The well-known Android Operating System is a patented product whose patent is held by Google, but smart phone manufacturers such as Motorola, Samsung, HTC, LG, etc are also using it in their products. Similarly, Dolby Atoms, also a patented sound technology, whose patent is held by Dolby Laboratories, is used by service providers and device manufacturers such as Netflix, Amazon Prime Video etc. Ever wondered how? Well, these manufacturing companies are the ‘licensee’ of the patent owners who have licensed their technology to these market players. We will discuss about the concept of patent licensing and related patent validation in detail in this article.
Patent licensing is the process by means of which patent owner grants permission to other party or licensee to use the patented invention for a specific period of time in a particular jurisdiction in lieu of royalty. By granting license to use the patent, the patent owner is able to introduce his patented invention into the new markets through the licensee, who, in most of the cases, is a well-established company. By obtaining a license, the licensee gets to exploit the patented invention in terms of building, marketing and selling innovative products.
The process of patent licensing starts with discussions and negotiations between the patent owner, also called as Licensor and the licensee. Process of arriving at a license fee or royalty may be complicated at times as many factors play a vital role, such as, technical and feasibility of the invention, R&D cost, stage of technology, approvals and compliances for the patented product, market demand, status of patent in India and abroad..
Conducting a legal due diligence of the patent before licensing is an important step and it involves:
- Verification of legal status of the patent as well as family patents to confirm if it is a granted patent or not, even though in several cases, licensee may be willing to license the invention at application stage itself.
- Freedom to operate search is often performed to confirm if licensee has freedom to manufacture, use, market, sell the patented invention in specific jurisdictions or not.
- Prior art search is usually performed to understand strength of the patent. If there is relevant prior art available, this indicates that patent to be licensed is easy to invalidate in court of law.
Invalidation or validation search is a kind of search wherein prior art is compared with the patent to assess the ease or difficulty involved in invalidating the patent. The term ‘Invalidation’ is often used when patent office declares a patent to be invalid as a result of pre/post-grant opposition or revocation of the patent. Before patent is granted and after its publication, there is a chance for third parties to oppose a patent application to prevent it from getting granted on the basis of statutory grounds listed under Section 25 (1) of the Indian patents Act 1970. Likewise, there are statutory grounds for post-grant opposition and revocation of patents also listed under section 25 (2) and Section 64 of the Act, respectively. It is important to note here that the Controller of Patents invalidates the patent only when opposition or revocation petition is filed by the third party (ies). Decision to invalidate the patent is taken by the Controller after reviewing arguments and evidence submitted by both the parties (i.e., opponent and patent owner). The steps and process involved to perform invalidation and validation search are the same but the outcome or opinion may be different. An invalidation search is performed to identify the grounds on the basis of which a patent can be opposed or revoked whereas validation search is primarily performed to find out how strong the patent is compared to the prior art and how strong is it to sustain a litigation. In simple words, we can say that when a search is conducted to validate the claims of a given patent, it is called a Patent Validity search and when it is used to invalidate the claims of a given patent then it is called Patent Invalidity Search. The prior arts which are taken into consideration to perform invalidity/validity search includes patent as well as non-patent literature.
As this search is commonly performed at the time of filing a petition to the Controller of Patents for opposition or revocation of a patent, the search results are really helpful to find out if the patent is strong or weak compared to the existing prior art. This may be useful for the licensee to take right decision with respect to licensing of the patent. If the patent is weak, it may not be able to give competitive advantage to the licensee and it may also prove to be ineffective to block the competitors. In future, if such patent is infringed by the third party(ies), there may be serious issues related to enforcing patent rights.
The ideal time to perform invalidation search is at the outset of the preliminary discussion on patent licensing between patent owner and potential licensee. The results of this search can play a very vital role during negotiation of the terms and conditions of license agreement. However, it is also important to understand that patent licensing is a complex process and in majority of the cases, the agreements are negotiated between relationship between the parties and their preference and hence invalidation search, though critical, is not the only factor that determines the value of the deal.
Conclusion
Invalidation or validation search is helpful to determine strength of the patent to be licensed. If done professionally, it may change direction of negotiations between the parties involved in a potential license agreement., In addition to invalidation search, based on preferences of the parties to the agreement, there may be several other factors responsible to determine deal value and other terms and conditions of the Patent Licensing Agreement, which the author shall discuss in the upcoming article.
Author: Bindu Sharma
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