PATENT LICENSING

Updated: Feb 4, 2022

Author: Salvee, IV Year of B.A.,LL.B from Bharati Vidyapeeth Deemed to be University, New Law School, Pune.

A patent is a limited right permitted for an innovation, which is a process that lay out, in general, a new method of doing something like a new practical solution to a problem. To acquire patent, technical details about the innovation must be revealed to the public in a patent application.

Licensing is explicated as a business disposition, in which a company sanctions another company by furnishing a license to transiently approach its intellectual property rights. A license is a compliance through which a licensee rents the rights to a legally secured block of intellectual property from a licensor.

WHAT IS PATENT LICENCING?

Patent licensing is an action of the third party in light of which, by process of selling and utilizing the patented patent, rights to withdraw its benefits. The possessor of the patent permits a third party to treat, sell and take benefit of its patented origination for a sum previously conferred as royalties. The license can be specified for a span of time as per the contract between patent owner and licensee. In the course of this time period, the license can utilize the patented invention and can take financial enjoyment.

According to section 68 of the patent act, 1970 for a patent license to be authentic, the contract must be in writing. As licensing is a deal between two parties where licensor admits the terms & conditions of the owner of the patent.

Licensing is determined as a contract therefore section 10 & 11 of IPA, 1970 will accompanied.

DIFFERENT TYPES OF PATENT LICENSING

There are 8 types of patent license: -

Exclusive Licensing: In this, all the rights beside title of the invention are provided to the licensee. Patent owner transmits the possession of the patent to the licensee. Patent owner has only acquired the title of the invention. Thus, licensee obtains all the duties related to the invention. However, licensee cannot allow the patent to anyone else. It is solely permitted to him/her; thus, licensee is the only certified person to utilize the patented invention.
Non-exclusive licensing: In a non-exclusive right, the licensee has the right to sell and construct the patented design, but such right is not unique. Patent owner may give approval to utilize and build such patented model to any other person also. In this case, all of them have the right to construct, utilize and sell the patented design. The rights exalt by this license are not unique to a specific licensee.
Sub license: In this process, the licensee has the right to issue a license to a distinct association for the manufacturing of the product. In other words, the licensee has the right to give the license to the third party who has the advantage to create the product. However, the profits will depend on the contract between the primary licensee and the third party.
Cross licensing: It is the interchange of license between different association and makers. When invention needs the reinforcement of other products to make its place in the market.
Voluntary Licensing: An action of goodness towards the society. It is also appropriate for medicinal patents. In this licensing, patent owner can license his patented invention to other parties on exclusive or non-exclusive basis and offer right to production, construction or administer a medicinal product. According to the contract, licensee can sale and allocate the product in a market. The owner of the patent gets its kingship as per the terms & conditions given in the contract.
Compulsory licensing: In compulsory licensing, the consent is given to a third party to create, utilize or sell a patented invention without the clearance of the owner of the patent. As per section 84 & 92 of the Indian Patent Act, 1970, if the stated conditions are fulfilled, license can be conceded to a third party without the sanction of the patent owner. According to the Section 84 of IPA, 1970, any person who is engrossed or already the possessor of the license under the patent can appeal to the controller for allowance of mandatory license after 3 years from the date of permit of that patent.

The patent office examines the essence of the invention, caliber of the candidate to use the invention for the public interest, any step so far taken by the licentiates to make complete utilization of the invention and time transpire from permit of the patent. Compulsory licensing is generally engaged for treatment of patents. Government grant someone to exercise patented invention, to construct, utilize or sell patented invention without taking consent of patent owner for public welfare.

7. Carrot licensing: In this the licensing perspective is advisable when the possible licensee is not in the exercise of the patented invention and does not fall under any commitment to take a license. This sort of license is a marketing strategy where the patent owner offers the license a sight of what could be achieved by obtaining a license for their patent. In other words, it is clearly a market practice in which you assure an expected licensee to take a license.

8. Stick licensing: It is another view point of licensing which is thoroughly disparity of the carrot licensing. In this licensing, awaited licensee is ahead using the patented technology and thus violating the patent. The patent owner can file litigation against the invader or settle with the invader accepting to license his patent.

