A patent 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.
Licensing the right to make, use, or sell your product is usually the most profitable route for inventors. As patent holder, you retain ownership of the invention and earn royalty payments on future sales of the product. You can grant an exclusive license to one company or several companies.
A patent owner can license or transfer interest in a patent. The licensor gives up the right to the intellectual property, usually for a certain period. During this time, the licensee can make or sell the invention or design. The licensee can also profit from the intellectual property during the license period.
There are two types of patent licenses:
- Exclusive Patent Licenses: These transfer all ownership rights to a licensee. The licensor still owns the title. All patent owners must agree to an exclusive license.
- Non-Exclusive Patent Licenses: These allow the licensee to produce the invention or design. The licensee doesn’t gain exclusive rights. The licensor and other parties can also produce the invention or design. Only one patent owner has to agree to a non-exclusive license.
Patent Licensing Process
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 a patent attorney. 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.