IP LICENSING - WHATS INVOLVED ?

Licensing a patent involves granting another party the right to use, make, sell, or distribute an invention that’s covered by the patent. The licensing process can be complex and requires careful planning to ensure that both parties' rights and obligations are clear. Below is a summary guide of the process of licensing a patent.

 

UNDERSTAND THE VALUE OF YOUR PATENT

​

• Determine the commercial viability of your invention. Patents tied to products or ideas with widespread market appeal or significant industrial applications tend to garner more interest.

• Qualify market demand, potential volume sales, profitability from the industries or niches that can benefit from your invention.

• Evaluate the financial worth of your patent by analysing potential revenue, cost savings for potential buyers, and the patent’s remaining lifespan.

 

PREPARING YOUR PATENT FOR SALE

 

• Verify that your patent is active and enforceable. Address any legal disputes or unpaid fees to ensure a clean transfer of rights.

• Gather all necessary materials, including the patent certificate, application documents, claims and supporting data.

• Refine the product or invention associated with the patent to a market-ready state. Buyers want more than just the patent; they want proof of the product’s feasibility and potential.

• Create multiple prototypes to demonstrate the invention’s viability to potential buyers.

• Clearly articulate the unique value of your patent, addressing key questions about its benefits and applications.

• Showcase the patent’s technical and financial potential, as well as its unique features.

 

IDENTIFYING POTENTIAL BUYERS

​​

• Approach businesses or individuals operating in industries relevant to your patent. Companies looking to expand their product lines or gain a competitive edge are ideal candidates.

• Use patent marketplaces and platforms like Patent Auction, IP Marketplace and Inventor's Network can help connect you with interested buyers.

• Leverage professional networks, attend trade shows, join inventor associations, and utilise industry contacts to identify potential buyers.

 

MARKETING

 

• Develop a marketing plan - creating a comprehensive strategy outlining your goals, target audience, and actionable steps for engaging stakeholders. Incorporate strategic tools, operational planning, and scenario mapping to address risks and maximise opportunities.

• Execute the marketing plan, ensuring consistent communication with potential buyers and timely adjustments based on feedback or market changes.

​

TYPES OF PATENT LICENSE

 

There are different forms of licensing depending on the extent of rights being transferred :

 

• An exclusive license grants the licensee sole rights to use the patent, excluding even the original patent holder from using it.

• A non-exclusive license allows the patent holder to license the patent to multiple parties.

• A sublicense permits the licensee to grant further licenses to third parties.

• A cross-license is where two companies grant licenses to each other, often for mutual benefit.

 

COMMONLY NEGOTIATED TERMS

 

• Financial Terms and emuneration in return for granting a licensee, e.g. royalties, fixed fee, dividend payments, shareholding or a combination of payment methods.

• Scope of use including limitations on manufacturing, selling, or sub-licensing.

• Quality control over the quality of the product to protect brand reputation.

• Accountability, regular audits to verify payment calculations.

• Marketing and promotion performance, sales, quantities, milestones, growth.

​

NEGOTIATING THE LICENSE

 

• Set a Fair Price by using your patent valuation as a benchmark, but remain flexible during negotiations.

• Draft a Patent Assignment Agreement by working with a patent attorney to draft a legally binding agreement that specifies the terms of the sale.

 

FINALISING THE TRANSFER

​

• Notify the Patent Office and file the necessary documents with the patent office to officially transfer ownership, ensuring the buyer’s rights are legally recognised.

• Keep detailed records of all agreements, correspondence, and transactions for future reference.

 

KEY CONSIDERATIONS

 

• Seek professional guidance, engage patent attorneys and brokers to navigate the legal and financial complexities of the sale.

• Use non-disclosure agreements (NDAs) during negotiations to safeguard sensitive information.

• Consult with a tax professional to understand the financial consequences of the transaction.

 

CONCLUSION

​

By carefully assessing the value of your patent, preparing it for sale, targeting the right buyers and managing the transaction with professional support, you can maximise the returns from your intellectual property.

​