How to license a patent for royalties

Utility patent holders usually do this in exchange for an agreed-upon royalty fee. Design patents protect how an invention looks or its appearance or aesthetics. A design patent allows patent holders to stop others from using, making, and selling the patented invention for 15 years from the date the patent office grants a patent application.

A design patent holder can license the design to third parties in exchange for an agreed-upon royalty or licensing fee. The same goes for plant patents, which are used to protect new plant species. A patent holder in the United States has the right to stop others from using, making, selling, and importing the patent invention to the United States.

If the patent holder succeeds in his lawsuit, he can get a court order, ordering that the infringing party immediately stop its infringing activities. By now, it should be clear that a patent holder can license his patent to a third party in exchange for royalties.

A patent holder can do this by executing an agreement that lays out the scope of the rights the patent holder is granting to the licensee. There are two main types of licensing agreements, exclusive license agreements and non-exclusive license agreement. These agreements typically allow a third party to make use of the patent invention and sell it in exchange for paying the licensor and agreed upon fee or royalty.

If you have any general questions or comments, please feel free to leave them in the comments section below. My name is Noah and I love everything about patents and patent law. During my law school years, I studied intellectual property law and took courses in patent law, trademark law, and copyright law.

Patent agents typically hold a degree in engineering or…. What is Patent Exhaustion? Inventors often have a hard time marketing the product…. You can also use it to explain which rights you aren't licensing.

This clause lets you keep some rights to your patent. Filing a patent application is difficult. Licensing a patent can be even harder. Hire a professional patent lawyer to do due diligence to protect your rights. This can also help you increase your profits. One analogy that can be helpful is to look at licensing approaches in two ways: "carrot" licensing and "stick" licensing. In reality, both situations involve the threat of a court case.

In the carrot approach, an inevitable court case is just implied. In the stick approach, it is directly stated. If you manage to get a large company to license your patent, you will get a lump sum payment that covers their past use of the product. You will also receive money based on future use.

Yes, but not in all cases. Talk with a patent attorney about your particular case. This works best if you already have your patent. If you don't have a patent, bring along a non-disclosure agreement to have people sign before you talk about it. Yes, sometimes the licensee can sublicense the rights. The grant clause explains whether this is possible. In some cases, patent rights are only part of the deal. A hybrid license includes a patent license and other rights.

This allows the licensee to make use of intellectual property rights as much as possible. This agreement covers any pre-existing intellectual property that a person or company has. It extends rights to using pre-existing intellectual property as you develop a new invention. In the U. They don't have to ask the other owner for permission. These two terms are just two faces of same coin. As already discussed, royalties are usage-based payments made to the owner of property for using their intellectual property for a certain period of time.

The licensee agrees to pay a variable or fixed amount to the licensor. The owner earns a profit percent without having to do any work and the minor earns a profit without having to raise capital to buy the entire business agreement, copyright or patent. When a licensor and licensee signs for license agreement, a fixed amount of money is paid under the terms and conditions of the agreement, which in place allows the licensee to use the tangible property for a certain lease period.

Royalties are mostly sharable profits. Whether you are dealing with tangible or intangible asset, royalty payments are a compulsory thing. Royalty payments are calculated on the types of royalty agreement made between two parties — it can be calculated on gross revenue, net revenue, price per unit, minimum sale, or fixed amount. When you consider a fixed amount of royalty, the licensee and licensor agrees to pay certain amount of profit percentage in between the agreement period.

Nobody can change the agreement throughout the term of licensing contract and abide to do the same. If you have an intellectual property and want to earn royalties from that, than you need to do two things —.

Sell the property and receive payment from buyer based on the amount of revenue generated from the sale. Take for example, you can sell the copyright of a book to publisher and gain royalty, everytime a piece of book is sold in the market.

This is called profit per unit sold. Many online resources exist that can assist the inventor. Such literature should be read and studied before the inventor should even consider looking for potential licensees. After conducting this research, the inventor should look online for companies that may be interested in licensing the product, while also learning more about each company — its net assets, where it operates, how many people are employed with the company, and other important factors.

Once the inventor has come up with a list of targeted companies, a meeting should be held in which the prospective licensee the company will provide the inventor with its business plan, assuming the company is interested in the product.

The inventor should make sure that the potential licensee doesn't offer a royalty rate far below what the inventor seeks. Again, the inventor will have a list of target companies, so if the first company offers a substantially lower rate than what the inventor seeks, then the inventor should hold off on agreeing to it. The royalty rate should, however, be the maximum rate that the licensee is willing and able to pay, which in turn meets the minimum royalty rate that the licensor the inventor is willing to accept.

The agreement for a third party to license your product should include the following contract terms:. Ensure that the license arrangement includes specifics on the companies reporting requirements in terms of audited records so that the inventor can keep track of what is owed.

If you need help learning more about patent licensing royalty rates or if you need help drafting a license agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.