ADVANTAGES AND DISADVANTAGES OF PATENT LICENSING

ADVANTAGES

For the owner of the patent, the licensing pattern suggests the following advantages:

There is no need to observe money to advertise the product – the license will be answerable for costs of fabricating, dispensation, wrapping, purchasing & sales etc.
Can grow your inventions faster ion the market – if you issue a license to an entrenched business, it will be easy for you to grasp their experience, armature & collusion. They will commonly be more able to pass your product into the marketplace more effortlessly and rapidly.
Will be able to create profits – the license will reimburse for the right to grasp the license to your patent.
One can split into two markets – based on the agreement and the license, you may be able to acquire markets that are limited to imports, avert export taxes or diminish risks related international enlargements.
Can keep possession of your intellectual property – licensing allows you to give distribute, challengers or supporting business specific rights over your patent while receiving royalty income and still keeping possession of your asset.

DISADVANTAGE

Loss of control – for the interval of license, the patent owner shifts his rights to the license. Consequence of which is he drop his own control, either moderately or wholly on his own invention.
Difficulty in regulating licensee – it takes lots of endeavor and time to ascertain the suitable licensee for the invention. It is necessary to get a potential licensee and have a organized contract in command to have the greatest possibility of success.
Risk of licensee’s ability – the patent owner depends on the coherence and capacity of the licensee to efficiently advertise the patent product. The fear of poor plan and quality management can resentfully influence the patent character & achievement.

LICENSING UNDER INDIAN PATENT ACT

Section 84 to 92 of IPA 1970 are associate to patent licensing. As per IPA 1970, patent licensing should be in writing between the licensor and the licensee. Section 84 of IPA 1970, affirm the terms and conditions needed for issuing compulsory licensing. The act has the amenities and authorize the controller to issue the compulsory licensing to the third party.

Compulsory licensing is feasible only if the patented formulation is beneficial to public health or in national emergencies or health disaster. According to the section 84 of the IPA 1970, after 3 years from the permit of the patent, any intrigued person can write an appeal to the controller for permit of compulsory license on the following grounds:

The logical necessity of the public for the patented formulation have not been triumphant.
Patented formulation is not accessible to the public in economical price.
Patented formulation is not performed within the domain of India.

After receiving the appeal, the controller can permit a compulsory license to the party.

However, prior to permitting the compulsory license, the controller has to contemplate various components such as:

Authority/remittance for the patented are equitable.
License will apply patented formulation properly.
Patented formulation will be accessible to the public at affordable prices.
The license is generic & inalienable.
The license will not be prolonged than the duration of the patent.
Licensing the patented formulation is for the finer contribution in Indian market.
If patented formulation is for semi-conductor mechanics, the license permitted is for charitable public benefit.

Compulsory license can be permitted to a medication products & exports of specific medication products that are mandatory for public health of a country having fragile magnitude of medication industry can be granted.

DIFFERENCE BETWEEN PATENT LICENSE AND PATENT ASSIGNMENT

Patent license can be introduced to be an act of the patent holder where he gives approval to withdraw advantage on interests on the patent to a third party for a restricted duration. Such transfer of rights is interim in essence. In patent license, the licensee is required to reimburse the authority to the licensor for the whole term of the license period.

Whereas, in patent assignment, patent holder assigns unique rights of the patent to a third party for forever. Such a transfer is documented in the official patent record. In patent assignment, the assignee has to reimburse the lump sum amount to the patent owner in the starting and later can collect surplus from the patented formulation.

Patent Assignment is an absolute transfer of rights to a third party. Patent owner don’t have any rights on his patented formulation once patent is transferred to a third party.

LIMITATIONS OF PATENT LICENSING

Licensing is a very easy way for a patent holder to take monetary assistance from a patented formulation.

Few limitations of licensing are as follows:

Licensing could be less beneficial. It may happen that if the patent holder makes the formulation accessible in market, it can attain more gain than license. Though investing funds is a risk, but gain can be more than presumption.
Patent holder has to rely upon the licensee for gains. Patent holder is completely dependent on the licensee, his sources, his skills and the attempt for marketing the patented formulation and further for monetary welfare. Thus, if an actual license is not chosen, then the product may get abort in the market.
A compliance of licensing should be inducted very carefully. All the terms & conditions associated to authority and further rectification should be declared distinctly in the agreement. Also, agreement should distinctly states all the sections associated to assets and details associated to patented formulation.
The license has to recompense fixed rank to the patent holder disregarding of the positions of the product in the market.

CONCLUSION

Patent licensing refers to granting authorization to a third party for utilizing patented innovation. Patent holder can get fine monetary welfare by licensing his patented innovation. As per Indian Patent Act, 1970 patent licensing should be in written format and persuade the subsections stated in section 84 to 94 of IPA, 1970. The license agreement is between two parties, one is licensee & other is patent holder or licensor. Slightly protection should be taken while choosing the licensee and formulating the accordance.