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Patent license
Here you find a basic understanding of the nature of patent licenses and some of the terms used in licensing transactions.
BY BJØRN RYBERG, RYBERG & RYBERG (br.jur@cbs.dk)
Why a patent license agreement
A license agreement is a very important kind of agreement; license agreements contribute substantially to the income of many small, medium-sized and even large enterprises. The 1998 Novo Nordisk accounts provide a good illustration:
the annual report reveals that total profits before tax were DKK 3,740 million, of which the net income from licensing alone was DKK 1,469 million. A patent license agreement may be entered into for various reasons. Some of the main reasons are:
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the licensor lacks adequate production and/or marketing facilities
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the licensor lacks the financial and/or technical resources needed to further develop the invention
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the transportation costs of the invented product from the licensor’s production
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facilities to the market in question are prohibitively high
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the exploitation of the invention does not fall within the core business of the licensor
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the licensee has more adequate production and/or marketing facilities, better financial and technical resources, etc.
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the licensee needs the technology in order to run and/or develop his business
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the grant of a license, or of reciprocal licenses, is an important ingredient in the settling of patent infringement disputes
As mentioned, a patent gives you as a patentee the right to prevent others from exploiting the invention covered by the patent. This also enables you to grant others a right to exploit the invention. An agreement in which such a right is granted is called a patent license agreement. The patentee is called the licensor, and the party to whom the license is granted is called the licensee. If the licensee, in accordance with the patent license agreement, is permitted to grant licenses to third parties to exploit the invention, he is said to have sub-licensing rights, the licenses granted by him are called sub-licenses and his licensees are sub-licensees.
