Patent License Agreements

A specific characteristic of patent license agreements is that the right to be licensed is protected by a patent. Patent license agreements usually grant a right of use. Patent license agreements are often used in conjunction with know-how license agreements.

The object of a patent license agreement is defined by reference to the definition of the patent. Consequently, the object of a patent license agreement is affirmed by the authorities.

In a patent license agreement, attention should be paid to the nature and scope of the right of use being granted. The right of use may, for instance, be restricted to manufacturing or sales. The patent holder may give the licensor either an exclusive or a non-exclusive right to utilize the patent. For further information, see Geographical Scope and Exclusivity of the License [4.2.8.2.3 Geographical Scope and Exclusivity of the License]. If two companies require each other’s technology for their respective business, it may be practical to agree on so-called cross-licensing, whereby the companies grant each other certain rights to utilize their respective technology. The license agreement should also set out the geographical scope of the license. If the patent license applies within the European Union, competition law regulations should be taken into account. See further in the Chapter Competition Law [8.1 Competition Law]

The license agreement must determine the consideration for the license. The consideration may be defined as a one-off fee, recurring fees payable at fixed intervals, or a percentage share based on the income received from sale of products manufactured pursuant to the license (royalty). It is also possible to use different fee combinations.

The patent license agreement may set an obligation on the licensee to utilize the patent. If the obligation is not fulfilled, the license may expire or become restricted in the manner set out in the agreement. The patent holder may develop the patented invention, and the licensee may be granted a right to obtain updates.

A registered patent often offers similar protection in respect of the patented technology as confidentiality. Nevertheless, it is important to ensure protection prior to filing or publication of the patent application. Nothing prevents the parties from entering into a separate agreements regarding confidentiality for different circumstances.