Patent Licenses – A license is an agreement between the owner of a patent or intellectual property and another party interested in using the owned property or protected invention. A license is one of the basic technology transfer tools and is granted by a licensor to a licensee as the key point of the agreement.
Licenses are usually granted to a private sector partner for the right to practice, make and/or sell a patented invention. Patents are geographical protections according countries registration, thus licensing also has geographical issues and is valid during a length of time. Licensing is different from selling because the licensor keeps the property rights over the patented invention.
The agreed terms and conditions include the amount and type of payment, a defined purpose, a defined territory and a defined period of time.
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Why does a patent owner grant a license to a third party?
There are different reasons of granting a license to a third party, but maybe the most important of all is the lack of resources for using it, develop it and apply it. The owner might not have infrastructure and manufacturing tools to produce his/her invention. Therefore the owner agrees to give a patent license in return for royalties.
In the case when the owner has a limited capacity of production it could be highly profitable to license the patent to another manufacturer to benefit from an additional income channel. A patent license is common when the owner is not able to satisfy the market demand.
The geographical limitation is another cause of licensing. It is pertinent when the licensor is focused in one or specific countries and is not able or there’s not interest to participate in new markets. The license allows both parties to have a mutual business relationship.