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Gary Baker, Esq., M.T.
LICENSING INTELLECTUAL PROPERTY*
Many inventors have patented ideas or inventions that are too expensive to take to market or patents that do not fit well in their current business plan. These inventors can still receive value from their invention by allowing another business to develop and market the product. In other cases, a business plan may require technology that is owned by another. In either case, licensing the intellectual property may be the best solution.
I. Types of Intellectual Property
Patents can be granted by the United States Patent and Trademark Office (USPTO) for new and useful compositions, processes or improvements thereof (see Patents). A patent grants a right for the inventor to exclude others from practicing the invention.
Trade Secrets are business information, not generally known in the trade and kept secret through reasonable efforts to maintain confidentiality (see Trade Secrets). It is illegal for others to take your business secrets by improper means but they can reverse engineer or license them from you.
Trademarks are words or symbols used to identify the source of goods or services (see Trademarks). Registration of a mark at the USPTO gives national constructive notice to prevent others from using confusingly similar marks.
Copyright protection automatically exists at the moment of creation of original and creative works. It is unlawful to reproduce, distribute, display or perform copyrighted works in public without permission of the author or artist.
II. Licensing and Alternatives
You can obtain intellectual property for your business in several ways:
Value can be received for intellectual property you own but do not need:
III. Licensing Considerations and Contract Clauses
- "Whereas" clauses are recitals that document the status and intent of the parties. This clause can be useful to demonstrate the understandings of the parties at the time of contract formation.
- The Definitions clause clarifies key words and phrases in the contract to make terms of compliance unambiguous.
- Grant of rights clauses specify exactly what intellectual property rights are being transferred to the licensee.
- General Terms clauses specify practical obligations such as how and when technology will be transferred, ownership of new improvements to the technology, quality control of trademarked products and responsibilities for registration maintenance.
- Royalties clauses specify the means of calculation and the timing of royalty payments. Payments may be, e.g., up front, periodic or linked to sales.
- Reporting clauses define the timing and detail of sales reports associated with royalty payments. The reporting clause can also define records maintenance requirements and rights of inspection (march in) conditions.
- Infringement/Indemnity clauses specify responsibility for detection, notification and litigation of third party infringers of the licensed intellectual property. The licensor may be required to indemnify the licensee for efforts to protect or defend the intellectual property.
- The Termination clause defines conditions terminating the license contract such as patent expiration or a breach of the contract.
- Applicable law/Arbitration clauses establish the forum to resolve disputes concerning the licensing contract. Applicable state law can affect contract interpretation, contract enforcement and the location of court litigation proceedings. Dispute arbitration may be required and arbitration terms outlined such as the choice of arbitrators and who must pay arbitrator fees.
- The Signature Block finalizes a binding agreement. Corporate officers or general managers are usually authorized and empowered to sign legally binding agreements for their associated business entity.
* See a licensing professional for current advice specific to your licensing situation.
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