What does it mean to license a patent?


A license is a written agreement which provides the other agreement party to use your patented invention usually for an agreed fee. It may allow the other party, according to the terms and conditions, to use, trade, manufacture the owner’s patented invention for an agreed purpose, in a defined country or region, and for an agreed period of time.

Businesses usually focus on supporting their business strategy with the IP they protect, for example the products and services that they sell. Increasingly, the licensing of IP is becoming a part of their overall business strategy. The concept of “license” is recognised in almost all countries. Any intellectual right can be licensed – copyright, trademark, patent, design.

License is the permission by the owner of a patented invention to another person or legal entity to perform, in the country and for the duration of the patent rights, one or more of the acts which are covered by the exclusive rights to the patented invention in that country. When that permission is given, a “license” has been granted.

The legal document evidencing the permission given by the owner of the patented invention is usually referred to as a “license contract” or, more simply yet, as a “license.” The licensing agreement can foresee the specific rights or full spectrum of rights given to a third party. In the agreement the specific limitations, such as the scope of use (for example allow to use the invention only in the specific field) or the scope of territory (only in US or EU) can be foreseen as well. 

Licensing is the main activity of many small R&D companies or universities. It enables commercially relevant IP to be transferred out to the business community. In another option, patent owner may not wish to retain ownership of a particular piece of IP and may offer to sell or assign ownership of it to a company for a lump sum payment.

Licensee usually makes payments in return for the license that is granted. The payment might be a fixed fee or a percentage from the revenues received from using the licensed technology. 

In a number of countries, the legal form of the document evidencing a license contract and other formalities are prescribed by the national patent law. Such requirement may that the agreement is signed not just by the licensor but also by the licensee.

In addition, in a number of countries, the patent law may require that a licensing agreement be presented to the patent office for registration. By the act of registration, the licensee is recognised by the Government as the holder of the rights conferred by the license contract.


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