License Information

What is a License?
A license is a contract where the owner of a patent, trademark, or copyright (and sometimes a patent application) gives permission for someone else to use the invention, mark, or work. A license is the major vehicle for making money with intellectual property. For example, to receive royalties on an invention, an inventor will have to license the patent to a company that is manufacturing it and selling it.

What is an Exclusive License?
An exclusive license states that only the licensee (the person who receives the license) can make or sell the invention or use the mark. A non-exclusive license allows the intellectual property owner to also license to others. Most companies who are serious about paying royalties require exclusive licenses.

If I own a patent, how do I license it?
The first step is to find a company who is interested in the invention. There are many ways to do this, and several good books on the market. There are also a few good invention marketing firms who can help with this (caution here - there have been marketing firms that were not honest). After a company is interested in an invention, they will either want to buy the patent outright, or they will want to license it for a certain length of time. All of this requires business negotiation with the company to achieve the best possible deal for the inventor. Once the parameters of the "deal" are worked out, a lawyer experienced in drafting licenses should formalize the agreement. The agreement is then sent to attorneys for the company. This goes back and forth several times until the attorneys on both sides agree that the license, as written, really reflects the negotiated "deal" correctly, and that there are no provisions in the license that one of the sides feels are unfair. The final license is then signed by both parties as is any other contract.

How much does a license cost? last?
That, of course, depends on how complex the license is. For a private inventor, where all the negotiation is complete, the attorney cost for the drafting is usually around $1000.

Does it take a lawyer to negotiate a license deal?
No, but it helps to have your attorney on the team during negotiations simply to make sure that you are not agreeing to something that will be unfair.

What protection do I need to approach a company or manufacturer?
You need a Non-Disclosure Agreement (NDA). With smaller companies and manufacturers, you can usually provide an NDA that your attorney has drafted. Large companies usually require you to use their NDA. Before giving any information to a company under an NDA, you must make sure the NDA actually protects you. Your attorney should approve of the NDA before you disclose.

What if I disclose under an NDA and the company later steals my invention?
With a good NDA, you have a winning law-suit against them. With no NDA, you might be out of luck. The moral is: DO NOT DISCLOSE without an NDA that has been checked by your attorney.

How long is a license good for?
That will be one of the items negotiated and put into the license. Many times, licenses are drawn for terms of around 5 years with provisions for renewal.

What if the company doesn't pay me the royalities under the license?
Again, with a good license, you probably have a winning lawsuit. This can sometimes be tricky, because you must prove how much money the company made without paying you royalties. Here you definitely need an experienced attorney. If it is a small company, and they go into bankruptcy, you will probably not be able to collect. However, you will be free of the license at that point to find another company.

What if the company promises to develop and sell the product under the license, but then doesn't?
Your attorney can break the license with them and maybe get some damages (money).

When should I start trying to license?
For an invention, you should first file a patent application. Then you should immediately start trying to find interested companies to license. In the US, you should use mark "Patent Pending" as long as you have filed some sort of patent application in the US.