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Patent Licensing

Patent licensing is a process of granting permission to a third party to extract benefits by selling and using the licensed product. The patent owner gives license to a third party to use his patented invention based on the agreement and royalty. The license can be given for a period of time as per the mutual understanding between patent owner and licensee. During this time period, the licensee can use patented invention and can take financial benefits.

Licensing is a contract between two parties where licensor agrees the terms and conditions of patent owner. Since it is a contract or agreement, it must follow the Sections 10 and 11 of Indian Patent Act 1970. As per Section 68 of the Patent Act 1970, the agreement must be in writing.

Types of Patent Licensing

There are eight types of patent licensing as described below;

  • Exclusive License
  • In Exclusive licensing, all the rights except title of the invention are given to the licensee. Patent owner transfers the ownership of the patent to the licensee. Patent owner has only the title of the invention. Thus licensee acquires all the responsibilities related to the invention. However, licensee cannot license the patent to anyone else. It is exclusively granted to him/her. Thus licensee is only the authorized person to use the patented invention.

  • Non Exclusive License
  • In Non Exclusive Licensing, the license of the patent can be granted to more than one party and all of them can commercialize the patent into the market. Thus, patent owner has rights to license his patented invention to more than one party.

  • Sub License
  • Licensee has rights to issue Sub license to different organizations for making the product of patented invention. Patent owner give rights to licensee and the licensee has the right to issue the license further to a third party that can use patented invention. The financial benefits will depend on the contract between the primary licensee and third party

  • Cross-Licensing
  • Cross-Licensing is the exchange of licenses between different organizations and creators. When invention requires the support of other products to make its place in the market, Cross-Licensing process is used.

  • Voluntary Licensing
  • Voluntary licensing is an act of goodwill towards the society. It is also applicable for pharmaceutical patents. In Voluntary Licensing, patent owner can license his patented invention to other parties on exclusive or non-exclusive basis and give right to manufacture, import or distribute a pharmaceutical product. According to the agreement, licensee can sale and distribute the product in a market. Patent owner gets its royalty as per the terms and conditions mentioned in the agreement.

  • Compulsory Licensing
  • In Compulsory Licensing, the authorization is given to a third party to make, use or sell a patented invention without the consent of patent owner. According to the Sections 84 and 92 of Indian Patent Act 1970, if the specified conditions are satisfied, license can be granted to a third party without permission of patent owner. According to Section 84 of IPA 1970, any person who is interested or already the holder of the license under the patent can request to the Controller for grant of Compulsory License after three years from the date of grant of that patent. The patent office considers the nature of the invention, ability of the applicant to use the invention for the public interest, any measures already taken by the patentees or any licensee to make full use of the invention and time elapsed from grant of the patent. Compulsory Licensing is usually reserved for pharmaceutical patents. Government allows someone to practice patented invention to make, use or sell patented invention without taking permission of patent owner for the public benefits

  • Carrot Licensing
  • Carrot Licensing is one of the approaches of patent licensing. This approach is suitable when prospective licensee is not in the practice of the patented invention and not falls under any obligation to take a license. In this case, patent owner has to convince the party to use his product and how licensing the product ca be beneficial for them. Carrot Licensing is a marketing policy where the patent owner tries to show the licensee what could be achieved by taking a license for his patent

  • Stick Licensing
  • Stick Licensing is another approach of licensing which is totally contrast of the carrot licensing. In Stick Licensing approach, prospective licensee is already using the patented technology and thus infringing the patent. The patent owner can file a suit against the infringer or settle with the infringer agreeing to license his patent.