Patent Licensing Agreements
Patent licensing agreements are commonplace in many industries. On the surface, they may seem to be a simple contract; however, there are numerous factors that business owners, entrepreneurs, and patent owners should consider when entering a patent licensing agreement. As the adage goes: “The devil is in the details.”
We highlight some of the common elements of licensing agreements and why they may be relevant to you.
What is a Licensing Agreement?
A patent license agreement is a legal contract between a patent owner (the licensor) and a party that wants to use the patented technology (the licensee). The license agreement typically contains provisions defining the invention(s) covered, the duration of the license, the field of use for the licensed technology, and the license terms, which include details of the conditions under which the licensee can make, use, and sell the patented invention, and the royalties required to be paid to the patent owner for doing so.
To be valid and enforceable, a patent license agreement must be in writing, signed by both parties, and include all essential terms and conditions, such as the license’s scope, duration, royalty rates, and the field of use.
There is no one-size-fits-all “template” for a patent license agreement. Every situation is different due to the specific relationships between the parties entering such an agreement.
Common Terms
Exclusive vs. Non-Exclusive.
Will the patent license be exclusive or non-exclusive? Each has its advantages and disadvantages.
An exclusive patent license means nobody other than the named licensee can use the patented invention, and no other licenses will be granted for that invention. This provides a competitive advantage to the licensee. A non-exclusive patent license allows the licensee to use the patented invention; however, the patented invention may also be licensed to other licensees as well.
Minimum Royalties.
Many patent license agreements include a minimum royalty, often on a basis of a time period. For example, a patent license agreement might call for a minimum royalty of $50,000 in a calendar year, which the licensee must pay, regardless of the number of units sold or produced. This ensures that the licensee makes good-faith efforts to commercialize the product, while providing a guaranteed return for the licensor.
Royalties as a Percentage or Per-Unit of Sales.
Patent license agreements often include a royalty as a percentage of sales or on a per-unit basis of sales. For example, a percentage of sales may be characterized as 5% of net sales per quarter. On a per-unit basis, it may be characterized as $1.50 per unit sold. The per-unit basis gives both licensor and licensee certainty as to the royalty amount; however, the per-unit basis does not necessarily account for future price fluctuations, potentially causing one party to realize an effective royalty percentage that differs from what they had anticipated. From an accounting or auditing perspective, the per-unit royalty basis is easier to calculate and track.
License Term.
Patent license agreements may not extend beyond the expiration of the licensed patent, thus allowing the licensor to monetize its patent rights only for the life of the patent.
License Territorial Scope.
Patent license agreements may be territorial in scope. For example, a licensor may allow one licensee to use the patented invention in the southeast and another licensee to use it in the northwest. Furthermore, if patent rights exist in foreign countries, then the territorial scope may be country-specific.
License Field-of-Use Scope.
Patent license agreements may be limited or specific to a particular field-of-use. For example, a patent license agreement may allow one licensee to use the patented invention for commercial installations and another licensee to use it for residential installations. In the medical field, the field-of-use may be in diabetics for one licensee and orthopedics for another.
Allowing Assignment or Sublicensing of License.
A patent license agreement should specify whether the license may be assigned and/or sublicensed to another party. An assignment may occur either as part of a business deal or as part of a sale of the licensee to another party. A sublicense may occur as part of a business deal or further efforts by the licensee to commercialize the patented technology.
Improvements to Technology.
Generally, improvements to patented technology will be covered by a patent license agreement unless the agreement specifically excludes such improvements. A patent license agreement should specify whether improvements are covered, and who owns any such improvements.
Royalty Stacking.
It is quite possible that a single product is covered by multiple patents owned by numerous unrelated parties. A licensee should be careful to ensure that they do not end up owing stacked royalties on multiple patents. For example, if a party agrees to license one patent from Party A for 5% of revenue and a second patent from Party B for 4% of revenue, then the licensee will be on the hook for 9% of their revenue, and neither of the separate licensors have much incentive to negotiate the royalty rate down.
At NK Patent Law, we help our clients leverage their intellectual property assets to grow their businesses. If you are interested in learning more about patent license agreements or other license agreements, please Contact Us today to learn more about how we can assist you.
Demystifying Trademarks: Your Top Questions Answered
Trademarks seem simple at first glance, right? After all, you just need to slap a “™” or an “®” on your products, and you’re good to go, right? If you’ve found this article, you may have already realized that navigating the complex world of trademarks can often feel much more overwhelming than you first thought. Whether you're a startup finding your footing in the market or an established company looking to further expand your brand, understanding the intricacies of trademarks is paramount. Today, we'll dive into some of the most common trademark questions business owners and decision-makers have and provide you with the clarity you need.
What is a Trademark?
A trademark (also referred to as a service mark when used in conjunction with services rather than goods) is any word, phrase, symbol, logo, or design that identifies
the source of the goods or services. Trademarks distinguish your goods/services from those of others. You have worked hard to develop your brand, and you want consumers to be able to immediately know that a product is “yours.”
What Does a Trademark Protect?
A trademark protects your brand. It safeguards your business's name, logo, slogan, or other distinguishing features associated with your products or services. These are aspects that customers identify with your brand, and by trademarking them, you gain exclusive rights, preventing others from using them without permission. This helps prevent others from trading on the name that you have worked so hard to develop.
