We have often reported why you should protect your invention with a patent application. A patent gives you the permission to utilize your invention and enables you to forbid others the use. This is a good thing as a patent protects your investments and achievements against infringers and counterfeiters.
Additionally you gain the right to allow others the utilization of your invention against payment after your application has been processed and your patent has been granted. In the following article we?ll explain the most necessary basics of licensing and why this topic is not only noteworthy for
patent holders, but for patent applicants as well.
Why is this Topic also Important for Patent Applicants?
There are at least three reasons why it is reasonable to occupy with the issue of licensing before you file your patent application:
- Licenses are a revenue source for inventors and companies. Anyone who allows others to utilize his invention against payment can restore at least some of the application costs
- The annual fees required for your patent?s maintenance are halved for every applicant who declares that he is willing to grant utilization of the invention to third parties against fair payment
- A lot of patent applications are filed for inventions that aren?t put into practice later on. Granting licenses prevents your patent from becoming a ?sleeping member? in the register whose maintenance costs a lot of money but that doesn?t earn you any money
What does ?Licensing? actually mean?
In a legal sense the term of licensing means transfering a positive right of use for the protected invention to third parties. By doing this the patent owner quasi revokes his right to forbid the utilization of his invention with regard to the licensee. If the licensee had used the invention without any license, he would have committed a patent infringement.
Which Aspects of Licensing have to be observed when Applying for a Patent?
Patent applicants respectively owners can issue two kinds of statements at the GPTO:
- Declaration that the patent owner is prepared to grant licenses (?Lizenzbereitschaftserklärung?): Anyone who issues this type of declaration agrees to grant licenses to every third party who wants to make use of this. The declaration is binding. The patent owner cannot decide whom he wants to grant a license or if he wants to grant one in the first place.Similarly, he cannot decide on the level of payment. The level of the license fees will be determined by the GPTO after the licensor or the licensee have made an application at the GPTO. The profound effects of this type of declaration might seem daunting. But there is a significant benefit: The renewal fees which have to be paid every year in order to maintain a patent and which total up to more than 13.000 Euros will be halved.
- Declaration that the patent owner is interested in granting licenses (?Lizenzinteresseerklärung?): This declaration is far less binding than type a). Because of the non-binding nature of this statement the patent owner isn?t obliged to grant a license to any third party who?s interested. Its main purpose is to inform interested persons about the patent owner?s basic willingness to grant licenses for his protected invention.
In its patent register the GPTO notes which type of declaration has been issued for a given invention so that researchers looking for patents can inform themselves.
What Types of Licenses can a Patent Owner grant?
In the context of the license agreement the granted use permission can basically be restricted e.g. geographically, temporally or objectively. Regarding the overall nature of the license contract there are essentially two kinds of licensing:
- Exclusive license (?ausschließliche Lizenz?)
If this type of license is granted, the licensee is the only one who is granted all essential rights to use and exploit the invention. The licensor isn?t allowed to grant further licenses for the same subject to other persons. The licensor is even no longer allowed to use the invention himself. The licensee in contrast is now allowed to forbid others the use of the invention. He even has the right to grant sublicenses. Important: In order to maintain these rights the licensee actually has to use the invention!
In practice this type of licensing is relatively rare, because the licensor gives away most of the rights he gained with patent protection. Of course the agreement for an exclusive license can be canceled like any normal contract. An exclusive license is transferable.
- Single license (?einfache Lizenz?)
By using this type of licensing the licensor retains more freedoms. He keeps the right to forbid and is further able to grant licenses to other persons for the same subject. The licensor also retains the right to further use the invention himself. A single license is not transferable.
Which Parts are Essential in a Licensing Agreement?
- The subject of the licensing agreement has to be clearly defined in the interest of both parties
- All kinds of utilization granted with the license should as well be exactly settled and limited
- Does the license refer to an exclusive or to a single license? This should be cleared up as well
- Payment, respectively licensing fees
- Contractual penalties in case the licensing contract is violated
Licensing your Patent to others may offer a lot of Advantages, but Drafting a good Licensing Agreement isn?t easy
The licensing of inventions offers important chances for both contracting parties: One the one hand the licensor gains the possibility to exploit his invention and generate some revenue. Especially at companies like Apple licensing fees can make up a huge part of the revenue. On the other hand the licensee can use the achievements of other companies to approach new projects of his own and to further technical development.
In order to make sure that everything is clearly regulated from the start and that slips like for example a too vague definition of the licensing subject won?t cause any inconveniences, it is appropriate to contact a patent attorney. A specialized expert helps to draft your licensing agreement and can further inform you about the numerous subtler aspects of licensing patents. This blog article is only suitable as a first impression of the topic.