Patents are valuable assets for innovators and businesses. Protecting intellectual property is only the first step; licensing patents can open new revenue streams, foster partnerships, and expand market reach. Successfully licensing patents requires understanding both the invention’s technical aspects and business goals.
Led by Attorney David L. Cohen, Kidon IP and David L Cohen, P.C. strive to offer patent licensing services that help clients unlock their patents' full potential. We focus on protecting intellectual property while fostering beneficial partnerships. Our approach aligns licensing agreements with clients' long-term goals, enabling them to move forward confidently.
Whether you’re a startup, an established business, or an individual inventor, we’re here in New York, New York, to discuss your patent licensing options. Here, we’ll provide an overview of our approach and the key aspects of patent licensing to help you make informed decisions.
An Intro to Patent Licensing
Patent licensing involves granting another party the right to use, manufacture, or sell an invention while retaining ownership of the patent. The patent holder benefits by receiving compensation, while the licensee gains access to technology or intellectual property that might be challenging or costly to develop independently.
Effective licensing agreements address the needs of both parties, balancing compensation with clear usage rights. Licensing can be a strategic tool for businesses of all sizes, offering ways to monetize patents without giving up control.
We at Kidon IP and David L Cohen, PC work with clients to create licensing agreements that protect their rights and align with their business objectives. By understanding the intricacies of patent licensing, we can help clients enter agreements that maximize the value of their intellectual property.
If you’re considering licensing as an option, we can help assess your patents, determine their market value, and explore potential licensing arrangements.
The Why of Licensing Agreements
There are two ways to think about patent licenses: their purpose and type.
Understanding the purpose behind a license significantly increases the odds that it will achieve its intended purpose.
The reasons a business may enter into a patent license fall into three broad categories.
Stick licenses: are licenses entered under (implied or explicit) the threat of litigation. Patent owners typically seek stick licenses to generate revenue; to stop infringement of their patents; and/or discourage competitors from infringing in the future.
Carrot licenses: are stick licenses that provide additional value to the licensee beyond promising not to sue them. Such value can include technical know-how regarding manufacturing or performing the invention; a sale of infringing product from the licensor to the licensee; a sale of a division of the patent owner which manufactures products or performs services covered by the patent; pairing the license with an unrelated business transaction or a cross license for the licensee's patents; and many others.
Secondary licenses: are licenses that arise from business transactions where the subject patents are a secondary consideration, if at all. For example, many supply, sales, manufacturing, or marketing agreements include language that provides the counter-party with a license to your patents. More often than not the patent owners will enter into these agreements without fully realizing that they are granting a license. To avoid unintended and unfortunate business consequences, patent owners should learn to identify agreements that might include understand secondary licenses and how any such license will impact their IP rights and overall business.
With our deep experience in patent licensing and monetization, Kidon IP and David L Cohen, PC can work with you to identify the reasons why licensing your patents may make sense for your business.
The Types of Licensing Agreements
There are several different ways to structure patent licensing agreements, each with its advantages depending on the situation. Here are a few common options we help clients evaluate:
Exclusive license: The patent holder grants rights to a single licensee, limiting others from using the patent. This often includes higher royalty payments since the licensee gains exclusivity.
Non-exclusive license: Multiple parties can license the patent, allowing the holder to broaden their market reach. This option is ideal for businesses aiming to license their patent to multiple manufacturers or sellers.
Sublicense: The licensee has the right to grant sublicenses to third parties. This can expand the invention's reach further, benefiting the original patent holder if the agreement allows it.
Cross-license: Two parties grant each other rights to their respective patents, allowing mutual use without payment. This type is common between companies with complementary technologies.
Each agreement type has its strategic advantages, and selecting the right one requires understanding your business goals and the potential market impact. Kidon IP and David L Cohen, PC strive to offer guidance on which licensing structure may be most beneficial for your needs, making sure each contract is carefully crafted to support your objectives.
Drafting an Agreement
Creating a well-structured licensing agreement requires attention to both legal and business details. A good agreement clearly defines the scope of rights, including territory, duration, and any restrictions on usage. It’s also essential to establish compensation terms, such as royalties, lump-sum payments, or ongoing fees.
These terms set expectations for both parties, reducing the likelihood of disputes. At Kidon IP and David L Cohen, PC , we work with clients to draft agreements that address all critical components, including usage rights, royalty rates, and sublicensing conditions.
