permitting companies to manufacture, market and sell the patentee’s patented products or technologies.
- Patentees can assign or sell their patents to other entities or companies & earn money.
Patent licensing is the most used method for patentees to commercialize patent or technology to generate revenue. Patentee can license his patent and introduce it to the market to earn royalties and sign deals with investors and other companies. Let us now discuss the differences between patent licensing and patent assignment along with their pros and cons.
Patent licensing
The dictionary meaning of the word “license” is permission. By entering into a patent licensing arrangement, the patentee grants a license or permission to the company to manufacture, market and sell their patented products in specified markets. Licensing of patents and technologies is completed by executing a Technology or Patent License Agreement comprising of all terms and conditions which both parties must agree upon mutually. The term of the license may be the same or less than the term of the patent itself, as the term of a patent starts from the date of grant and lasts for 20 years forth. However, in most of the cases licensing does not just involve using a patent but also involves sharing of knowledge, experience and expertise that the patentee has. Therefore, even if the patent expires, the licensing relationship continues. By executing a license agreement, the patentees get to push their products into new markets by taking advantage of the manufacturing, marketing and selling expertise of the company or the licensee, and the company gets to use innovative and new technologies of the patentees.
In case of patent licensing, the patentee doesn’t transfer ownership of the patent to a company but rather a set of rights for a specific period of time. The patent license may be exclusive or non-exclusive in nature. In exclusive licenses, the patentee grants a license to only one party whereas if the agreement is non-exclusive, the patentee may grant it to more than one party.
Let’s consider a situation relevant to our current scenario. An independent researcher has invented a formula that can cure Covid-infected patients who contract the deadly black fungus disease. The patentee gets a patent for this formula, but due to a limitation of resources, he cannot afford production of the same. In such a case, he can either grant permission (i.e. license his technology) to any drug manufacturing company (exclusive licensing) or to several other drug manufacturing companies (non-exclusive licensing) to produce, distribute and sell the drug on a massive scale in return for some royalty fees. However, if the drug is vital for a greater public health concern, and if there is an increased demand in the market or the price of the drug is too high for the general public to afford, then the licensing will fall under a specific category called compulsory licensing in which government can license the patent associated with the drug without the permission of the patentee for large scale production and affordable accessibility.
In licensing, some important points to be considered by both parties are:
- Term of the patent
- Scope of rights granted
- Value of technology and royalty fees
- Stage of technology (idea, prototype, etc.)
- Market size
- Patent prosecution and renewal responsibilities
- Terms of termination
- Dispute resolution measures
- Governing laws
- Liabilities and indemnities
Patent assignment
Assignment means permanent transfer of rights. In this way, patent assignment is a kind of selling of the patent by the patentee to a company. When assignment occurs, amendments in the patentee name are also required to be done formally where patent assignment deed along with prescribed forms and fees is required to be submitted to the patent office. There are various advantages of patent assignment for the patentee. Upon patent assignment, the patentee usually gets a lump sum amount of money and is relieved of renewals and all other statutory obligations with respect to the patent. For the company or patent buyer, assignment is a simple and easy way to acquire a patent portfolio without performing in-house research and development.
Patent licensing and assignment are two popular options to exploit patent rights. Both have their own pros and cons and is hence advisable to seek expert advice before entering into any kind of agreement, to make good use of the opportunity.
Author Bindu Sharma
Acknowledgement: I would like to thank Raghu Ram V, Udit Sharma & Himani Jaruhar for helping me to finalize this article
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