Obtaining licences - Strategic Management

A license is a written contract and may include whatever provisions the parties agree upon, including the payment of fees whether one time or royalties. It is a way for commercialization of a patent. Licenses are revocable since it is a contract with performance obligations, the failure to comply with them may lead to the termination of the license, and the patent exclusive rights coming back to the licensor. Several companies such as IBM and Microsoft, and Universities around the world generate large amounts of revenue via patent licensing.

Broad Classification of License Agreement

In License (obtaning a license ) Out License (granting a license)

Before going for licensing, a company should do strategic planning by identifying the potential opportunities and then contacting with potential partners, negotiation and management of deals post-completion. The agreement to obtain a license acquires the rights to use a patent. In-licensing allows a company to obtain IP rights, without the risks and costs involved in the otherwise tedious and long R&D. Benefits of In- Licensing:

  • Widening of a company's IP Portfolio
  • Speeds up research
  • Accessibility to new products and processes
  • Enable a company to obtain rights in platform technologies to assist in internal R&D activities
  • To avoid infringement action
  • Financially rewarding, as the cost of procuring a license may be very less as compared to the cost incurred on in-house R&D

Things to take care of before in licensing a patent:

  • Scope of claim should be broad enough to encompass any obvious design modifications to the licensed-in technology. For a narrow claim set, a competitor may be able to potentially "design around" the patent claims and commercialize a competing product, thereby undermining the value of such a patent.
  • Patent portfolio should not be involved in any Infringement legalities

Check whether the technology is of interest, be it a product or a method, and is actually covered by the claims of a patent portfolio. A patent does not give the owner the right to practice the invention; rather, it provides the owner with the right to exclude others from making, using, selling, offering for sale, or importing the patented invention for the term of the patent. Therefore it is crucial to check whether the issued patent claims actually cover the technology.


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