We take the time to understand each client’s goals, allowing us to shape agreements that protect their interests while appealing to potential licensees. We’re here to support you through each step, from drafting to final review, so you feel confident in every aspect of your contract.
Drafting is only one part of the process, though. Once the agreement is complete, we guide clients through final negotiations to confirm all terms are mutually beneficial.
Negotiating Patent Licensing Terms
Negotiating a patent licensing agreement requires skill and a clear understanding of both parties’ interests. Royalty rates, minimum payments, and termination clauses are often the most significant aspects of a licensing deal. If the license is a carrot license, then it is important to understand the other sources of value whether it is the value of the related business, the licensee's own patent portfolio, or something else. If the license is a secondary license, it is important to understand the risks and rewards that the license pose to the clients operations in light of the objectives of the larger business deal.
For the patent holder, royalties provide a revenue stream, while the licensee gains valuable rights to the patented technology. Achieving a fair balance is crucial to maintaining a positive working relationship. During negotiations, Kidon IP and David L Cohen, PC strive to support clients in securing terms that reflect the true value of their intellectual property.
We work closely with clients to identify their bottom line, seeing that they receive justice without compromising their rights. Our goal is to facilitate transparent discussions that lead to agreements both parties can uphold over time.
Once terms are finalized, we assist clients with contract review to verify that each detail is fully documented and legally sound. This thorough approach helps prevent misunderstandings and protects our clients' interests as they move forward.
By securing a solid foundation through careful contract review, clients can confidently explore the financial and strategic advantages of effective patent licensing agreements.
Benefits of Patent Licensing
Patent licensing offers several key benefits for businesses and individual inventors. Some reasons why clients often pursue licensing agreements include:
New revenue streams: Licensing can generate income through royalties, providing consistent cash flow without requiring additional production.
Broaden market reach: Licensing allows your technology to reach broader markets by partnering with companies that already have distribution networks.
Focus on core business: Licensing enables patent holders to focus on their primary business areas while others handle production and distribution.
Leverage partnerships: Strategic licensing can foster valuable partnerships, helping both parties benefit from shared technology or innovation.
These benefits make patent licensing an attractive option for those looking to maximize the potential of their intellectual property. By working with Kidon IP, clients gain access to guidance on structuring agreements that bring these advantages to life.
With a well-structured agreement in place, it's essential to consider key factors that can impact the long-term success of any patent licensing arrangement.
Important Things to Consider
Patent licensing involves several important considerations to achieve successful agreements. Below are some factors to keep in mind include:
Clear definition of rights: It’s essential to define what rights are granted and any restrictions on usage to avoid misunderstandings.
Compensation structure: Royalty rates and payment schedules should be carefully negotiated to match the value of the patent.
Geographic scope: Determine the geographic territories where the licensee can use the patent, balancing market reach with exclusivity.
Term and renewal options: Agreements should specify duration and any options for renewal to keep expectations clear for both parties.
By addressing these factors upfront, clients can establish agreements that are mutually beneficial and set the stage for a successful licensing relationship. We work with clients to review each detail, making sure their goals are fully reflected in the final document.
Frequently Asked Questions
What’s the difference between exclusive and non-exclusive licenses? An exclusive license grants rights to one licensee, while a non-exclusive license allows multiple parties to license the patent.
How are royalties calculated in a licensing agreement? Royalties can be based on a percentage of sales or as fixed payments, or any other arrangements that seem sensible to the parties. That said, it should be non-negotiable that whatever mechanism the parties use to calculate royalties be readily understandable and transparent to both parties and such neutral third party auditors should there be a dispute in the future.
Can I still use my patent if I license it to another company? Yes, depending on the license type. Non-exclusive licenses typically allow the patent holder to retain usage rights.
Is it possible to terminate a licensing agreement? Yes, many agreements include termination clauses, allowing either party to end the contract under specified conditions.
How do I determine the value of my patent for licensing? Patent valuation considers factors like market demand, the uniqueness of the technology, and potential revenue, often requiring professional assessment.
Partner With Us
We’re here to help you turn your intellectual property into a valuable asset that supports your business goals worldwide. If you’re ready to explore licensing opportunities, reach out to us at Kidon IP and David L Cohen, PC .