Patent License Agreement

What is a patent license agreement?

A patent license agreement is a legal contract between a patent owner and another party that obtains the permission to use the patent under defined terms and conditions. This agreement allows the third party to legally make, use, sell, or import the invention covered by the patent. A patent license agreement plays a pivotal role in business relations by facilitating economical progress and commercializing intellectual property.

A typical patent license agreement template shall include:

• full name and address of the parties involved;
• detailed description of the patent;
• owner’s warranties and legal representations;
• licensee’s list of duties and obligations;
• payment provisions and schedule;
• duration and termination; and
• other general clauses (e.g., applicable law, liability, indemnification, etc.).

The patent license agreement is commonly used in various industries, including pharmaceuticals, electronics, software, and mechanical engineering, where patented technologies are valuable assets.

The parties involved in a patent licensing agreement are the licensor and the licensee.

The licensor is a registered owner of the invention whose name is included in the patent certificate. The owner is the sole and exclusive owner of all rights, interests, and titles in the patent and has the exclusive right to grant permission to use a patent to the third parties.

The licensee is a business, organization, or individual who is willing to use a patent. Normally, a licensee obtains permission to use a patent for a limited period of time in exchange for remuneration.

Under a patent license agreement, the owner of a patent transfers all or some of the rights to use a patent to another person. However, the owner does not transfer the title for such a patent. Contrary to that, an owner under a patent assignment contract sells all the intellectual property rights, title, and interest in a patent in full to another party. As a result of such an assignment, another party becomes the new owner of a patent.

How to draft a patent license agreement template?

When drafting a patent license agreement template, several key components must be included to ensure the document is well-drafted, clear, and reflects the real parties’ intentions.

Description of the Patent

A proper license agreement template shall identify the patent that is being licensed, including:

• its name or title;
• if a patent is registered, its USPTO number and registration date;
• if a patent is not registered, the application number and application date;
• CPC code classification;
• type of a patent (i.e., utility, design, or plant); and
• short description.

All this information could be found in a patent certificate issued by the U.S. Patent and Trademark Office. A patent license agreement could be concluded only with regard to the registered patent or a patent under the registration.

Scope of Usage and Territorial Scope

A well-drafted license agreement template shall define the type of license to be granted—exclusive or non-exclusive. Under the exclusive patent license agreement template, the licensee obtains an exclusive right to use the patent in a specific way. That means that neither the licensor nor any other third party can use a patent in the same way as the licensee is licensed to use it.

Contrary to that, a non-exclusive license is a less restrictive legal structure. According to the non-exclusive license agreement, the owner can license the patent an unlimited number of times to third parties, as well as use it on their own.

Another important consideration the parties shall include in their contract is a patent’s scope of usage. Patents could be used in various ways, including the sale or distribution of products that incorporate the patent, usage of the patented technology in business operations, etc. Therefore, it is crucial to clearly define the exact ways the licensee can use a patent.

Finally, a solid patent license agreement example shall outline the territory within which the patent can be used. This territory could be limited to:

• specific region (e.g., Latin America);
• country (e.g., USA, Canada); or
• state or city (e.g., Wisconsin).

If the text of a contract does not define where exactly the patent could be used, it means that the licensee may use it worldwide.

Licensee Obligations

A licensee under a patent licensing agreement does not get only rights to use a patent but also acquires a number of legal obligations and duties. Depending on the type of patent and technology involved, the licensee’s obligations may include:

• compliance with industry standards in terms of product quality;
• meeting production or sales milestones;
• non-disclosure of confidential information (in most of the cases parties tend to conclude separate NDAs);
• regular reporting requirements and many more.

Payment Provisions

A key section of any patent license agreement sample is the financial arrangement. The parties should be able to agree upon the following:

• type of remuneration (e.g., fixed fee, regular payments, or royalties);
• payment schedule (e.g., full sum on the date of signing, periodic payments);
• acceptable payment methods (e.g., cash, bank transfer, check).

Duration and Termination

Every patent license agreement sample shall provide the exact start and end date of the license. Therefore, the parties have to agree about the following:

• When the license shall start (e.g., date of signing the license agreement, any other date);
• When the license shall end (e.g., date of a patent’s expiration, any other date);
• What is the notice period to terminate the contract earlier (e.g., 30 days, or 60 days’ prior notice)?
• Shall the contract be automatically renewed after its termination?

The parties to a patent licensing agreement shall keep in mind that termination of a contract may not necessarily end some obligations. For instance, if a contract has been ended due to the licensee’s failure to pay royalties, the licensee remains liable for that debt even after the contract’s end. Or, a licensee’s obligation to not disclose confidential information shall also survive the contract’s termination.

How to customize a license agreement at Faster Draft?

To get your personalized patent licensing agreement, follow a few easy steps below:

1. Click the button “Create Document.”
2. Answer simple questions in the form.
3. Select a document’s format—license agreement template Word or PDF.
4. Make a payment.
5. Digitally sign, download, print, and use your customized legal document template in minutes.