If you hold a patent or want to use someone else’s patented technology, a license to do so is likely part of the conversation. But if you do not know the first thing about this sort of agreement, this blog will explore what it can entail.
How does a patent license work?
A patent license is a legal agreement in which a patent holder grants you permission to make, use or sell the patented invention. Without it, using someone else’s patented technology could expose you to infringement claims and liability for damages.
A patent license does not transfer ownership of the patent itself. The patent holder retains title to the intellectual property, while the licensee receives only the rights outlined in the agreement. However, an exclusive license that grants all substantial rights may be legally equivalent to an assignment of the patent.
Which elements define the agreement?
A well-drafted patent license typically includes the following elements:
- Scope of the license: Defines whether the rights are exclusive, non-exclusive or sole while identifying the specific uses allowed.
- Territory and duration: Establishes where the rights apply and how long they remain in force.
- Royalty terms: Sets out the payment structure, including flat fees, ongoing royalties tied to sales or a combination of both.
Each of these elements requires careful consideration, and the way they interact can significantly affect the value and enforceability of the agreement.
Are there any risks?
Vague language around the definition of “licensed products” is one of the most common sources of disputes in patent licensing. If the scope is too broad or too narrow, you could face infringement claims or lose access to technology you assumed the license covered.
Royalty structures also present risk if they are not clearly defined. Disputes over how royalties are calculated, when they are due and what triggers a payment obligation can lead to costly litigation in New York courts under both state contract law and federal patent law.
Indemnification clauses and representations about the validity of the patent can create unexpected liability. The rights associated with patent ownership do not always align with the terms a licensor includes in a draft agreement, and that gap can expose you to liability you did not anticipate.
Can you draft the license on your own?
Patent licensing is not a process you should navigate without legal counsel. The technical and legal complexities involved make it essential to have an attorney who understands both patent law and contract negotiation on your side.
A qualified patent attorney can review proposed terms, identify provisions that may not serve your interests and help you negotiate a license that reflects the true value of the intellectual property at stake. In New York, where businesses frequently deal with licensing agreements across multiple jurisdictions, this type of guidance is important.