Why Do I Need a Trademark?
Securing a trademark does more than protect your brand. It provides legal cover in case of misappropriation or misuse by competitors, assuring your customers of authentic products or services. In addition, owning a trademark enhances the value of your brand, giving it an edge in an increasingly competitive market.
How Long Does Trademark Protection Last?
Here's the good news: A trademark can potentially last forever in the United States. As long as you continue to use your trademark in commerce and meet renewal requirements, your trademark protection remains in place. Keeping up with your renewal ensures that your trademark protection does not lapse, offering your business and brand long-standing safeguarding.
Why should I conduct a trademark search?
Offensively and defensively, trademark rights deal with the "likelihood of confusion" consumers might experience between and among marks and the goods and services the marks represent. The relevant slogan is "sight, sound, and meaning." By conducting a specialized search of your proposed mark before starting to use it or filing a trademark application for it, you may identify potential problems early, such as a likelihood of confusion with another mark that is already in use. Many an eager, excited entrepreneur has gone out and bought a domain name, developed a logo, printed marketing materials, etc., only to later find out that there’s already a similar existing mark that is in use and has been registered. An initial search can help reduce or eliminate the chance that you might need to rebrand a new enterprise or risk infringing another person's trademark or sink costs into an unsuccessful application for registration.
How Do I Register a Trademark?
The trademark registration process can be complex, which is why having a trusted advisor can make your life much easier. You'll want to search for existing trademarks to ensure yours is unique, and then file an application with the United States Patent and Trademark Office (USPTO) to register your mark. Ensuring you have all the information required for this application is vital—this includes a clear representation of your mark, the goods or services it will be used in conjunction with, and the filing fee, among other details.
Remember, every business's needs are unique. Consult with knowledgeable trademark attorneys to ensure your interests are well-protected. Your brand identity is unique and valuable—and well worth protecting.
At NK Patent Law, we're here to assist you every step of the way. Reach out for tailored guidance on safeguarding your valuable asset—your trademark.
NK Patent Law Hires Patent Agent Cameron Applegate
Raleigh, NC, September 13, 2023 — NK Patent Law is pleased to welcome patent agent Cameron Applegate to the team! Cameron has a wealth of knowledge and experience on patent-related issues and a technical background in biomedical research and clinical medicine.
Cameron is an experienced Patent Agent with 10+ years of experience drafting and prosecuting patent applications and focuses on patent prosecution before the USPTO and in foreign countries. In addition to patent prosecution, she provides general guidance on patent-related issues, such as advising clients on patent prosecution strategies and providing research on patentability, freedom to operate, validity, and non-infringement. She also has experience practicing before the Patent Trial and Appeal Board with the appeal process.
Managing partner Doug Meier notes,
“Cameron brings a unique background to her patent practice due to her work experience in laboratory science and clinical medicine. Her background and skills add value to the firm’s intellectual property offerings for its diverse client base.”
About NK Patent Law:
NK Patent Law is an intellectual property boutique serving clients throughout the United States and abroad. The firm focuses on patent preparation and prosecution, trademark preparation and prosecution, and general IP counseling to help businesses navigate complex IP issues and potential disputes. NK helps startups, established companies, and universities protect their intellectual property and navigate the competitive landscape to protect their valuable intellectual property assets.
Three NK Patent Law Attorneys Receive Legal Elite Recognition
Raleigh, North Carolina, January 8, 2023—NK Patent Law is pleased to announce that three of the firm’s attorneys received recognition as top IP lawyers in Business North Carolina's Legal Elite.
Once a year, the magazine distributes ballots to active North Carolina Bar Association members who reside in the state. Attorneys are not allowed to vote for themselves and may only select members of their firms if they also select out-of-firm lawyers in the same categories, with the out-of-firm votes weighted more heavily. Business North Carolina magazine staff compiles these votes and recognizes the best of the best as their Legal Elite for the year.
The NK Patent Law 2023 Legal Elite attorneys are noted below.
Doug Meier
Doug Meier is an experienced patent attorney and managing partner of NK Patent Law. With a background in electrical engineering and in-depth experience practicing patent law, Doug brings a unique combination of legal and technical experience that allows him to quickly understand complex electrical, computer, and software technologies.
Justin R. Nifong
Justin Nifong is a founder of NK Patent Law and is recognized as a preeminent North Carolina patent attorney by his peers and in numerous publications. His practice focuses on patent prosecution before the USPTO and in foreign countries. Justin also renders patentability and clearance opinions and counsels clients regarding preparing for intellectual property litigation.
Ani Agrawal
Ani Agrawal is an experienced patent attorney focusing on patent and trademark prosecution before the United States Patent and Trademark Office and in foreign countries. His diverse experience includes consumer- and technology-focused clients in the medical device, retail, and computer technology fields and other industries.
About NK Patent Law
NK Patent Law is an intellectual property boutique serving clients throughout the United States and abroad. The firm focuses on patent preparation and prosecution, trademark preparation and prosecution, and general IP counseling to help businesses navigate complex IP issues and potential disputes. NK helps startups, established companies, and universities protect their intellectual property and navigate the competitive landscape to protect their valuable intellectual property assets.