Patent Licensing

INTELLECTUAL PROPERTY RIGHTS | PATENT LICENSING     Intellectual Property Rights patent licensing raises as a host for critical legal and business issues for companies to ensure that the company has a right level of protections as it approaches the market place. The company should determine if it will obtain an exclusive right or a non-exclusive right.   Patent licensing is a waiver by the licensor of the right to exclude the licensee from practicing under the patent rights. Licensee would prefer to obtain an exclusive right. Even though there are disadvantages of a non exclusive license, a non exclusive license does not require any affirmative rights with respect to the enforcement of the licensed patent.   An exclusive patent licensing provides the licensee the promise that the licensor will not grant licenses to other parties. An exclusive license does not imply that the licensor has not granted any non exclusive licenses prior to the grant of exclusive license and the license agreement should mention that the licensor has not issued any prior licenses. An exclusive license does not grant the right to sublicense. This right must be separately granted.   To obtain an exclusive license, the licensee should agree to a minimum annual royalty provision. The licensee may wish to commercialize the patent rights in the first year of license or after a period of time. A minimum royalty is provided where if the royalty do not set a minimum amount after the agreed commercial period, the licensor may terminate the license agreement or the licensee mast pay the difference in the actual royalty amount. According to the license agreement, there are chances other than the termination of the patent right where the exclusive right of the patent may be converted to the non exclusive right if the licensee does not pay the minimum royalty amount.     In patent licensing, the licensor may also ensure that the exclusive licensee commercializes the patent rights by the 'Best Efforts' clause. The court may interpret this clause to avoid exploitation of the licensed patents. The licensee may rely upon the annual royalty provision to ensure commercialization efforts.   The exclusive license may be also limited to a field of use as a way to limit the licensor's risk of licensee non-exploitation. Here, the licensor can grant exclusive rights to different licensees in markets and application areas. Care must be taken in defining the field of use in these arrangements.   The patent licensing agreements should address the issue of improvements. Improvements are something which does the same function as the licensed invention in a better and cheaper way or modification of a part or process of the invention or something which is similar to the function of licensed patent.   The issue of royalties plays an important part in patent licensing. The licensee would like to know the cost in the commercialization effort, while the licensor wants to recover its patent costs and reap the rewards of the invention. Payment of royalties on the use of the licensed products that are not sold but otherwise disposed should be addressed in the agreement.

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