HOW TO LICENSE A PATENT
Find out how to license a patent with World Patent Marketing.

Should I License My Patent?

Licensing your patent is a good way to finance the development and marketing of your invention. Plus, it can also help you to bring experienced specialists onto your team, while keeping some control of your patent and invention idea. For many inventors, licensing offers the best chance to earn big money on your invention in the long run and make your invention a success.

In this article we are going to explain the benefits and pitfalls of licensing your invention. We will cover how to find licensing partners and what to look for in a licensing deal. Every invention is unique and different, and there is no “cookie cutter” approach to licensing. But, we let you know how to to protect yourself and your idea, and ideally find a licensing partner that is a good fit for you.

Remember, if you are one of the lucky inventors that secure a patent licensing deal – try not to brag too much to your fellow inventors.  Remember, most inventors are not as fortunate as you.

What Do You Have and What Do You Need

Before you approach potential licensing partners, you first need to understand what type of help you need in bringing your invention to market. A solid understanding of what skills and resources you bring to the table will help you to find and make a good match in a licensing partner.

In other words, perhaps you need legal assistance, or engineering, or manufacturing. For many inventors, the most crucial piece of the invention puzzle that they lack is money. Without liquid capital, it can be very difficult to bring a patented invention onto the market. There are simply too many steps along the way to do it “on the cheap.” Cutting corners can be very costly in the long run.

Unless you are one of the few lucky inventors who has sufficient funds to launch your invention from the development stage right into the customers’ hands and all on your own, you would probably be smart to seek a licensing partner with the capital to get the job done right.

But, licensing partners bring more than just money to the table. There are several aspects of the manufacturing and distribution process that you have to consider. They include manufacturing ability, shipping, capital investment, connections to established retailers, marketing experience, business knowledge and experience, regional connections and most important of all – CREATIVE CAPITAL.

One reason licensing your patented invention can be so powerful and effective, is that few inventors have all of these skills and resources. A good licensing partner will help you to fill in the knowledge gap.

For example, you may want to manufacture your product in China or overseas. This is certainly an option for best price and quality, but it can be a huge challenge if you lack overseas connections.

The same applies to selling your product outside of the United States. When you sell products overseas, you need to have a complete understanding of the legal requirements and conditions in that country or region. Partnering with a firm that has these types of connections and experience can be a powerful way to leverage your strongest skills, while relying on your partners to bring their knowledge to the project.

So, before you move forward in your search for a licensing partner, do an honest assessment of what you hope to gain from the agreement. Make an inventory of what you need, what your invention requires, what you can do on your own, and what you need help with. This will allow you to find the best partner for you and your invention.

License your invention to raise capital for development.

Patent Licensing or Patent Assignment

As an inventor, you need to understand the difference between patent licensing and patent assignment. Assignment is the sale of your patent to a person or company. You give up all future rights to your invention, and agree to a one time purchase.

Patent licensing is a bit more complex, because it can involve almost any type of agreement you and your partner make. Essentially, when you license your invention you take a partner on board, you can share profits in any way you decide and you can also divide responsibilities for developing and distributing your invention. You can use a licensing agreement to gain access to funding or specialized skills. And you generally give up a percentage of the profit from your invention.

Licensing has one significant advantage over assignment. With a licensing agreement, you get to stay involved with your invention and maintain some control, and it allows you to earn income on the future success of your invention. Some licensees will even allow you to share in a significant share of the profits.

How to Find a Company that will License or take Assignment of my Patent

You can find potential licensees through advertising, in much the same way that you would advertise for assignment. For both license and assignment you can advertise in the classified sections of magazines or online listing services. Simply take out an advertisement that explains the merits of your invention and describe what you are seeking.

Another option can be to attend trade shows. Trade shows are a great way to meet industry moguls and thought leaders.  A single day at a trade show can sometimes yield very impressive results.  And don’t forget, if you already have a prototype, you can show off your invention at a trade show.  You can potentially gain valuable insight into what others think of your idea.

Find the right licensing partner with World Patent Marketing.

How to Choose the Right Licensing Partner 

In terms of your licensing partner, you have the greatest odds of success with a company that is established and experienced, with a strong brand image. Look for a partner with adequate resources to complete their agreed obligations as well as positive reviews and experienced management.

Once you have found a potential licensee, it is time to negotiate the terms of the deal. You must be sure that you fully understand all of the terms and conditions of the agreement before you sign anything. There are a few general rules of the road that you should know.

Know your responsibilities.  Does the licensee want you to be involved?  Does he value your input?  Is the license is exclusive or non-exclusive?  If the license agreement is exclusive, it means that you cannot sell your invention idea to anyone else, or develop it on your own.  You are basically “married” to this licensee so you better be sure.  Generally, stronger licensees generally ask for exclusives so it isn’t necessarily a negative.

At the end of the day, like most business agreements, it comes down to trust.  Do you trust the company that you are in business with.  That is something only you can decide.

The Patent Licensing Agreement

The patent licensing agreement is an agreement between you, the Patent Licensor and the company that wishes to license your patent, the Patent Licensee.

Unlike a patent assignment or a patent sales agreement, there isn’t a standardized form that needs to be filled out or put on record with a government agency.  That is one of the benefits of a licensing agreement.  Your business dealings remain confidential. 

 Provisions for advance payments, royalty payments and percentages, litigation expenses, and infringement issues must be spelled out and included in the agreement.   Because you will continue to own the patent in the case of a license agreement, you need to understand who will be responsible for suing any unauthorized third party infringement of the patent.   Make sure your agreement details your willingness to sue, and also who will bear the financial costs, in the event that legal proceedings become necessary.

 Your agreement should be forward looking, and spell out the terms and conditions for the immediate future and the long term. Royalty percentages sometimes change over time if stipulated in your contract.

It’s important that you negotiate a fair deal.   Patent licensing agreements can turn into life long business relationships.  You want to make sure that your licensee has the proper motivation to aggressively market your invention.  All parties have to be well rewarded at the end of the day.

Execute your license agreement the right way.

Executing Your Patent License Agreement

Unlike the sale of your patent, the licensing agreement does not have to be recorded with the United States Patent and Trademark Office. It doesn’t transfer ownership of the actual patent, just the rights.

 However, different states and regions may have specific requirements for contract recording. Among the possible requirements are official recording and the use of notaries, but this again can vary depending on the particulars of your agreement and your location.

More typically, inventors seek out the help of an attorney experienced with patent licensing agreements.  Patent licensing is a specialized field of law and most attorneys have a unique experience because no deal is ever the same.  Most of these professionals bill by the hour, generally at rates of more than $250 per hour. Patent licensing agreements can sometimes take months to negotiate. It can be difficult even for an experienced attorney to estimate how much time it will take to successfully negotiate a licensing agreement for you.  It is not unusual for legal bills to add up to  $50,000, $100,000 or more – so be careful. On the other hand, there are some companies out there that have the experience to streamline the process so both parties save on outside professional fees.