Inventors around the world come up with thousands of great ideas every second. Most of these will go by the wayside; but, a precious handful will be put on paper and pushed forward. These products and services provide solutions to a wide range of needs, and the first need inventors must consider is the requirement to protect their idea from thieves eager to profit from their hard work. Otherwise, inventors can spend years and considerable resources fighting patent infringement and licensing claims. As the saying goes, “knowledge is power” —the more information you have, the more power you will have to protect your ideas in an economy built on great ideas.

Patents are as valuable, if not more valuable than currency. While it may be tempting to sell your patent outright, you stand to make considerably more profit by licensing your patent. When you have identified the most likely licensees, you need to determine if you want to offer an exclusive or non-exclusive license. If you choose to agree to an exclusive license, the ownership rights will transfer to the licensee. With a non-exclusive license, you can establish the terms under which the licensed entities can produce, market, and sell your invention. As a licensee, they are bound to the terms of your agreement for the duration of the license.

There are many advantages to patent licensing. One of the most appealing ones is that it minimizes your risk, because the licensee accepts the financial responsibility for manufacturing, marketing, and distributing the product. If the licensee is an established national or international company, this makes it possible to introduce your products within a vast marketplace in a short timeframe. Licensing also reduces the risk of patent infringement ,because legitimate competitors would rather have a legal license to produce and profit from the product than face potentially costly licensing claims.

Finally, when you issue a non-exclusive patent license, your transfer of rights lasts only as long as the license. You will receive patent royalties during this period, which can range anywhere from 2% to 20% of net revenue. However, depending on the terms of the agreement, you may lose control over the design. You may also lose the right to determine to whom they sub-license their rights. Failing to verify these points of the patent license can lead to licensing claims if the licensee uses the license in a way that willfully violates the agreement or either party’s understanding of the agreement.

The fact is that there are many mistakes to avoid when licensing a patent. Each can easily lead to lawsuits over licensing claims. The first mistake to avoid is not carefully choosing the licensee(s). Always investigate whether a company has a solid reputation, the production capacity, the desired distribution network, and a solid financial footing to manufacture the product before reaching out. You should also clearly identify your performance obligations and the right to sublicense within the grant clause. Another critical point is never to forget to secure insurance coverage for the patent, paid for by the licensee, for the duration of the license. In a worst-case scenario where the licensee violates the license and produces an inferior product that causes harm, this will shield you from considerable financial exposure.

Contact Global Patent Solutions at 877-208-7308 for more information about our services and the solutions we offer for inventors and companies seeking to patent new ideas, or with the need to pursue licensing claims.