Profiting From Your Patent FAQ

What does it mean to "license" an invention?

A license is written authorization to exploit an invention. An inventor usually authorizes a manufacturer (the licensee) to make and sell the invention in exchange for paying the inventor royalties.

A license may be exclusive (if only one manufacturer is licensed to develop the invention) or non-exclusive (if a number of manufacturers are licensed to develop it). The license may be for the duration of the patent or for a shorter period of time. The territory is usually limited to the geographic extent of the patent protection. For example, the owner of a U.S. patent will license the rights for the U.S. but will not be able to exploit beyond that patent territory.

The licensee may in turn license other companies to market or distribute the invention. The extent to which the inventor will benefit from these sub-licenses depends on the terms of the main agreement between the inventor and the licensee.

In some cases, an inventor or a company may trade licenses with other companies -- called cross-licensing -- so that companies involved in the trade will benefit from each other's technology. For example, assume that two computer companies each own several patents on newly developed remote-control techniques. Because each company would be strengthened by being able to use the other company's inventions as well as its own, the companies may agree to swap the licenses of their respective inventions.

For more on the ins and outs of licensing your invention, see Should You License or Manufacture Your Invention?.

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